Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our California newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (March 22, 2021, 10:27 PM EDT) -- Gaming industry giant Caesars Entertainment Inc. has brought more than 36 property insurers to Nevada state court, alleging the carriers should pay for its over $2 billion in pandemic-related losses after it gave COVID-19 sick pay to over 15,000 employees and had more than 2 million cancellations.
In a complaint filed Friday, the entertainment company said that it has paid over $25 million in annual premiums under its $3.4 billion all-risk policies, which do not exclude virus or pandemic losses, but none of its insurers has met their obligations to provide benefits after its insurance claims were filed last year.
The Reno, Nevada-based company operates over 50 properties and seven golf courses under several brands and is one of the largest gaming companies in the world. Caesars said it has experienced property damage after more than 2,600 staff and visitors, who had been present at its insured properties, tested and reported positive for COVID-19. The virus was spread through airborne droplets that physically attached to the surfaces of its property, it said.
"During the pandemic, Caesars has paid approximately 15,000 employees COVID-19 sick pay because they either tested positive for COVID-19 or were forced to quarantine because they came in contact with an infected individual," the company said.
The casino and hotel giant named more than three dozen carriers in the suit including ACE American Insurance Co., Evanston Insurance Co., Hallmark Specialty Insurance Co., Everest Indemnity Insurance Co. and Lloyd's of London. It has also included insurance units under Allianz, Liberty Mutual, Great American, Chubb and AXA among others in the complaint.
Caesars said its 65,000 gaming machines, 3,400 table games, and 47,000 hotel rooms that closed from March to June 2020 due to government orders are covered under its all-risk policies. More than 110,000 daily guests visited its properties, but after the pandemic hit, they lost their primary use of for operating the business. This created a direct physical loss or damage to property, as required for coverage under its policies, it said.
The virus particles "have been omnipresent at Caesars' Covered Properties throughout the course of the pandemic, and their complete elimination from the indoor air and surfaces at the Covered Properties is physically impossible at this stage," it added.
Although some of its policies contain a contamination exclusion, it only precludes coverage for traditional environmental pollution, not pandemic conditions, it says. The company said it does not seek decontamination or pollutant cleanup costs because COVID-19 is neither a contaminant nor a pollutant.
Additionally, the fact that its insurers added "communicable Disease/Pandemic exclusion" to preclude all virus-related losses to its 2021 policy forms confirms that its 2020 and previous years' policies cover virus and pandemic losses, it added.
The hotel giant said that since the start of the pandemic it has suffered significant workforce disruptions and had to furlough a great number of its 79,000 employees and cut pay. The company said more than 3,600 groups canceled events at its venues and that it has experienced some 2 million hotel cancellations resulting in over $2 billion in losses.
The company is seeking a declaration that its COVID-19-related losses are covered under the policy, alleging its carriers breached the insurance contract and violated the Nevada Unfair Claims Practice Act, demanding over $15,000 of compensatory damages due to the insurers' refusal to provide coverage, with the exact amount to be determined in a jury trial.
The entertainment giant's suit followed a string of actions filed by the hospitality and gaming industry against their insurers seeking coverage for COVID-19 losses. Earlier this month, Detroit Entertainment LLC, the owner of the Motor City Casino Hotel, told Michigan state court its Zurich affiliate insurer owes it $270 million for pandemic-related losses.
Last week, Bradley Hotel Corp., the owner of an Illinois Quality Inn & Suites urged the Seventh Circuit to revive its proposed class action alleging Aspen Specialty Insurance Co. is responsible for its COVID-19 losses. Bradley said that its inability to use the hotel's restaurant and convention center was clearly covered by losses under Aspen's all-risk policy.
Earlier this month, the owners of the Sacramento Kings and its downtown arena, plus a nearby hotel and shopping complex, alleged Factory Mutual Insurance Co. owed $850 million for pandemic-related losses in California federal court.
Representatives for the parties could not be immediately reached for comment Monday.
Caesars is represented by Frank M. Flansburg III of Brownstein Hyatt Farber Schreck and Brook Roberts and John M Wilson of Latham & Watkins LLP.
The case is Caesars Entertainment Inc. v. ACE American Insurance Co., case number A-21-831477, in the District Court of Clark County in Nevada.
--Additional reporting by Shawn Rice. Editing by Andrew Cohen.
Update: This story has been updated with case number information.
For a reprint of this article, please contact reprints@law360.com.
