AC Casinos at the Mercy of the NJ Supreme Court over Insurance Payouts

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Years after suffering irreversible financial damage because of COVID-19, casino operators are still fighting with insurance carriers that have neglected to cover claims. In New Jersey, the state's Supreme Court could soon determine if they'll have to pay.

Atlantic City Casinos Want Compensation

Anticipated deliberation by the New Jersey Supreme Court looms as it grapples with determining the eligibility of Atlantic City casinos to claim compensation from business interruption insurance for the economic setbacks endured during the COVID-19 pandemic. This pivotal ruling has the potential to set a precedent nationwide, shaping the scope and inclusivity of disease-related loss coverage provided by regulatory bodies.

Prior to the outbreak of the COVID-19 pandemic, it was widely acknowledged within the insurance sector that the existence of a virus or any hazardous substance, or the immediate threat of its presence within the insured individual, has the potential to meet the requirements for physical harm or damage to property, according to one's own subjective evaluation.

In an effort to contain the spread of the pandemic, Governor Phil Murphy of New Jersey took decisive action in March 2020 by issuing a series of executive orders that effectively shuttered the casino until the early days of July of the same year.

However, AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co. and Interstate Fire & Casualty Co. have all denied operators' claims for coverage. The carriers have repeatedly denied coverage, asserting that the casinos didn't incur immediate physical loss or damage.

Related: New Jersey's Gambling Industry Faces Contrasting In-Person and Online Trends

In court, Atlantic City's Ocean Casino Resort stated that the presence and potential danger of the coronavirus have severely affected the physical integrity of the building, rendering it unusable, unsafe, and unsuitable for its intended purpose.

The casinos held their ground against the insurers' attempts to dismiss the case, resulting in a successful lawsuit. However, the judgment was challenged when the appeal court reversed the initial outcome.

Long-Running Battle

The matter has been brought up in state and federal courts nationwide, with instances seen in bankruptcy suits related to movie theaters in California, a sales office in Los Angeles, a Pennsylvania hotel, and a law firm and hotel in New Jersey.

Ocean, in court documents, expressed the importance of this case in settling a long-standing dispute between generations. The resolution of this controversy by the court will bring much-needed clarification to numerous policyholders and their insurers in New Jersey, regarding the scope of coverage for the damages inflicted by this ailment.

Last year, the Supreme Court made a decision to address certain matters within the case. These matters encompass the determination of whether claimants can assert physical loss or damage to their property due to the detrimental effects of the COVID-19 pandemic, as well as the permissibility of insurers to deny coverage for associated losses, without the influence of pollution concerns.

In a plea to the court, United Policyholders, an insurance collective devoted to safeguarding consumers' interests, urged the justices to render a verdict favoring the casino. According to its brief, complying with the desired decision of the insurers would inevitably curtail coverage for countless users residing in New Jersey.

The state Supreme Court will debate the case today.

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