Mohegan Sun Loses COVID-19 Insurance Lawsuit, Insurers Maintain Unbeaten Streak

Mohegan Sun Casino & Resort in Uncasville, Ct., is the latest gaming property to see its COVID-19 insurance lawsuit be dismissed.

Mohegan Sun Casino & Resort in Connecticut. The federally recognized tribe is the latest plaintiff on the losing end of a COVID-19 property insurance lawsuit. (Image: Mohegan Sun)

The Mohegan Tribal Gaming Authority brought litigation a year ago this month against its property insurer, Factory Mutual Insurance Co. (FM). The Mohegan Tribe contended that its property insurance warranted coverage for business disruptions caused by the pandemic.

The tribe argued that its casino resort policy included provisional coverage for “communicable disease response.”

But Connecticut Superior Court Judge Cesar Noble ruled this week that the FM agreement extends only to physical property damage. Since the virus itself did no physical harm to the 364,000-square-foot casino spaces, nor the rest of the resort, FM is not legally bound to pay Mohegan Sun coverage.

Noble’s ruling is yet another loss for casinos seeking property insurance distributions as a result of the pandemic. To date, no insurer has been ordered by a court to pay out property coverage for physical damage incurred by the coronavirus.

Circus Circus on the Las Vegas Strip was dealt a similar fate last month by a Nevada judge.

Tribe’s Actions Prompt Dismissal

While every commercial casino in the US was forced to close on state orders at some point in 2020 during the height of the pandemic, Mohegan Sun voluntarily shuttered. Being a tribal property on sovereign land, Mohegan Sun — as well as its state rival Foxwoods —  does not need to adhere to Connecticut state orders.

The Connecticut tribal casinos, however, agreed to shutter their gaming and resort operations in March of 2020 in order to help slow the spread of the virus. But more than two years later, those voluntary actions, Noble says, are the legal basis for ruling against Mohegan Sun in its FM lawsuit.

The complaint seeks damages for breach of an insurance contract, as well as for FM’s bad faith in failing to pay for economic loss, occasioned by the closure of the Authority’s operations due to the immediately impending presence of coronavirus at its insured property,” Noble wrote in his ruling. “The Authority alleged in its complaint that the closure of the Resort property was done to prevent the immediately impending actual presence of communicable disease at the Resort by preventing guests who were infected with COVID-19 from entering the premises.”

The judge went on to say that because Mohegan Sun’s complaint did not allege “physical loss or damage,” as required under its Communicable Disease section, coverage would be “erroneous.”

Noble added that the Authority “failed to sufficiently allege that the cessation of its operations was due to the “actual, not suspected, presence of COVID-19 at the Resort.” Noble concluded by saying FM’s motion to strike the lawsuit is “granted in its entirety.”

Overhaul Ongoing

Mohegan Sun lost tens of millions of dollars in operating revenue in 2020. But the tribal property still has enough cash to carry on with its renovation plans.

The Mohegan Tribe is spending $15 million to update its Royal Suites and build a new 6,500-square-foot VIP Lounge & Bar inside its “Casino of the Earth.” More than $1 million has also been set aside for improvements to the resort’s on-site 18-hole championship golf course.

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