Amid 2020's mandated shutdowns

Nevada federal judge rules against Circus Circus casino in Covid-19 insurance coverage lawsuit

Circus Circus Hotel and Casino in Las Vegas.
Reading time 2 min

A Nevada federal judge has ruled that the operator of Circus Circus Hotel and Casino in Las Vegas is owed no insurance coverage for business income losses resulting from Covid-19-related shutdown orders imposed last year on venues.

According to U.S. District Judge Jennifer A. Dorsey’s ruling, Circus Circus LV LP is on its own for its losses, given the operator failed to allege it suffered any tangible damage that would be considered a direct physical loss under its policy, reports Business Insurance. Thus, the judge granted AIG Specialty Insurance Co.’s motion to dismiss.

However, Dorsey has granted Circus Circus’ motion for leave to amend its complaint. The casino is set to add allegations that AIG violated the state’s unfair-claims statute by delaying its handling of the casino’s coverage claim.

Court filings show Gov. Sisolak issued an order on March 17, 2020, for gaming activities to close by midnight, in an effort to address the Covid-19 pandemic. The casino then submitted a claim to AIG requesting coverage for business interruption losses and physical damage to property within a few days of the closure order, which the defendant denied on June 19.

According to the casino, the insurance organization’s conduct was unlawful given the policy’s business interruption coverage protects against "an actual loss of income sustained by the insured during the necessary partial or total interruption of the insured's business operations," reports WESTLAW Today.

Additionally, the plaintiff argued premises sustained direct physical damage as parts of the casino were rendered unusable, given Covid-19’s ability to survive on surfaces for indeterminate periods of time.

However, Judge Dorsey’s ruling argues that Circus Circus failed to allege a plausible claim for physical loss or damage to its property: the lawsuit provides no supporting factual allegations as to how Covid-19 physically altered any Circus Circus’ property.

Live! Casino Hotel in Maryland also lost a similar lawsuit

"Circus Circus's own pleadings indicate that, while the pandemic is ongoing, any alleged surface contamination is ephemeral — the virus is only detectable on surfaces for 'up to three days,'" the ruling reads, according to WESTLAW Today. Additionally, even if the claims could fall within the realm of coverage, the policy expressly excludes payout for any loss caused by the release, discharge, escape or dispersal of pollutants or contaminants, including bacteria or viruses.

Circus Circus is not the only casino that has filed a lawsuit against its insurance carriers for Covid-19 compensation, which have thus far been supported in the courts. Last week, The Cordish Companies faced a similar defeat to that of Circus Circus when the US Court of Appeals for the Fourth Circuit in Richmond, Virginia, ruled against the Maryland Live! Casino operator.

The business had filed a lawsuit against the FM Global insurance unit, a subsidiary of Affiliated FM Insurance Company. “We have reviewed the record and find no reversible error,” the ruling said, concluding that the lower district court was right.

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