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Law360 (December 18, 2020, 8:38 PM EST) -- An insurer for the Saint Regis Mohawk Tribe's Akwesasne Mohawk Casino Resort has urged a New York federal court to grant it a quick win in a suit seeking business interruption coverage following the casino's closure due to COVID-19, saying there was no physical loss or damage.
Affiliated FM Insurance Co. argued Thursday in a cross-motion for judgment on the pleadings that casino owner Mohawk Gaming Enterprises LLC has failed to show that the insurer must cover the loss of business income that allegedly resulted from the closure under the casino's all-risk property insurance policy.
The policy provided coverage for "all risks of physical loss or damage" to Mohawk's insured property, but Mohawk doesn't allege that the coronavirus caused physical loss or damage to casino property or even that the virus was ever present there, according to Affiliated. Instead, Mohawk wrongly bases its claim on the policy's civil authority provision that provides business interruption coverage if a civil order prohibits access to a location due to the direct result of physical loss or damage at a location or within five miles of it, according to Affiliated.
But, the insurer said, the Saint Regis Mohawk Tribal Council ordered the casino closure because a student infected with the virus visited a nearby college campus located within five miles of the casino, on an unspecified date.
"Mohawk alleges in a conclusory manner that the student's presence at the college constituted 'physical loss or damage' to property at the college, that the claimed damage to the college's property constituted physical loss or damage of the type insured under the policy, and that the closure order was a direct result of that alleged physical loss or damage," Affiliated said.
Mohawk Gaming Enterprises in a Nov. 6 partial summary judgment motion argued that Affiliated 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 150-room casino resort in Hogansburg, New York, near the Canadian border on March 17 as a result of a COVID-19 outbreak at nearby St. Lawrence College in Cornwall, Ontario, the tribe said, claiming that Affiliated's policy covers closure orders that are caused by physical damage within five miles of the casino.
The campus had shut down on March 15 after the student who had recently traveled to New York City tested positive for COVID-19, according to the Nov. 6 motion. The St. Regis Mohawk Tribe quickly issued its own shutdown order, and Mohawk Gaming subsequently lost "millions of dollars," the motion said.
"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 said. "In this case, 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 the 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.
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. Damages sought have since climbed north of $28 million, according to Mohawk Gaming's counsel.
Counsel for Affiliated FM and Mohawk Gaming did not immediately respond Friday to requests for comment.
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, Piel A. Lora and Edward T. Hagan 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.
--Additional reporting by Emma Whitford. Editing by Gemma Horowitz.
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