Court Rules Pandemic Casino Losses Not Covered by Commercial Property Insurance Policy

The New Jersey Supreme Court has rejected a casino’s attempt to claim pandemic-related losses under its commercial property insurance policy.

A standard commercial insurance policy includes business interruption coverage. If your business is unable to operate because of a covered event – like a pandemic or a fire – then insurance compensates you for the money you would have made.

Business interruption cases get complicated. How much money does your business make in an average day? How much business do you lose after a disaster even though it’s safe to reopen? At what point in the recovery can your business safely resume operations? It’s difficult to answer all of these questions.

Ocean Casino Resort, however, took a unique approach: they tried to claim pandemic-related losses under their commercial property insurance policy, arguing the pandemic caused physical damage to their property.

Casino Claims It Experienced “Direct Physical Loss” Due to Pandemic

Five years later, courts are still processing disputes related to the pandemic.

In this case, the plaintiff is AC Ocean Walk, LLC, which operates the Ocean Casino Resort in Atlantic City, New Jersey.

The casino sought to recover losses under its commercial property insurance policies for the period during the pandemic when it was forced to shut down or limit operations due to government orders.

Interestingly, the casino’s argument isn’t based on business interruption coverage. Instead, it’s based on its commercial property insurance policy – the same coverage that protects the casino’s property (like slot machines and poker tables) and dwelling (like the walls and roof).

According to AC Ocean Walk, the pandemic-related closure was a “direct physical loss” and caused “direct physical damage” to the property, as reported by Law.com.

Does a Government Closure Constitute Physical Damage?

Typically, a commercial property damage claim requires physical damage to commercial property.

AC Ocean Walk, however, took a unique approach to the argument.

The casino company argued that the government-mandated closure destroyed or altered the property to a point where it became unusable or uninhabitable.

In other words, the presence or threat of coronavirus on the premises of the casino constituted a “direct physical loss” and “direct physical damage” to the property.

The property was unusable because of the pandemic and government-mandated closure, constituting a physical loss and tangible damage.

New Jersey Supreme Court Unanimously Rejects Claim

The arguments above may sort of make sense. However, they didn’t hold up in court.

In an October 2025 ruling, the New Jersey Supreme Court rejected AC Ocean Walk’s claim unanimously:

• The New Jersey Supreme Court held that, per the terms of the insurance policy, there must be actual physical change or damage to the property.
• That physical change or damage must be serious enough that the business becomes unusable or uninhabitable – not merely that it cannot be used because of external factors.
• Even if the casino was able to prove it experienced physical loss, however, the New Jersey Supreme Court ruled a contamination exclusion in the policy absolved the insurer of responsibility for damages. The pandemic fell squarely within this exclusion.

For all of these reasons, the New Jersey Supreme Court declared the casino’s business interruption losses were not covered under the commercial policy in question.

Court Ruling Similar to Other Pandemic-Related Business Interruption Claims

In the years following the pandemic, many American businesses have tried to claim pandemic-related losses under business interruption coverage – and many have failed.

The majority of US court rulings, per Law.com, have denied business interruption claims for pandemic losses under standard property insurance when no physical damage is shown.

That’s because most commercial property insurance policies use specific words like “direct physical loss” or “damage.” If there’s no physical damage, it’s difficult to justify a payout.

Nevertheless, business interruption claims are rarely straightforward. Many businesses hire public adjusters to handle complex cases. A good public adjuster represents the business’s best interests and strives for the highest possible payout.

To speak with a licensed public adjuster experienced in business interruption claims, contact ClaimsMate today for a no-cost consultation.