By Dave Sebastian 

Caesars Entertainment Inc. sued a group of insurance carriers, accusing them of declining to cover an estimated loss of more than $2 billion because of the Covid-19 pandemic.

The casino and hotel company alleges in the lawsuit that it had purchased property insurance coverage to protect against "all risk of physical loss or damage" and resulting business interruption. Most of the policies don't exclude loss or damage caused by a virus or pandemic, Caesars said in the lawsuit filed Friday in the Eighth Judicial District Court of Clark County, Nev.

The company said it has paid more than $25 million in premiums to secure the all-risk policy portfolio providing more than $3.4 billion in coverage limits. Caesars, which was formed as a result of Eldorado Resort Inc.'s combination with Caesars Entertainment Corp. last year, swung to a loss of $1.76 billion in 2020.

The suit is the latest case of a company trying to recover lost business during the pandemic through insurance. The insurers have had the upper hand so far. Of the more than 200 rulings in suits pitting businesses against insurers, more than 80% have been in favor of insurers, according to a Covid-19 litigation-tracking effort at the University of Pennsylvania Carey Law School.

The corporate-insurance arm of Allianz SE, which was one of the firms named as a defendant, said it wouldn't comment on individual situations, though it has been evaluating claims during the pandemic case-by-case to determine coverage.

"We will certainly honor Covid-19-related claims where they are part of our policies and cover is clear," Allianz said. "However, many businesses will not have purchased cover that will enable them to claim on their insurance for Covid-19 pandemic losses."

The insurance carriers in the suit include select subsidiaries of Chubb Ltd., Markel Corp. and Aspen Insurance Holdings Ltd. as well as certain underwriters at Lloyd's of London. Chubb, Markel and Aspen declined to comment. Lloyd's, an insurance marketplace, said it isn't authorized to comment on any litigation.

Caesars, like other casino owners, shut down its properties in March 2020 as Covid-19 lockdowns began, the start of what Chief Executive Officer Thomas Reeg would later call "the most challenging year that we've had operationally and personally to date." Its properties now operate with local restrictions.

A cavalcade of restaurants, retailers and others hurt by pandemic restrictions have sued to force their insurers to cover billions of dollars in business losses. Millions of businesses across the U.S. have "business interruption" insurance.

Insurance companies have largely refused to pay claims under that coverage, citing a standard requirement for physical damage. That is a legacy of its origins in the early 1900s as part of property insurance protecting manufacturers from broken boilers or other failing equipment that closed factories. The insurance is also known as "business income" coverage.

The point of dispute in Caesars' suit is whether business disruption caused by the pandemic constitutes physical damage, a key component in an insurance claim. Caesars said the pandemic led to physical loss or damage, including losses from closures and capacity restrictions. But courts have ruled that the loss of an intended use of a property doesn't constitute physical loss or damage the same way a fire obliterates a building, said Michael Menapace, an insurance lawyer at Wiggin and Dana LLP.

"The virus itself does not physically damage property," said Mr. Menapace, who is also a nonresident scholar at the Insurance Information Institute, a trade group for insurance carriers.

In a win for insurance policyholders, the U.K. Supreme Court ruled in January that insurers must pay out disputed claims related to the coronavirus to a range of businesses. Rulings from courts outside the U.S. don't normally have an impact on insurance-coverage disputes in American courts, where judges rely on individual state laws, said industry executives and academics.

Write to Dave Sebastian at


(END) Dow Jones Newswires

March 22, 2021 17:36 ET (21:36 GMT)

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