By Shawn Rice

Law360 (July 12, 2021, 6:59 PM EDT) -- A London judge ruled that Caesars Entertainment Inc. must halt Nevada litigation against Markel Bermuda Ltd. over pandemic-related losses, citing an arbitration provision, a move that experts said will send the dispute to an insurer-friendly venue.

Justice Simon Bryan on Friday found that the arbitration provision in Markel's policy issued to the Reno, Nevada-based gaming industry giant was valid and binding, entitling the insurer to an anti-suit injunction. The clause required arbitration of any disputes under New York law in a London proceeding.

Caesars and Markel are expected to draft an order that would explain what the scope of the anti-suit injunction will be. According to arbitration legal experts, the injunction will be pretty broad and most likely enjoin Caesars from taking any further action against Markel in a pending Nevada state suit.

The insurers see a clear benefit to Bermuda Form arbitration, said Peter Halprin, at attorney with Pasich LLP and an arbitrator. Bermuda Forms are specialty policies with provisions, such as providing for arbitration of disputes in London under New York law. Halprin told Law360 that "it is essentially home court advantage," with "Bermudian and English insurers saying I'd rather have this dispute decided by former English justices and barristers." 

In March, Caesars hit many insurers, including Markel, with the Nevada state suit claiming various all-risk policies cover more than $2 billion in losses the company suffered during the pandemic. The losses were attributed to COVID-19 sick pay given to over 15,000 employees and more than 2 million cancellations.

Caesars said there is property damage, citing more than 2,600 staff and visitors who were present at its Las Vegas properties and tested positive for COVID-19. The virus was spread through airborne droplets that physically attached to surfaces, according to the casino and hotel giant.

Markel issued two policies to Caesars, one under its former name Eldorado Resorts Inc. The first policy provided $5 million in coverage, and the second provided $12 million. Caesars denied that the Eldorado policy contained an arbitration clause but accepted that the other policy did, according to court records.

On Friday, Justice Bryan ruled that Caesars and Markel intended for the London arbitration clause to apply New York law. But the justice explained that an anti-suit injunction would not be granted "out of fear that a foreign court or tribunal" — in this matter, the Nevada state court — "will wrongly assume jurisdiction."

Rather, the injunction was to be issued on the basis that Caesars "promised to resolve disputes only by way of arbitration governed by English law and that damages are likely to be an inadequate remedy."

Once the order is drafted, arbitration experts said, Markel can be expected to take it to the Nevada court in order to separate itself from the coverage dispute there. While the state court could still try to assert jurisdiction over Markel, experts said the U.K. court would enforce the judgment.

Larry P. Schiffer, president of Schiffer Law & Consulting PLLC and a hearing officer with National Arbitration and Mediation, told Law360 that most insurers would rather present to an arbitration panel that is more likely to be familiar with concepts of "direct physical loss of or damage to property" under a property policy.

Andrew Nadolna, a mediator and arbitrator, agreed, telling Law360 that insurance companies favor a dispute resolution method like arbitration, "given the cross-border/international nature of the coverage."

Insurers prefer specialist decision-makers as opposed to generalist judges, the confidentiality, and the nonprecedential factor of arbitration, Nadolna added, while policyholders favor courts for the availability of state-based causes of action such as bad faith and the public and precedential value of any decision.

In the COVID-19 business interruption landscape, policyholders have alleged losses from physical damage attributed to the presence of the coronavirus or loss of use from government shutdown orders.

While there are far fewer policies with arbitration clauses, according to Schiffer, policyholders with these clauses "will have even less success because arbitrators experienced in insurance understand what 'direct physical loss of or damage to property' means."

Insurers see a distinct advantage over policyholders in Bermuda Form arbitration, said Pasich's Halprin, as they are "repeat players" under clauses that "they have drafted and refined over many years." Halprin noted that Bermuda Form arbitrations follow the English system, which, unlike the U.S. system, forces the losing side to pay for the other side's costs.

Halprin expects a further increase in pandemic insurance arbitrations with reinsurance arbitrations to follow, as policyholders with large towers of insurance will likely encounter participating foreign insurers with arbitration provisions.

Counsel for Caesars declined to comment Monday, and counsel for Markel did not respond to requests for comment.

Markel is represented by David Scorey QC and Edward Brown instructed by Clyde & Co LLP.

Caesars is represented by Vernon Flynn QC and Ben Woolgar instructed by Latham & Watkins LLP.

Caesars, in the Nevada state suit, is represented by Frank M. Flansburg III and Connor H. Shea of Brownstein Hyatt Farber Schreck LLP and Brook B. Roberts and John M. Wilson of Latham & Watkins LLP.

The cases are Markel Bermuda Ltd. v. Caesars Entertainment Inc., case CL-2021-000228, in the High Court of Justice of England and Wales; and 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 Daphne Zhang. Editing by Haylee Pearl.

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