On March 19, Caesars Entertainment joined the long list of businesses that have filed lawsuits against their insurance companies for refusing to pay business interruption losses stemming from COVID-19-related government shutdowns of economies across the nation and world. Whether Caesars, which asserts that losses its various business entities incurred may exceed $2 billion, succeeds where a lot of other plaintiffs have failed will be worth monitoring.
Caesars describes itself as “the largest casino-entertainment company in the United States and one of the world’s most diversified casino-entertainment providers.” The suit lists about 60 insurers as defendants. Caesars claims it bought $3.4 billion of all-risk insurance for business interruption losses “precisely to cover catastrophic situations at its properties.” Regardless, insurers have refused to pay for Caesars’ “devastating losses,” Caesars says. Therefore, it decided to sue. Caesars says the insurers “are keenly aware of Caesars’ rights to coverage for its losses under the policies at issue here, and have increased premiums accordingly and inserted new exclusions in subsequent policies.”
Caesars filed suit in District Court, Clark County, Nevada. The complaint points out that, prepandemic, Caesars employed more than 79,000 people. “As of the date of filing, Caesars has been forced to significantly reduce its pre-COVID-19 workforce.” The complaint discusses the economic impact of the virus and the “crippling” government-mandated closures on the economy in Nevada, and particularly Las Vegas.
“Nevada’s labor market has been especially hard hit,” the complaint says, noting Caesars had to shut down properties in March 2020 based on orders of the gaming control boards and other civil authorities. Since then, other orders varying by degree and location have continued and “substantially impacted” the company’s properties and businesses, the suit asserts.
As BVLaw’s limited tracking of COVID-19-related cases has shown, many suits fail in the pretrial, motion-to-dismiss stage, frequently because defendant insurers are able to show that their policies include a “physical damage or loss” requirement that, many courts have found, the plaintiffs are unable to meet. Another stumbling block are virus exceptions built into the policy.
Caesars’ complaint argues the virus contaminated all the grounds and, in this way, caused physical damage to the property. It talks about “the tangible, physical presence” of the coronavirus on surfaces or in the air of its properties, which “alters, damages, and renders the physical property unfit and unsafe for its intended use.”
“Caesars fortunately had the foresight to purchase broad insurance from the Defendant All Risk Insurers,” the complaint says. Caesars notes that this type of comprehensive coverage “is very expensive. Caesars paid over $25 million in premiums for the policy year at issue.”
The complaint also points out that most “of the highly sophisticated insurance companies” issuing the all-risk policies did not include a virus exclusion for 2020. The complaint says the lawsuit specifically excluded insurers that included the exclusion from the defendant list.