Treasure Island on the Las Vegas Strip has lost its lawsuit seeking financial compensation from its property insurer stemming from the COVID-19 pandemic.
Cristina Silva, a federal judge in Nevada’s U.S. District Court appointed to the bench by President Joe Biden, on Nov. 27, 2024, sided with Treasure Island’s property insurer — Affiliated FM Insurance Company — in the case that dates back to its May 2020 filing.
Attorneys for Treasure Island argued that the resort’s property insurance included coverage for “Communicable Disease.” The T.I. complaint detailed that the policy language said it would cover “the reasonable and necessary costs incurred for the cleanup, removal, and disposal of communicable disease from the insured property.”
Affiliated refused to pay, claiming that the coverage required that the contamination cause physical harm to the property.
Steve Sisolak, then the Democratic governor of Nevada, ordered all casinos to close between March 17, 2020, through June 4, 2020. Treasure Island is owned by billionaire Phil Ruffin, a close ally of President-elect Donald Trump.
No Treasure for Treasure Island
In April, U.S. District Court Judge James Mahan ruled that Treasure Island’s complaint had sufficient merit to proceed to a jury trial. Affiliated appealed, and the matter moved to Silva.
Treasure Island’s legal team argued that Sisolak’s order to shutter nonessential businesses to stop the spread of the coronavirus warranted coverage under its “Communicable Disease” provision. Silva, however, said the legal language of the contract shows it did not.
In her summary judgment for Affiliated, Silva cited the contamination exclusion, which read: “If contamination due only to the actual not suspected presence of contaminant(s) directly results from other physical damage not excluded by this Policy, then only physical damage caused by such contamination may be insured.”
In layman’s terms, Silva said the language means claims are only warranted for physical damage caused by contaminants.
Silva pointed to the Nevada Supreme Court case, Starr Surplus Lines Ins. Co. v. Eighth Judicial Dist. Ct., where the state’s highest court unanimously ruled against claims that the COVID-19 virus “altered the surfaces or air of the covered property” and therefore “all-risk” property insurance payouts were reasonable. The Starr Surplus decision additionally clarified that property insurers are not liable for COVID-19 claims unless the insured can prove that its property was physically harmed.
Treasure Island advances the same rejected arguments that the presence of the COVID-19 virus, or ‘fomites,’ rendered the property uninhabitable and resulted in a loss of use of the property,” Silva wrote. “Treasure Island fails to ‘demonstrate how it was subject to the type of material, tangible harm constituting direct physical loss or damage.”
Silva said the Starr Surplus outcome “conclusively forecloses Treasure Island’s breach of contract claims for relief.”
Insurers Victorious
Property insurers won nearly all COVID-19 property tax cases across the country, as judges and courts reached similar conclusions as Silva in that the virus did not do physical damage. Other casino operators who were unsuccessful in suing their property insurers include MGM Resorts, Caesars Entertainment, Mohegan, and Cordish Companies.
There were only two cases where financial damages were awarded to casinos. Both were in favor of tribal resorts.
In Connecticut, a state court ruled that Foxwoods was entitled to $2 million in coronavirus-related coverages for communicable disease response and interruption of business. Foxwoods was seeking $76 million.
In Washington, a state court ruled that the Snoqualmie Indian Tribe should receive $100K for its policy covering “all risks of physical loss or damage.” The policy capped the provision at $100K. The tribe was seeking $150 million in damages for operational losses incurred at its Snoqualmie Casino and Salish Lodge & Spa.
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