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A Las Vegas casino sued an FM Global unit last week for coronavirus-related coverage, arguing that the full $1.18 billion combined limit on its property policy applied to its losses.
Affiliated FM Insurance Co., the insurer’s midmarket affiliate, denied Treasure Island LLC’s property damage and business interruption claim but said that cleanup coverage may be available under the $100,000 communicable disease sublimits on the policy, according to the suit.
In the case Treasure Island LLC v. Affiliated FM Insurance Co. filed in federal court in Nevada on May 28, the casino seeks a declaratory judgment that it is owed coverage under multiple clauses in the policy.
Treasure Island, a nearly 3,000-room casino and resort, purchased an insurance policy with AFM that was effective March 20, 2019, to March 20, 2020, and provided $850 million limits for property damage and $327 million for business interruption coverage, including coverage for when access to the property is prohibited by civil authorities, court papers say.
The casino paid nearly $1 million in premium for the coverage, the suit states.
One of the first COVID-19 cases in Las Vegas was reported on March 11 at the Mirage Resort and Casino located next to Treasure Island, court papers say. On March 17, Nevada authorities ordered all casinos closed in an effort to slow the spread of the virus.
“Persons infected with COVID-19 were present at Treasure Island prior to March 18, 2020. In fact, during the period January 1, 2020, to March 18, 2020, Treasure Island employees recorded more than 1,500 sick days. During that same period, Treasure Island had more than 329,000 registered guests from all over the world,” the suit states.
The presence of the coronavirus caused physical loss and damage to the property, triggering coverage under all the clauses in the policy, not just the communicable disease coverage extension, which has $100,000 sublimits for property damage and business interruption, the suit states.
“The On-Site Sublimited Communicable Disease Coverages do not apply to limit any other coverage under the Policy that may also apply to loss or damage resulting from or caused by communicable disease, including physical damage resulting from or caused by communicable disease away from Treasure Island Locations,” the suit states.
After the casino submitted its claim to AFM, the insurer focused its discussions about the claim on the communicable disease endorsement, court papers say.
An adjuster for the insurer called Treasure Island’s general counsel, Brad Anthony, and asked whether any employees of Treasure Island had tested positive for COVID-19. Mr. Anthony said he was not comfortable disclosing personnel information due to privacy concerns.
The adjuster then followed up with an email stating that the casino was not aware of any COVID-19 cases and there was no physical damage to the property, but that coverage is potentially available to cover clean-up costs.
According to the AFM policy, communicable disease coverage is triggered by the “actual not suspected” presence of the disease on a covered property.
FM Global declined to comment on the suit.
Unlike many insurers, FM Global offers communicable disease coverage to policyholders, with various sublimits.
More insurance and risk management news on the coronavirus crisis here.