MotorCity Casino sues insurer, wants $270M for COVID-19 losses
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Feb. 26—MotorCity Casino Hotel is suing its commercial property insurance company for breach of contract after it denied a claim representing more than $270 million in losses related to the impact of the COVID-19 pandemic on the business.
Detroit Entertainment LLC this week filed the 55-page complaint in Wayne County Circuit Court against New York-based American Guarantee and Liability Insurance Co., a subsidiary of the Swiss Zurich Insurance Group Ltd. Detroit's only locally owned and operated casino claims its policy covering the "physical loss of or damage" to its property demands a payout.
"The Coronavirus and COVID-19 caused direct physical loss of or damage to property at MotorCity," MotorCity's attorney J. Michael Huget wrote. "The Coronavirus and COVID-19 also rendered MotorCity's property unfit and unsafe for its normal usages, depriving Detroit Entertainment of its property."
A Zurich spokesman said as a matter of policy, the company does not comment on litigation.
By executive order, Gov. Gretchen Whitmer closed casinos in mid-March through early August, when they could reopen at 15% capacity. The state once again shut them down Nov. 17 as COVID-19 cases climbed, and MotorCity reopened more than a month later on Dec. 23 at 12.4% capacity.
The Marian Ilitch-owned site furloughed 2,600 workers, more than half who live in Detroit, amid the shutdown, and still has 1,100 on leave as many functions like its Sound Board theater and D.Tour Spa remain closed.
"The coronavirus pandemic significantly impacted us, our employees and our community. Indeed, a very small percentage of our total workforce reportedly contracted COVID since the pandemic first began," MotorCity President Brian Hall said in a statement, noting it has successfully implemented new protocols, contact tracing and quarantining policies.
"Thus far, our insurance carrier has failed to honor our business insurance claims, necessitating this action," he said. "Our hope remains for an amicable resolution."
MotorCity's revenue declined year-over-year 54.9% to $222.7 million in 2020, according to the Michigan Gaming Control Board. Casinos represent 16% of Detroit's general fund revenue and are its third-largest source of income. As of June 2020, MotorCity had paid $5.6 million wagering taxes to the city, a 93% decrease from 2019, and $40.3 million to the state, a 57% decrease, according to the lawsuit. The state control board did not immediately have a breakdown of the annual figures for MotorCity.
The 400-room hotel and casino seeks judgment on whether the policy covers the claim and to what extent. Zurich identified minimal coverage totaling $100,000. The policy covers up to $750 million.
Huget argues the insurance plan does not exclude coverage in case of virus, communicable disease or pandemic, and explicitly provides coverage in cases of civil or military authority, interruption by communicable diseases and other cases. MotorCity seeks recovery not just of its lost earnings but extra expenses spent on personal protective equipment, plexiglass barriers and other mitigation efforts taken to keep employees and customers safe while operating.
In communication with MotorCity, the insurance company cited exclusions in the policy for "interruption by communicable disease," according to the lawsuit, but Huget argues a virus deletion endorsement "removes, among other things, viruses and disease or illness causing agents from the Contamination Exclusion." It also did not send an adjuster or any other representative out to the site.
With 100 employees last year testing positive for COVID-19, confirming the presence of the virus in the facility, Huget wrote that the virus made the casino, hotel and its amenities "uninhabitable, unsafe and unfit for their normal and intended uses — just as if asbestos, cat urine, ammonia, fumes or a salmonella outbreak was in the air or on surfaces of the premises."
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