Connecticut court rules against Mohegan Sun in Covid-19 insurance coverage lawsuit

Mohegan Gaming & Entertainment, a business arm of the Mohegan tribe and operator of the Mohegan Sun casino and resort in Uncasville, Connecticut, has lost its Covid-19 insurance claim. Insurance firm Factory Mutual Insurance Co. (FMI) has succeeded in having a suit filed by the tribal operator dismissed.

The Mohegan tribe had sought payment under its FMI commercial property policy for millions of dollars in business losses alleged to have been the result of having to close its doors for about two weeks in 2020, amid the Covid-19 pandemic. The tribal authority first filed a suit about a year ago, alleging breach of contract and bad faith for refusing to cover the losses.

But FMI has now won the dispute, reports Insurance Journal. The state Superior Court in Hartford dismissed last week the suit, agreeing with the insurance firm that the tribal authority “failed to show that the virus caused any physical loss or damage” to the property, as required by the commercial policy.

Thus, the casino operator has been denied reimbursement, a decision in line with the majority of rulings that have sided with insurers in their denials of Covid-19-based claims for business interruption losses. The tribe had unsuccessfully attempted to argue that the virus did not actually have to be present at the property for coverage to kick in, reports Law 360.

In his ruling, Connecticut Superior Court Judge Cesar Noble wrote that the Authority failed to “sufficiently allege” that the cessation of operations was due to the “actual, not suspected, presence of COVID-19 at the Resort.” To date, no insurer has been ordered by a court to pay out property coverage for physical damage incurred by the pandemic.

In May, a Nevada federal judge ruled that the operator of Circus Circus Hotel and Casino in Las Vegas was owed no insurance coverage for business income losses resulting from Covid-19-related shutdown orders imposed last year. That same month, The Cordish Companies also faced a defeat when the US Court of Appeals for the Fourth Circuit in Richmond, Virginia, ruled against the Maryland Live! Casino operator on a similar case.

In those suits, operators also failed to prove tangible damage that could be considered a direct physical loss under their policies. The lawsuits provided no supporting factual allegations as to how Covid-19 physically altered any property.

Last month, Connecticut's Foxwoods Resort Casino and Mohegan Sun both reported a year-over-year decline in their April slot machine revenues. Foxwoods kept $29.7 million, a 45% decline compared to April 2021; while Mohegan Sun won $42.7 million, perceiving a 3.5% drop year-over-year. The properties contribute 25% of their slots winnings to the state.