By Mike Curley

Law360 (July 6, 2020, 6:09 PM EDT) -- The operators of Las Vegas' Circus Circus Hotel and Casino are taking AIG Specialty Insurance Company to Nevada federal court, alleging that the insurer has wrongfully denied coverage for business lost as a result of the COVID-19 pandemic.

In a complaint filed Thursday, Circus Circus LV LP said that its all risks policy should cover its losses, because the government-mandated stay-at-home orders and the virus itself are not excluded, despite AIG's denial of coverage.

"AIG relies on sleight-of-hand, distortions of fact and contortions of law to escape from Circus Circus's covered claim," the casino told the court. "But no illusion or death-defying feat can alter the plain language of AIG's policy and the broad all risks coverage that it provides."

According to the complaint, Circus Circus shut its doors on March 18 in response to state orders to close non-essential businesses and sent its claim in two days later, while AIG responded with a denial in June.

As a business that relies on materials from all over the country and the world, and which serves hundreds of thousands of customers from all over, persons with COVID-19 were present at Circus Circus before the shutdown, the casino said.

The casino told the court that it is suffering both from business loss and from physical damage, as COVID-19 is able to survive on surfaces for indeterminate amounts of time, rendering the casino's property unusable.

In addition, the casino said other endorsements in the policy trigger coverage, such as civil authority, because the government mandated that non-essential businesses like Circus Circus close their doors.

There is no exclusion in the policy that would bar coverage, Circus Circus told the court, saying that the "pollutants or contaminants" exclusion refers to smoke, vapor, acids, chemicals and other such waste that threaten human health.

While the text of the exclusion cited in the complaint does include bacteria and viruses, Circus Circus said that COVID-19 is a communicable disease, and that the definition of "pollutants or contaminants" in the policy does not include communicable disease. The casino added AIG could have added an exclusion for communicable disease if it wished, but did not.

The casino is pursuing breach of contract claims as well as a declaration that AIG has a duty to cover its losses stemming from the pandemic. While the casino did not specify what amount of money it seeks, the complaint says the casino is covered for up to $500 million in physical loss or property damage and $97 million for loss of business income.

Representatives for Circus Circus and AIG could not immediately be reached for comment Monday.

Circus Circus joins hundreds of businesses that have sued their insurers over coverage of government-mandated shutdowns resulting from the pandemic, including at least one other Vegas casino that has taken its insurer to court.

In late May, Treasure Island LLC made similar claims against its insurer, telling a Nevada federal court that the presence of COVID-19 in its casino and resort has triggered coverage under its "all risk" policy with Affiliated FM Insurance Co. The resort added that the insurer specifically said in an April letter that COVID-19 is a "communicable disease," the cleanup of which is covered under its policy, but denied its claim for coverage by citing a virus contamination exclusion. According to its complaint, Treasure Island is owed up to $1.1 billion in reimbursement.

Circus Circus is represented by Renee M. Finch of Messner Reeves LLP and Michael S. Levine, Kevin V. Small, Harry L. Manion III and Christopher Cunio of Hunton Andrews Kurth LLP.

Counsel information for AIG wasn't available.

The case is Circus Circus LV LP v. AIG Specialty Insurance Co., case number 2:20-cv-01240, in the U.S. District Court for the District of Nevada.

--Additional reporting by Daphne Zhang. Editing by Michael Watanabe.

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