NY Tribe's Casino Says Insurer Must Cover COVID-19 Closure

By Emma Whitford
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Law360 (November 9, 2020, 3:49 PM EST) -- The operator of the Saint Regis Mohawk Tribe's Akwesasne Mohawk Casino and Resort in Hogansburg, New York, is seeking coverage for losses stemming from a COVID-19 shutdown, saying communicable diseases are covered by its insurance policy.

In a partial summary judgment motion filed Friday in New York federal court, Mohawk Gaming Enterprises said that Affiliated FM Insurance must cover its claim under a business interruption extension in the policy, rejecting the insurer's argument that the novel coronavirus fits into a so-called "contamination exclusion."

The northern New York tribe closed its casino on March 17 as a result of a COVID-19 outbreak at nearby St. Lawrence College in Cornwall, Ontario, it said, claiming that Affiliated's ProVision policy covers closure orders that are caused by physical damage within 5 miles of the casino.

"The policy provides that the presence of a communicable disease is physical damage and the actual presence of a communicable disease is a covered injury," Mohawk Gaming wrote.

"In this case," the casino manager continued, "an actual communicable disease incident, a positive case of COVID-19, had occurred at St. Lawrence College, within five miles of the casino, and that incident resulted in the closure order."

According to Friday's motion, Affiliated denied Mohawk Gaming's March coverage claim on July 21, saying that viruses fall under the policy's contamination exclusion and do not constitute "physical damage" covered under the policy.

But the casino manager countered Friday that the contamination exclusion covers costs, not business interruption losses. Also, Mohawk Gaming said, "communicable disease" is defined separately in the policy as a covered occurrence.

"The important factor is transmissibility, the key which distinguishes a 'communicable disease' from 'contamination,'" Mohawk Gaming said. For example, the Zika virus would not be covered because it is spread by mosquitoes, but the coronavirus fits the bill because it is "highly contagious," it said.

Affiliated's reading, Mohawk Gaming added, "would cause the exclusion to swallow the coverage."

St. Lawrence College's campus shut down on March 15 after a student who had recently traveled to New York City tested positive for COVID-19, according to Friday's motion. The St. Regis Mohawk Tribe quickly issued its own shutdown order, and Mohawk Gaming subsequently lost "millions of dollars," the Friday motion said.

The casino reopened in late August, according to the manager's legal team. The 150-room resort is located about 10 minutes south of the Canadian border in Franklin County, New York. 

In its June 23 complaint, Mohawk Gaming sought "at least" $15.26 million, which it said accounts for lost gross earnings, damages and attorney fees.

The complaint also accused Affiliated of committing fraud by denying coverage "based on a contorted interpretation of the policy that was adopted ... on a company-wide basis to create a pre-conceived and prepared basis for denial of any COVID-19 claim." The fraud count was not addressed in Friday's pre-discovery motion. 

Damages sought have since climbed north of $28 million, according to Mohawk Gaming's counsel. 

"We simply want Affiliated to fulfill its contract," said attorney Marsha Schmidt in a Monday email to Law360. "It promised communicable disease and closure order coverage and given COVID-19 is a communicable disease it seems clear to us."

Affiliated spokesperson Steve Zenofsky told Law360 on Monday that "AFM values the long-term relationships we have with our policyholders, and we are proud in leading the industry for claims service. It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided."  

Mohawk Gaming Enterprises is represented by Marsha K. Schmidt and Lisa A. Coppola of the Coppola Firm.

Affiliated FM Insurance is represented by Robert F. Cossolini of Finazzo Cossolini O'Leary Meola & Hager LLC.

The case is Mohawk Gaming Enterprises, LLC v. Affiliated FM Insurance Co., case number 8:20-cv-00701, in the U.S. District Court for the Northern District of New York.

--Editing by Gemma Horowitz.

For a reprint of this article, please contact reprints@law360.com.

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