A $2 billion lawsuit by gaming industry giant Caesars Entertainment Inc. is the latest action by hospitality and gaming companies against insurance providers that have refused to cover losses from months of shutdowns in the pandemic.
Caesars, one of the world's largest gaming companies with more than 50 properties and seven golf courses under several brands, including Caesars Palace in Las Vegas, named 36 insurance companies as plaintiffs in the lawsuit filed in Eighth Judicial District Court of Clark County, Nevada, that seeks to recover business interruption losses.
While damage from the pandemic has ravaged every aspect of the economy, no sector and city has been hit harder than gaming and hospitality and Las Vegas, Caesars argued in the 80-page lawsuit it disclosed in a Securities and Exchange Commission filing this week.
"Caesars has suffered significant business interruption losses at its properties, which through the course of the pandemic have mounted to more than $2 billion and are continuing," the company said in the lawsuit and filing. Caesars did not respond to a request for additional comment.
Caesars, based in Reno, Nevada, claimed that its insurance carriers refused to pay the losses even though it paid $25 million in annual premiums for $3.4 billion in all-risk coverage. The vast majority of the company’s insurance policies do not exclude loss or damage caused by a virus or pandemic, Caesars said in the filings.
Caesars said it has paid about 15,000 employees COVID-19 sick pay during the pandemic because they either tested positive for the virus or were forced to quarantine.
The lawsuit said Caesars has experienced property damage after more than 2,600 staff and visitors at its insured properties tested positive for COVID-19. The company said the virus was spread through airborne droplets that physically attached to the surfaces of its property.
The company's arguments could face an uphill battle in court, based on data from a litigation-tracking program at the University of Pennsylvania Carey Law School. More than 80% of 240 rulings in lawsuits by businesses against insurance companies since the pandemic started a year ago have favored insurers, according to the data.
For example, an Illinois federal judge in January ruled in a lawsuit by East Moline, Illinois-based Bend Hotel Development Co. against Cincinnati Insurance Co. that the lodging company failed to prove that either COVID-19 or ensuing government shutdown orders caused physical damage to its property, according to court documents.
Leo Gibbons, a partner in the commercial and real estate litigation practice of Wilmington, Delaware-based MacElree Harvey, told CoStar News that the lawsuits underscore the importance of having specific insurance coverage against fires, floods, pandemics or other extraordinary events.
While landlords and tenants can negotiate so-called "acts of God" into their lease's force majeure clause, commercial insurance policies typically have set terms that exclude business interruptions caused by viruses, Gibbons said.
"Property owners or tenants may not give insurance the attention it deserves and they may think that they're covered when they're not," Gibbons said.
He said that both tenants and landlords should consider being insured against force majeure-type events, with particular attention paid to the language in the insurance policies that cover such events.
"While tenants and landlords often revisit their lease several times a year, you usually only interact with your insurer if you're paying the premium or there's a claim," he said. "But once you get to court, you're stuck with the language in the contract."