New Jersey Supreme Court to rule whether Atlantic City casino can get insurance payouts for pandemic losses

New Jersey’s Supreme Court is expected to consider whether an Atlantic City casino can get payouts from business interruption insurance for losses during the COVID-19 outbreak, potentially providing guidance for policyholders nationwide regarding the scope of coverage for pandemic-related losses.

The state’s high court is scheduled to hear arguments Wednesday in a case brought by the owners of the Ocean Casino Resort, which had $50 million in business interruption insurance before the 2020 virus outbreak.

Three insurers — AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co. and Interstate Fire & Casualty Co. — largely denied coverage to the casino, saying it did not suffer direct physical loss or damage because of the virus.

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The casino sued and defeated an attempt by the insurers to dismiss the case. But that decision was reversed by an appellate court.

The issue has arisen in state and federal courts around the country, including cases where payouts were denied involving a chain of California movie theaters; a Los Angeles real estate firm; a group of hotels in Pennsylvania, and a group of hotels and a law firm in New Jersey.

“This case presents a generational legal dispute that this court should resolve in order to provide needed clarity to hundreds of thousands of affected New Jersey policyholders and their insurers regarding the scope of coverage for losses arising from the pandemic,” Ocean wrote in court papers.

Last year, the Supreme Court agreed to resolve some questions regarding the case.

They include whether a claim that the coronavirus physically damaged insured property is enough to allege “direct physical loss of or damage to” it, and whether insurers can legally restrict coverage for pandemic-related losses by mentioning viruses in general pollution or “contamination” exclusions.

New Jersey Gov. Phil Murphy issued an executive order in March 2020 closing the casinos until early July of that year due to the pandemic.

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The casino sought payouts for losses incurred during that time under policies from the three insurers.

“The actual and/or threatened presence of coronavirus particles at the Ocean Casino Resort rendered physical property within the premises damaged, unusable, uninhabitable, unfit for its intended function, dangerous, and unsafe,” the casino wrote in court papers.

United Policyholders, an advocacy group for insurance customers, urges the justices in a friend-of-the-court brief to rule in favor of the casino.

“The ruling sought by the (insurers) here would curtail coverage for millions of New Jersey policyholders,” it wrote. “The insurance industry at large understood, prior to the COVID-19 pandemic, that the presence of a virus or any dangerous substance, or the imminent risk of its presence at (an) insured property was capable of satisfying their own understood meaning of ‘physical loss or damage’ to property.”


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