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New York Federal Court ignores policy's uniquely broad wording in favor of following crew



The Northern District of New York recently issued a summary judgment to the insurer Affiliated Factory Mutual Insurance Co. against Mohawk Gaming Enterprises, a casino and resort operated by the Saint Regis Mohawk Tribe located on the border of New York and Canada. Mohawk Gaming sued AFM to recover revenue losses due to COVID-19 pandemic. In granting the insurer's proposal, however, the court failed to consider all aspects of the AFM policy required by New York law, and failed to make sense of the specific language contained in the policy's two communicable disease sections, each of which specifically considers “Contagious disease ”, Which is defined and covered by AFM's policy, may cause loss and damage to property. Instead, the court followed other decisions from "many courts around the country", each based on inherently incorrect reasoning (eg depending on cases where no presence of virus was alleged or cases that clearly and broadly exclude loss caused by viruses ), to conclude that the presence of viruses "is insufficient to trigger coverage when policy language requires physical loss or physical damage." In fact, a Texas federal court recently rejected the same reasoning used in Mohawk Gaming after acknowledging that FM / AFM's policy form "is much broader than [others] and explicitly covers loss and damage caused by & # 39; Infectious Diseases. ”” See Cinemark Holdings, Inc. v Factory Mut. Ins. Co ., No. 4: 21

-cv-00011 (ED Tex. 5 May 2021).

Mohawk Gaming closed its casino to the public after a COVID-19 outbreak was discovered at a college 50 km away, and then filed a claim with AFM to recover the business interruptions it incurred as a result of COVID-19. The AFM Policy provides business interruption coverage for losses caused by "an order from civil or military authorities [that] prohibits access to a site" if that order "is a direct result of physical damage of the insured type" at or within five miles of a covered Mohawk Gaming claimed that COVID-19 caused “phys loss or damage ”of the type insured by the insurance and the fact that COVID-19 was located within 50 km of the casino, the coverage for business interruptions was applicable.

In granting a summary judgment to the AFM, the court found that the meaning of "physical harm" unequivocally does not cover "only the presence or spread of the new coronavirus." However, as acknowledged by the court in Cinemark and explained above, the decision Mohawk Gaming apparently did not comply with the specific wording of the AFM policy and instead neglected what insurers have been advocating as "the overwhelming majority "of decisions in their favor. In New York and elsewhere, however, insurance coverage is not determined on the basis of a "scoreboard". It is based on the words and phrases actually used by the parties. Here the insurer chose all the words and phrases.

Even more serious than most Mohawk Gaming decisions raise significant issues of appeal. First as noted, the court failed to make sense of the policy's two explicit acknowledgments that "contagious disease" – a term defined by the AFM – can cause "loss or damage" to property. Second, because the Mohawk Gaming court did not expressly acknowledge that communicable disease may cause loss or damage to property, the court failed to consider that such loss or damage is "loss or damage to property". type insured, "which triggers the insurance's valuable Time Element coverage for loss of business income arising from the occurrence of communicable disease. Third, the court erred in" to the vast majority of courts that have dealt with "the issue In fact, no "large majority" of courts dealt with the issue under the uniquely broad FM / AFM policy before the court in Mohawk Gaming and so far only the court in Cinemark has fully reconciled the policy express transferable disease provisions with the policy commonly used phrase “loss or damage” to property.The only other decision to to list the policy formulation from FM / AFM's policy form (as opposed to just looking at the scoreboard) is Thor Equities, LLC v Factory Mutual Insurance Co. No. 20 Civ. 3380 (AT), 2021 WL 1226983 (SDNY March 31, 2021), in which a New York federal court rejected the insurer's strained interpretations of the exclusion of policy contamination and found that the provision was ambiguous and therefore not applicable to losses. caused by COVID-19.


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