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Las Vegas Co. Seeks to Force Insurance Companies to Pay for COVID-19 Losses
Chaffin Luhana LLP
(888) 480-1123

A Las Vegas casino products company has filed a new class-action lawsuit against Valley Forge Insurance Co., seeking full payment on its business interruption insurance claims. The company had to shut down during the COVID-19 closure orders, resulting in business losses that occurred because of events beyond its control.

As a result of government shutdowns related to COVID-19, thousands of businesses have suffered similar income losses through no fault of their own. Many of these business owners previously purchased often expensive “business interruption insurance” to cover these types of losses, but now insurance companies are denying COVID-19 claims.

Company Owners Purchased Comprehensive Insurance Policy

The company, which distributes bulk casino and gambling-themed chocolates and candy gift boxes and plush toys in Las Vegas, is a family-owned and family-operated business. Its products can be found in most of the major casinos along the Las Vegas Strip, and are also offered on sale via the company’s website.

The business owners purchased insurance coverage from Valley Forge Insurance Company (VFIC) to protect their business in the event they suddenly had to suspend operations for reasons outside their control, or if they had to act to prevent further property damage. Among the coverages they purchased:

  • VFIC’s Special Property coverage, which provides business income coverage, promising to pay for losses due to the necessary suspension of operations following a loss to property.
  • VFIC’s Civil Authority coverage, which promises to pay for loss caused by the action of a civil authority that prohibits access to the insured premises.
  • VFIC’s Extra Expense coverage, which promises to pay the expenses incurred to minimize the suspension of business and to continue operations.

The plaintiffs note that unlike some policies providing business income coverage, VFIC’s policy does not include any exclusions for losses caused by the spread of viruses or communicable diseases.

Plaintiffs Argue that COVID-19 Losses are Related to Physical Damage

On March 20, 2020, the State of Nevada issued a civil authority order and regulations requiring the closure of non-essential businesses and imposing COVID-19 risk mitigation measures on essential businesses. The plaintiffs, therefore, were required to close as a result of this order.

They submitted claims to VFIC, but the insurance company refused to pay those claims. In general, insurance companies around the country have argued that COVID-19 did not cause “physical damage” to property, which is what business interruption policies are supposed to be for.

The plaintiffs argue that the presence of COVID-19 did cause physical damage, as the presence of a virus or disease can constitute physical damage to property. They point to a statement issued by the Insurance Services Office to state insurance regulators that stated, in part, “Disease-causing agents may render a product impure (change its quality or substance), or enable the spread of disease by their presence on interior building surfaces or the surfaces of personal property. When disease-causing viral or bacterial contamination occurs, potential claims involve the cost of replacement of property…cost of decontamination…and business interruption (time element) losses.”

The plaintiffs seek to represent all other companies across the nation similarly situated. They bring claims of breach of contract and seek declaratory judgments requiring VFIC to pay for the full amount of business losses incurred related to COVID-19.

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