MS Gulf Coast casino sues insurer over failure to cover millions in COVID-19 losses
Island View Casino Resort in Gulfport is suing its insurance carrier over so far refusing to cover substantial business losses caused by a 65-day COVID-19 shutdown in the spring.
The casino says in the lawsuit, moved from state to federal court by the insurer, that it is owed policy limits of $10 million for much higher losses during the shutdown.
The resort says in the lawsuit that it lost $46.2 million in net revenue when it was closed from March 16 until May 21 under orders from the Mississippi Gaming Commission.
The lawsuit alleges breach of contract and negligence against Georgia-based Westchester Surplus Lines Insurance Co., which enlisted nine additional companies — called endorsement participants or EPs — to cover insured losses.
In the lawsuit, Island View is seeking policy limits of $10 million on booking cancellations, plus $90 million in punitive damages, attorney’s fees and interest.
Gulfside Casino Partnership, Island View’s owner, submitted its claim for losses due to cancellations by April 29, when an insurance adjuster was assigned to assess the claim, the lawsuit says. In May, GCP submitted additional information the adjuster requested.
In July, an adjusting company for the insurance carrier sent a “reservation of rights” letter that pointed out exclusions in the policy and other information.
“The RR letter was a shot across the bow by Westchester and the other EP (endorsement participants) that the claim may be denied, or the claim investigation will continue indefinitely, not withstanding the ongoing financial hardship GCP was enduring,” the lawsuit says.
Island View joins a variety of U.S. businesses, including casinos, suing insurers over failure to cover COVID-19 losses.
Physical damage vs. coronavirus losses
Gulfport attorney Joe Sam Owen, who represents GCP, said legal disputes over COVID-19 insurance claims have generally boiled down to the definition of “physical damage.”
Insurance companies argue the property must suffer actual physical damage, as it would in a hurricane, to recover losses under their policies.
But GPC’s policy specifically says it covers losses caused by canceled bookings, or the inability to accept bookings, caused by “a contagious or infectious disease at an insured location, as determined by a public or civil authority . . . “ The loss is covered, the policy says, “whether or not physical damage occurs to the property.”
The cancellation coverage cost Island View an annual premium of $408,268.
The insurance adjusting firm, Crawford Global Technical Services, said in its July letter to GCP: “As a general matter, the policies afford coverage only when there has been direct physical loss, damage or destruction. In the absence of such damage, there is not coverage.”
Pollutants and contaminants, including viruses, are listed in an underlying policy as being excluded from coverage, the letter said. It also said other policy language states that “communicable disease” is not covered.
“It gets down to inconsistencies in the language of the policy,” Owen said. Inconsistencies generally are interpreted in a policyholder’s favor because he or she must accept the policy as written by the insurer.
Insurance policy changes without notice, lawsuit says
The policy covers Island View properties on U.S. 90, including its northside and beachside casinos, hotel, restaurants, bars and spa. It also covers GCP’s Windance Country Club. All the businesses closed under COVID-19 orders.
Overall, GCP paid an annual premium of more than $3.6 million for property insurance that covered up to $300 million in losses for a single event.
To add insult to injury, GCP says, the annual premium increased 20%, to more than $4.5 million, to renew the policy with reduced coverage for the policy period that runs from May 2020-21.
The lawsuit alleges negligence because, it says, Westchester failed to follow state law by notifying GCP in advance of substantial changes to the policy.
GCP had no option but to renew the policy required by its lenders, the lawsuit says.
This story was originally published November 20, 2020 at 5:50 AM with the headline "MS Gulf Coast casino sues insurer over failure to cover millions in COVID-19 losses."
