Law360 (April 15, 2021, 8:14 PM EDT) -- Affiliated FM Insurance Co. is not required to cover Mohawk Gaming Enterprises LLC's business interruption losses from closing its casino due to a positive COVID-19 test at a nearby college, a New York federal judge ruled Thursday, saying there wasn't any physical loss.
U.S. District Judge David N. Hurd held that Affiliated FM's civil authority coverage wasn't triggered for the losses to the Saint Regis Mohawk Tribe's Akwesasne Mohawk Casino Resort, which is owned by Mohawk Gaming. The New York casino closed after a COVID-19 exposure incident at St. Lawrence College, a nearby college located a few miles away in Kingston, Ontario, according to court records.
"Indeed, numerous courts around the country — including those that have applied New York law — have routinely held that the mere presence or spread of the novel coronavirus is insufficient to trigger coverage when the policy's language requires physical loss or physical damage," Judge Hurd said.
Mohawk Gaming filed suit back in June, alleging the civil authority provision in Affiliated FM's policy covers the business interruption losses caused by the pandemic. The gaming company brought claims for breach of contract, fraud and a violation of New York law.
Mohawk Gaming moved for partial summary judgment, arguing a "contamination exclusion" didn't bar its business income loss. Affiliated FM cross-moved for a judgment on the pleadings, arguing the casino's closure wasn't a physical loss triggering coverage under the civil authority provision.
In Thursday's ruling, Judge Hurd sided with Affiliated FM, finding there wasn't any physical loss or damage to the casino or the college, which was within the policy's five-mile radius requirement.
Mohawk Gaming had argued that the presence of the coronavirus was "physical damage" under the communicable disease provisions triggering coverage for the losses. But Judge Hurd said the gaming company needed to allege the "actual not suspected presence of communicable disease" at the casino.
"Mohawk Gaming has only alleged 'actual not suspected' exposure at the college, not at the casino or at another 'described location' listed as insured under the policy," the judge said. "Even assuming otherwise, the presence of the novel coronavirus at the casino would still not qualify as 'physical damage.'"
Finally, Judge Hurd rejected the gaming company's attempt to portray Affiliated FM's coverage decisions on the COVID-19 pandemic as something affecting the entire business interruption insurance market.
Steve Zenofsky, Affiliated FM's assistant vice president of public relations, told Law360 in an email that the insurer values its relationships with policyholders and is a proud leader in the claims service industry.
"It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided," Zenofsky said in a written statement Thursday.
Representatives for Mohawk Gaming did not respond to requests for comment.
Mohawk Gaming is represented by Lisa A. Coppola of The Coppola Firm and Marsha K. Schmidt of Marsha K. Schmidt, Attorney-at-Law.
Affiliated FM is represented by Robert B. Meola, Edward Terrence Hagan, Piel Lora and Robert Francis 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.
--Additional reporting by Daphne Zhang. Editing by Abbie Sarfo.
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