MotorCity Seeks $270 Million COVID-19 Damages from Insurer

MotorCity Casino Hotel sues the company providing its commercial property insurance because it declined a $270 million claim for losses related to the Covid-19 pandemic.

MotorCity Files Lawsuit against Swiss Zurich Insurance Group

The company behind MotorCity Casino, Detroit Entertainment LLC, filed a complaint in Wayne County Circuit this week. The 55-page complaint is against American Guarantee and Liability Insurance Co, which is based in New York and part of Swiss Zurich Insurance Group Ltd.

The MotorCity casino claims its policy covering the “physical loss of or damage” to its property requires remuneration.

Casinos in Michigan were closed mid-March until August, when they were allowed to return at 15% capacity only. As Covid cases increased and a lockdown was imposed again in November, MotorCity reopened more than a month later at 12% capacity. 

The president of MotorCity, Bruce Dall, explained in a statement the coronavirus had significantly affected the business and so far the insurance company has not honored any claims. He remained hopeful of reaching a cordial agreement. 

State Revenue Declined along with Casino Income as Well

According to the Michigan Gaming Control Board, in 2020, the casino’s revenue declined 54.9% compared to 2019. The third-largest income source for Detroit’s general fund revenue is casinos, representing 16% of the total income. 

MotorCity had paid $5.6 million in taxes to the city by June 2020. That is 93% less than what it paid in 2019 and $40.3 million to the state, a 57% decrease since 2019. 

The company aims to find out whether its policy covers the $227 million and to what degree. So far, Swiss Zurich Insurance Group determined a minimum coverage of $100,000 while the policy covers up to $750 million. 

Detroit Entertainment’s lawyer asserted the policy does not exclude coverage in the case of a virus, pandemic, or infectious disease and specifically mentions cases of civil or military interruption of normal activities. 

The casino is not only looking to recover lost income but the cost for personal protective equipment and other safety-related expenses.

Insurance Company Renounces Claim Due to Virus Exclusion Endorsement

The insurance company has denied MotorCity’s claim citing exclusion in the policy for interruption by infectious disease, but Huget argues a virus deletion endorsement would remove viruses and disease-causing agents from the Contamination Exclusion.

Huget wrote in the lawsuit that with 100 employees positive for Covid-19, the presence of the virus in the facility made the casino, hotel, and its amenities “uninhabitable, unsafe and unfit for their normal and intended uses” just like asbestos, ammonia, fumes or a salmonella outbreak would. 

Stars Entertainment Group Also Filed a Complaint Last Year

Last year the Australian casino operator The Star Entertainment Group filed a complaint in court due to a declined indemnity claim connected with Covid-19 from policy provider Chubb Insurance. 

The case is still stuck in court, with the next hearing set for April this year. So far, court decisions support the idea that actual or potential coronavirus contamination can cause physical loss or damage and would trigger business interruption coverage.  

It appears it is uncertain whether the law will side with policyholders or insurers as there is no uniform rule regarding infectious agents when it comes to insurance claims. Every business will have to carefully review its insurance policy to see if exclusions are mentioned and how they can be interpreted.