United States
United Kingdom
Summary:
- Ocean Casino seeked millions in payout from three insurers over losses incurred during COVID-19
- The Supreme Court ruled Ocean’s pandemic-related losses did not constitute physical loss or damage
- Several other firms throughout the US launched similar cases but were also unsuccessful
Ocean Casino Resort has lost its pandemic-related business interruption insurance case against its three insurers, with the New Jersey Supreme Court ultimately ruling that the Atlantic City casino is not entitled to insurance coverage as the losses it suffered during COVID-19 did not constitute direct physical loss or damage.
Supreme Court Rules Against Ocean Casino
Ocean Casino sued three insurance companies – AIG Specialty Insurance Co., Interstate Fire & Casualty Co., and American Guarantee & Liability Insurance Co. – for failing to pay out for financial losses it sustained when it was forced to suspend its operations due to COVID-19. The defendants refused payouts to the casino, arguing that the property did not suffer any physical damage during the pandemic.
The insurance firms initially lost in their attempt to have the case dismissed, but that ruling was overturned by an appellate court earlier this year. The New Jersey Supreme Court was compelled to interfere in the case to provide clarity concerning the scope of insurance coverage for pandemic-related losses.
The parties presented their arguments before the Supreme Court in September 2023, with the insurance providers arguing that viruses are explicitly excluded from coverage. The defendants maintained that Ocean’s financial losses were primarily due to Gov. Phil Murphy’s shutdown order and that the casino did not suffer any actual damages to its premises due to COVID-19.
Ocean countered by saying it was forced to temporarily cease operations during the pandemic not only because of the shutdown order from Gov. Murphy but also because of the threat that the virus posed on the physical surfaces and the air inside the property.
Ruling against Ocean through a unanimous decision, the Supreme Court concluded that the casino failed to demonstrate that its property suffered direct physical damage that rendered it unusable or uninhabitable. Thus, Ocean is not entitled to insurance coverage, the court ruled.
COVID-19 Business Interruption Insurance Cases Rarely Successful
New Jersey Supreme Court’s ruling mirrors those reached in various state and federal courts across the US. Several companies, including a Los Angeles real estate firm, a group of hotels in Pennsylvania and New Jersey, and a chain of movie theaters in California, launched similar cases but were unsuccessful.
While Ocean was denied a payout for losses incurred during COVID-19, it did receive $850,000 under a separate policy provision relating to communicable diseases. As of this writing, the casino has yet to issue a statement on the Supreme Court’s ruling.
