Las Vegas: Treasure Island Casino's COVID-19 insurance lawsuit advances to trial amid coverage dispute

Las Vegas casino Treasure Island's legal battle with Affiliated FM Insurance Company over coverage for losses incurred during the COVID-19 pandemic has progressed to trial following a federal judge's decision to deny the insurer's motion for summary judgment.

In the case of Treasure Island LLC v. Affiliated FM Insurance Co., a federal judge in Nevada’s District Court ruled that significant questions remain regarding whether the casino sustained physical loss or damage and the applicability of exclusions in its all-risks insurance policy. However, the judge did grant summary judgment to the insurer on Treasure Island’s claims for bad faith and violation of the Nevada Unfair Claims Practices Act.

Treasure Island initiated the lawsuit against AFM in July 2020 after the insurer refused to pay for property insurance claims related to pandemic-induced business losses. The casino, owned by billionaire Phil Ruffin, contends that the losses were caused by physical damage due to the presence of the virus on its premises.

The judge's decision follows Treasure Island's argument that the communicable disease provision in its insurance policy contradicts the contamination exclusion, creating ambiguity in the policy's language. This ambiguity, the casino asserts, supports its claim that coverage should extend to losses stemming from the virus.

The lawsuit's outcome hinges on whether the casino's property was physically damaged by the virus, a determination that will impact the applicability of various policy exclusions, including the loss of use exclusion and communicable disease provision.

The trial is expected to proceed later this year, pending any appeal by the insurance firm, marking a rare instance in which a casino's COVID-19 insurance dispute advances to trial amid widespread legal battles between insurers and policyholders across the country.