10th Circuit Court: Insurance Policy Excludes Coverage for COVID-19

Last week, the federal appeals court in Denver ruled that a Black Hawk casino’s insurance policy did not cover the hundreds of millions of dollars in losses caused by COVID-19 in 2020. Monarch Casino & Resort sued its insurer, Affiliated FM Insurance Company, under a $350 million policy that covered its Monarch Casino in Black Hawk and another facility in Reno. The casino argued that the presence of COVID-19 constituted “physical loss or damage” under the policy and sought payment for the months it was subjected to public health restrictions.

However, the U.S. Court of Appeals for the 10th Circuit disagreed with Monarch’s interpretation. They pointed to a previous opinion issued in January, which stated that COVID-19 did not cause physical damage and therefore could not support an insurance claim. Judge Allison H. Eid, who authored the panel’s opinion, also noted that Monarch’s policy contained a broad exclusion for contamination, including viruses.

The case received attention from various interest groups. The American Property Casualty Insurance Association, representing insurers, argued that forcing insurance companies to compensate policyholders for COVID-19 closures would bankrupt insurers and require them to cover more routine impacts on businesses in the future. United Policyholders, an advocate for insurance consumers, called this argument a scare tactic, pointing out that insurers made a profit in 2020.

Monarch’s policy provided general coverage for its casinos, subject to exclusions. While the policy excluded coverage for contamination, it did include “communicable disease” coverage for the costs of cleaning and removing diseases in response to public health regulations. However, this provision had a maximum coverage limit of $100,000. Monarch sought to recover a significantly larger sum from Affiliated FM Insurance.

In September 2021, U.S. District Court Judge Regina M. Rodriguez ruled that while Monarch may be eligible for the $100,000 communicable disease coverage, the contamination exclusion prevented them from claiming the additional millions of dollars. Monarch appealed the decision to the 10th Circuit, arguing that the insurance policy was confusing and ambiguous.

During the appeal, the panel struggled to understand the terms of coverage, with Affiliated FM Insurance’s lawyer having to correct them multiple times. Monarch’s attorney argued that the presence of COVID-19 should be considered as physical loss or damage. However, the 10th Circuit stood by its previous decision, supported by Colorado’s highest court, that COVID-19 does not cause physical damage.

The 10th Circuit acknowledged that Monarch was entitled to some coverage from the shutdowns under the communicable disease provision, but they could not extend the coverage beyond the policy’s limit of $100,000. The court emphasized that they could not rewrite the policy.

The case is titled Monarch Casino & Resort, Inc. v. Affiliated FM Insurance Company.