New Jersey Supreme Court rules against Ocean casino in COVID business interruption case
ATLANTIC CITY, NJ — The New Jersey Supreme Court ruled Wednesday that an Atlantic City casino is not entitled to business interruption insurance payouts for losses during the COVID-19 outbreak, ruling that the presence of the virus did not constitute the type of “direct physical loss or damage” that was necessary for such a payment.
The case involved Ocean Casino Resort’s claims against three insurance companies: AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co. and Interstate Fire & Casualty Co. These insurers largely denied payouts to the casino, saying it had suffered no direct physical loss or damage as a result of the virus.
The casino sued and rejected an attempt by insurers to dismiss the case. But that decision was reversed by an appeals court.
The Supreme Court agreed to hear the case to resolve the legal question of what constituted loss or damage.
“Based on the clear terms of the policies, we conclude that to demonstrate a ‘direct physical loss’ of property or ‘direct physical loss’. . . damage to his property under the policy language at issue (parent company AC Ocean Walk LLC) was required to show that his property had been destroyed or altered in a manner that rendered it unusable or uninhabitable,” the court wrote in a unanimous decision.
“At most, the company has alleged that the company suffered a loss during the government-mandated suspension of business operations due to COVID-19 because it was not allowed to use its properties as it otherwise would have done,” the opinion said.
It concluded that the casino’s pleadings “do not support a finding that it is entitled to insurance coverage.”
The casino declined comment Wednesday.
The ruling is similar to others reached in state and federal courts across the country, including cases in which payouts were denied involving a chain of movie theaters in California; a real estate company in Los Angeles; a group of hotels in Pennsylvania; and a group of hotels and a law firm in New Jersey.
During arguments in September before the Supreme Court, Stephen Orlofsky, an attorney for Ocean, said the casino has taken several steps to respond to the virus, including using air filtration systems and using “industrial” cleaning products.
But David Roth, an attorney for American Guarantee, said the policy requires that there be physical damage to the property, which he said did not occur at the casino. He said 14 high courts across the country have ruled that the mere interruption of business activities during the pandemic does not constitute physical losses.
Ocean claimed that in addition to an order from Democratic Gov. Phil Murphy to close the casinos for 3 1/2 months in 2020, it also closed due to “the concerns the virus was having on the physical surfaces and in the air” in the casinos . casino.
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