AIG Asks Ninth Circuit to Uphold Ruling On Circus Circus COVID-19 Claims

Posted on: July 13, 2021, 12:18h. 

Last updated on: July 13, 2021, 02:43h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

AIG Specialty Insurance Co. is asking the Ninth Circuit Court of Appeals to uphold a US district court’s ruling. The lower court ruled that the carrier isn’t on the hook to pay coronavirus-related damages to Circus Circus LV LP, operator of the eponymous Las Vegas Strip casino.

Circus Circus
Police vehicles parked in front of the Circus Circus Las Vegas sign, where the owner is suing its insurance company. That provider is asking a court to dismiss the case. (Image: 8 News Now)

Circus Circus, owned by billionaire Bruce Ruffin, brought the litigation against American International Group (AIG) last year. The company claimed the insurance provider refused to cover losses stemming from the coronavirus pandemic.

At that time, attorneys for the gaming company said the insurance firm was relying on “sleight-of-hand, distortions of fact, and contortions of law” to avoid paying claims. In March 2021, US District Judge Jennifer A. Dorsey of the District of Nevada ruled in favor of AIG, noting Circus Circus failed to assert that the venue suffered property damage that would be considered physical loss under the terms of its policy.

Dorsey did, however, rule that the gaming company can amend its complaint. If it did so, that would include allegations that AIG is violating Nevada’s unfair claims provisions by purposefully lengthening legal proceedings.

Circus Circus told the Ninth Circuit in May that Dorsey’s ruling was “wrong from the very first sentence,” because the suit isn’t economic losses, but rather, AIG’s obligations to cover physical loss and damage to the Strip casino.

AIG Says Circus Circus Argument Flawed

Because of the pandemic, gaming operators last year faced lengthy shutdowns, which essentially forced temporary zero-revenue operating climates. As a result, it’s been common for companies in the industry to pursue litigation against insurance providers, arguing that COVID-19 is a force majeure event and that carriers are obligated to payout.

However, the American Property Casualty Insurance Association, a trade association comprised of companies like AIG, said last year the losses endured by casino operators were likely uninsurable. In the Circus Circus case, AIG is arguing that COVID-19 is not comparable to fire damage or noxious fumes, which would constitute physical damage the insurer would be obligated to cover.

Circus does not allege COVID imbeds in property such that it must be repaired or replaced; rather, Circus concedes COVID-19 has temporal limitations and will not be ‘detectable’ after a matter of hours or days,” said the insurance provider in a brief filed to the Ninth Circuit.

Ruffin’s company claims AIG is trying to exploit a pollutants or contaminants clause in the policy, and that a communicable disease clause could have been added to the policy to protect the carrier, but the provider opted against that.

Recasting Allegations

In its brief to the Ninth Circuit, AIG chastises Circus Circus for remaining open until the last minute it was able to do so prior to the March 2020 shutdown order going into effect. The insurance company says the casino could have closed earlier and opted not to do so, even though it acknowledged COVID-19 was on its property for months beforehand.”

AIG goes on to note courts across the US are rejecting companies’ efforts to recover economic losses stemming from coronavirus closures.

“Attempting to avoid the same fate, Circus recast its allegations and argued what it actually meant to allege was that it also closed because of the physical presence of the COVID-19 virus on its property,” according to the AIG legal document. “That coverage theory doesn’t pan out, either. Courts both inside and outside the Ninth Circuit have interpreted physical loss or damage’ to require a distinct, demonstrable, physical alteration of property or a physical change in the condition of property.