By Andrew Westney

Law360 (June 17, 2021, 8:43 PM EDT) -- The Mashantucket Pequot Tribal Nation has urged a Connecticut state court not to toss its suit seeking coverage for over $76 million in losses at the Foxwoods Resort Casino and other businesses from the COVID-19 pandemic, saying the tribe's insurance policy, unlike many others, specifically covers such losses.

Factory Mutual Insurance Co. asked the court in early May to strike the tribe's complaint, saying the tribe's policy covering "all risks of physical loss or damage" includes an exception for viruses. And apart from that exclusion, COVID-19 does not cause "physical loss or damage" to property that would be covered by the policy, the company argued.

The federally recognized Mashantucket Pequot tribe said in its opposition Wednesday to the company's motion that Factory Mutual "is in an unenviable position relative to other insurers concerning coverage for COVID-19 losses" because its policy with the tribe is broader than other companies' coverage.

Factory Mutual "now attempts to avoid its obligation to cover insured losses arising from the COVID-19 communicable disease pandemic by hiding behind rulings other courts have entered precluding claims under substantively different policies with less generous language," the tribe said, but the company's "attempt to retroactively re-write its unique policy to align with others in the industry that it deems more favorable should not be permitted."

Under the policy, COVID-19 is explicitly deemed to be a communicable disease causing physical loss that must be covered by Factory Mutual, the tribe said.

The Mashantucket Pequot tribe filed its original complaint in late January and an amended complaint in April, seeking a declaration that Factory Mutual's policy applies to over $76 million in "covered losses and expenses" due to COVID and that the company acted in bad faith in denying the claims.

The tribe's losses are connected with multiple facilities the tribe owns and operates on and near its reservation lands in southeastern Connecticut, including the Foxwoods casino, hotels, golf courses, health care facilities, restaurants, theaters, and a museum, according to the complaint.

In its May 4 motion to strike the complaint, Factory Mutual said that its policy with the tribe specifically denies coverage for "contamination" caused by a disease such as COVID-19.

And the virus does not cause property damage, since "as many courts nationwide have now concluded, COVID-19 threatens people, not property," the company said.

Social-distancing directives from state and tribal governments don't cause covered losses because they "did not physically or tangibly alter plaintiff's property," a position that is also supported by many court decisions around the country, Factory Mutual said.

The Mashantucket Pequot tribe did obtain coverage for losses from any business interruption "caused by the presence of communicable diseases such as COVID-19 at insured locations," but that coverage does not apply because the tribe has not shown that the disease was present at its facilities, according to the motion.

The insurer added that if the disease were present at Foxwoods and other tribal properties, there would be a cap of $1 million per year for that coverage.

In its response Wednesday, the tribe said that "this is not a typical insurance coverage case involving COVID-19," because Factory Mutual "issued a unique policy form to the Mashantucket Pequot Tribal Nation that expressly covers communicable disease as 'insured physical loss or damage.'"

The tribe pointed to a Texas federal judge's decision in early May that Factory Mutual could not escape Cinemark Holdings Inc.'s suit asserting that the coronavirus damages property by changing the content of the air, saying Cinemark's losses are potentially covered under a communicable disease provision of its policy.

The tribe said that its policy with Factory Mutual "does not contain exclusions common in other policies that specifically exclude losses caused by communicable diseases and pandemics caused by viruses," and that the "contamination" exclusion it does include is inapplicable to losses from communicable disease.

The tribe also said that it had adequately alleged the "actual" and not just the "probable" presence of COVID at its properties.

In addition, the limit for communicable disease coverage does not limit available coverage under the overall policy, the tribe said.

Representatives for the parties were not immediately available for comment Thursday.

Mashantucket Pequot Tribal Nation is represented by Michael C. D'Agostino and Sergio F. Oehninger of Morgan Lewis & Bockius LLP.

Factory Mutual Insurance Co. is represented by Chase T. Rogers and Andraya Pulaski Brunau of Day Pitney LLP; and Bryce L. Friedman and Isaac Rethy of Simpson Thacher & Bartlett LLP.

The case is Mashantucket Pequot Tribal Nation v. Factory Mutual Insurance Co., case number X07 HHD-CV-21-6140378-S, in the Superior Court of Connecticut, Judicial District of Hartford.

—Additional reporting by Daphne Zhang and Shawn Rice. Editing by Peter Rozovsky.

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