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A Mohawk casino that closed its doors in March 2020 after a COVID-19 case was reported at a nearby college cannot recover under its FM Global unit policy’s business interruption coverage, a New York federal district court said Thursday.
The Saint Regis Mohawk Tribe, which operates Mohawk Gaming Enterprises LLC on reservation land in Franklin County, New York, closed the Akwesasne Mohawk Casino Resort after a virus case was reported at St. Lawrence College, 4.5 miles across the Canadian border in Ontario, according to the ruling by the U.S. District Court in Utica, New York, in Mohawk Gaming Enterprises, LLC v. Affiliated FM Insurance Co.
Mohawk filed a business interruption claim with FM Global unit Affiliated FM Insurance Co. seeking business interruption coverage based on the tribe’s closure order.
As the 30-day deadline for investigating and settling the claim neared without a response, Mohawk filed suit against the insurer on charges including breach of contract and fraud, according to the ruling.
“Mohawk Gaming’s claim for coverage under the policy is grounded in the Civil Authority provision,” the ruling said. “Thus, the initial burden is on plaintiff to allege facts that would plausibly establish that the business interruption it suffered is ‘the direct result of physical damage of the type insured,’” either at the casino or at the college, the ruling said, in citing the policy.
“However, as other courts have explained, the inclusion of the modifier ‘physical’ in a phrase such as ‘direct result of physical damage’ clearly imposes a requirement that the damage actually be tangible in nature,” it said.
“Indeed, numerous courts around the country — including those that have applied New York law — have routinely held that the mere presence or spread of the novel coronavirus is insufficient to trigger coverage when the policy’s language requires physical loss or damage,” the ruling said, in dismissing the case.
A Mohawk Gaming attorney, Burtonsville, Maryland-based Marsha K. Schmidt, said in a statement, “We are very disappointed in this outcome since the contract itself defines a communicable disease as causing property damage.
“The court failed to take that fact into account and instead followed rulings that are simply not applicable. We are considering our options.”
FM Global said in a statement, “It is unfortunate when legal matters arise, because we strongly believe our insurance policies are clear on the coverage provided.”
More insurance and risk management news on the coronavirus crisis here.