Circus Circus Casino has filed a lawsuit against insurance company AIG for damages exceeding $75m in the United States District Court for Nevada, arguing the operator’s AIG insurance policy failed to cover “all risks” as specified during the novel coronavirus (Covid-19) crisis.
The operator entered into an insurance agreement with AIG starting in December 2019 providing coverage of up to $500m to Circus Circus against “all risks of direct physical loss or damage to insured property from a covered cause of loss”.
A “covered cause” in the policy refers to any that is not specifically excluded.
The operator said that a “highly contagious disease for which there is no known vaccine” was not excluded, nor were government stay-at-home orders. The policy came to a cost of $1.6m per year.
When Covid-19 spread to the United States, all casinos in the country closed in March following stay-at-home orders to limit the spread of the virus, including Circus Circus on 18 March.
“The physical loss and damage caused by Covid-19 and the threat of further physical loss or damage caused by Covid-19 has had a devastating effect on Circus Circus’s business,” Circus Circus said in its lawsuit.
“Likewise, the stay-at-home Orders and the physical loss of property caused by those orders has had a devastating effect on Circus Circus’s business.”
The policy covers losses of income, while Circus Circus also said that contamination of surfaces should be classified as a form of physical damage to its property. It should also be covered for losses to suppliers and customers that have impacted its own business, and extra expenses it incurred to maintain its business after reopening, it argued.
Although the casino reopened early last month when Nevada casinos were permitted to do so, Circus Circus noted that some of these orders in other states remain in effect and said these “have caused and continue to cause a partial prohibition of access to Circus Circus”.
The operator said it notified AIG that it was experiencing a covered loss due to the pandemic on 20 March. However, on 19 June, AIG responded by arguing that it should not need to pay the claim.
AIG said it did not need to pay the claim because the policy specifically excluded the “actual, alleged or threatened release, discharge, escape or dispersal of pollutants or contaminants”.
However, Circus Circus said that the novel coronavirus which causes Covid-19 is not a pollutant or contaminant, nor was it released, discharged, escaped or dispersed.
It noted that pollutants and contaminants are specifically defined in the policy as “any solid, liquid, gaseous or thermal irritant or contaminant… which after its release can cause or threaten damage to human health or human welfare or causes or threatens damage… including, but not limited to, bacteria, virus or hazardous substances listed in applicable environmental state, federal or foreign law or regulation”.
Circus Circus added that exclusions for communicable diseases or pandemics were common in the insurance industry before the outbreak of Covid-19 and said that if AIG wished to exclude such an outbreak it would have referred to one specifically.
Circus Circus said that it is entitled to coverage up to the Policy’s $96,774,307 limit and sued for special and consequential damages in excess of $75m.