Circus Circus Las Vegas Casino Loses COVID-19 Insurance Lawsuit

Posted on: April 19, 2022, 12:07h. 

Last updated on: April 19, 2022, 12:57h.

Circus Circus Las Vegas and Baltimore-based Cordish Companies each recently lost appeals regarding their COVID-19 coverage lawsuits against their property insurers.

Circus Circus Las Vegas casino insurance COVID-19
Las Vegas and the entire US commercial gaming industry came to a standstill in 2020 because of the COVID-19 pandemic. Federal courts have routinely ruled that casinos like Circus Circus have no legal case to seek property damage compensation from their insurance carriers. (Image: Yahoo)

The US Court of Appeals for the Ninth Circuit in San Francisco last week ruled in favor of American International Group Inc. (AIG) in its defense against Circus Circus. The Las Vegas Strip casino sued AIG on grounds that the insurance carrier should be liable to pay the resort damages for business interruptions and impacts caused by COVID-19.

The federal court, however, upheld a lower court’s ruling that the coronavirus pandemic did not create physical harm to the casino, and therefore no financial coverage is warranted.

The district court correctly held that Circus Circus does not plausibly allege that it suffered direct physical damage to its property under terms of the Policy,” the Ninth Circuit said. “Despite Circus Circus’s allegation that the COVID-19 virus was present on its premises, it has not identified any direct physical damage to its property caused by the virus which led to the casino’s closure.”

Circus Circus owner Phil Ruffin acquired the Strip budget-friendly casino from MGM Resorts for $825 million in 2019. The transaction closed in December of that year, less than three months before every commercial casino in the country was forced to shutter operations in an effort to slow the spread of the coronavirus.

Insurance Carries Not Liable

Several casinos have filed lawsuits against their insurance carriers for COVID-19 compensation. The insurance companies have broadly denied paying out on coverage for claimed damage the gaming facilities incurred because of the virus. So far, the courts have ruled on the side of the insurers.

Along with Circus Circus being denied property coverage damages, The Cordish Companies suffered a similar defeat. The US Court of Appeals for the Fourth Circuit in Richmond, Va., ruled last week against the Maryland Live! Casino operator in the gaming company’s lawsuit against FM Global. The insurance unit is a subsidiary of Affiliated FM Insurance Company.

In the Cordish lawsuit, the federal appeals court concluded that the lower district court was right in siding with FM Global.

“We have reviewed the record and find no reversible error,” the ruling stated.

No Physical Damage

It isn’t only casinos that have been dealt one loss after another in COVID-19 insurance cases. Chicago-based attorneys Sarah Anderson and Scott Seaman of Hinshaw & Culbertson, a law firm specializing in the insurance industry, say insurers have maintained an “unbeaten record in all appellate court decisions” regarding COVID-19 coverage.

Things are still looking good for insurers in the COVID-19 coverage litigation battle,” Anderson and Seaman said earlier this month. The attorneys explained that of the 28 appellate court decisions regarding coronavirus insurance cases, all 28 have gone in favor of the insurers.

“These courts have ruled in insurers’ favor based on the lack of ‘direct physical loss or damage,'” Anderson and Seaman explained.

There are many more cases to go. There are approximately 240 federal COVID-19 property insurance appeals pending. But for now, the odds seem long that an insurance carrier will be forced to compensate a casino for business losses caused by the coronavirus.