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Casino COVID-related ruling turns in favor of Zurich, AIG, Allianz


A New Jersey appeals court overturned a lower court and ruled against an Atlantic City casino and in favor of units of Zurich Insurance Group Ltd., American International Group Inc. and Allianz SE in COVID-19-related business interruption coverage Thursday.  

The litigation was filed by the Ocean Casino Resort, a 138,000-square-foot casino and gaming entertainment facility that is the largest gaming suite in the U.S., according to the ruling by the Superior Court of New Jersey appellate division in Jersey City in AC Ocean Walk, LLC v. American Guarantee and Liability Insurance Co., AIG Specialty Insurance Co. and Interstate Fire and Casualty Co. and National Fire & Marine Insurance Co

Earlier in the week, the same court had affirmed seven lower court rulings dismissing similar litigation. 

The Zurich, AIG and Allianz units, along with National Fire & Marine Insurance Co., a Berkshire Hathaway Group unit, had provided a total of $50 million in coverage on a quota share basis, according to the report. 

The insurers agreed to pay $850,000 in coverage under an “interruption by communicable disease” endorsement, but otherwise refused to indemnify the casino. 

The casino filed suit against them in state court in Atlantic City.  The court agreed to dismiss Berkshire Hathway based on a “biological or chemical substances exclusion endorsement” in its policy. 

But it refused to do so for the remaining defendants, stating that the phrase “direct physical loss of or damage” in its coverage was ambiguous and that “may be satisfied if the property becomes unusable for its intended purpose, whether or not the property is altered by the COVID-19 virus.” 

The trial court also concluded the coverage’s contamination exclusion did not preclude coverage because it related to “traditional environmental and industrial damages.” 

In overturning the lower court, the state appeals court said, “the record supports the conclusion there was no damage to equipment or property on- or off-site that caused Ocean to lose its physical alteration that made the casino resort too dangerous to enter.” 

While Ocean was forced to close its casino gaming floor and other operations in accordance with the governor’s executive order, it “was able to continue operating its restaurants, bars, and hotel accommodations in a restricted manner, as well as its online gaming services, from March 16 to July 2, 2020,” the ruling said. 

It also said that “even assuming Ocean successfully pled the COVID-19 virus caused an actual or imminent physical loss or damage to Ocean,” the coverage’s contamination exclusion “unambiguously excludes coverage.” 

Attorneys in the case had no comment or did not respond to requests for comment.