Pandemic shutdown harms at issue in Ocean insurance lawsuit

Society and its federal and state governments have yet to achieve this healthy response regarding the Covid-19 pandemic. The risk of guilt and blame are too great since errors harmed many people and businesses. Even related errors made prior to the appearance of the new virus haven't been dispassionately examined and understood.

One pandemic harm is at the center of a case before the N.J. Supreme Court pitting the Ocean Casino Resort against its insurers.

The casino company, like many others, was insured against losses of up to $50 million caused by interruption of its business. Its insurers -- AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co. and Interstate Fire & Casualty Co. -- denied the casino's main claims, awarding it just $850,000 under a separate policy provision regarding communicable diseases.

The insurance companies say their policies included viruses among the list of things that could be excluded from coverage, which typically replaces revenue lost as a result of damage to the business property.

Most of the loss in this case was caused by Gov. Phil Murphy ordering the casinos to shut for more than three months in 2020. Ocean Casino Resort has argued the virus physically damaged the surfaces and air within the casino hotel.

Most litigation regarding pandemic-related claims for business losses already has played out and overwhelmingly in favor of insurers and against businesses.

One of the last rays of hope for Ocean was extinguished last month in Nevada. There a lower court had ruled that the Grand Bazaar Shops in the Strip could pursue its business-interruption claim against its insurer. But the Nevada Supreme Court ordered the lower court to grant summary judgment in favor of the insurer.

A lawyer for one of Ocean's insurers said 14 state Supreme Courts have ruled against pandemic-related interruption of business claims.

Every federal appellate court considering the matter so far has ruled that commercial all-risk property insurance policies do not cover income lost due to the pandemic.

Pandemic shutdowns were ineffective because the virus was exceptionally contagious and couldn't be stopped from spreading. Even Murphy's commissioner of health, Judith Persichilli, had said the virus would infect everyone eventually. Isolating and supporting those most at Covid risk would have saved many, but wasn't done until well into the pandemic.

Although federal and state governments responded to the crisis by spending trillions of dollars, little if anything was done to help businesses forced to shut. Perhaps that would have been seen as admitting an error.

In arguments during the Ocean Resort case, New Jersey justices agreed the Covid pandemic wasn't foreseeable when the insurance policies were written, but wondered whether the casino should have understood what would be covered anyway.

That seems strange. If the risk-obsessed insurance industry wasn't writing policies explicitly covering or excluding a catastrophic global pandemic, why would any private business give it a thought?

Since neither insurers nor policyholders anticipated the risk, not considering it part of pre-pandemic policies is fair (absent a specific pandemic rider to include coverage). This wasn't an active mistake on the part of insurers and their customers, but an understandable (if avoidable) omission.

Now that they all now, insurers may cover such a cause of lost business and companies may add that to their policies if they think the risk is worth offsetting for the price.