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Baltimore developer The Cordish Cos. sues insurer to recover pandemic business losses

The Cordish Cos., operator of Live! Casino in Hanover and entertainment centers, casinos, malls and hotels across the United States, is suing its insurer for failing to cover hundreds of millions of dollars in business losses amid pandemic closures.

The Baltimore-based developer filed a breach-of-contract lawsuit against Affiliated FM Insurance Co., arguing that business interruption losses associated with communicable disease are covered in its policy.

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Cordish properties, such as Power Plant and Power Plant Live! in Baltimore, depend upon gatherings of large crowds, with visitors typically able to mill about from bar to restaurant in a stadium-like atmosphere, says the lawsuit, filed in Baltimore Circuit Court.

“Unlike a retail store selling a product, or a traditional restaurant selling food and beverages, the sports and entertainment businesses primarily sell experiences that involve customers coming onto and moving about the premises and interacting with one another there,” the lawsuit says.

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Responding to the lawsuit, a spokesman for Johnston, Rhode Island-based Affiliated FM said the company values the long-term relationships it has with policyholders.

“It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided,” said Steve Zenofsky, the spokesman, in an email.

It became common in the insurance industry for policies to exclude coverage for losses caused by the perils of pandemic, virus or communicable disease, especially after outbreaks of SARS, H1N1 and Zika, the lawsuit says.

But the suit argues that the insurer did not exclude coverage for such perils when it sold Cordish the policy. Instead, the policy includes coverage under “communicable disease - property damage” and “communicable disease - business interruption,” the filing says.

Faced with the rapid spread of COVID-19, state and local governments issued orders this spring closing stores, casinos, restaurants, bars, malls and other public gathering spots. Cordish’s lawsuit says those orders prohibited access to its properties in multiple states.

Among the worst hit has been the Live! Casino in Anne Arundel County, which typically has 18 million visitors a year and generates revenue of more than $50 million a month but was completely closed, the lawsuit said. Other Cordish properties in Maryland that were shut down included Power Plant, Power Plant Live! and Pier IV in Baltimore

Courts are seeing a surge of similar lawsuits and likely will see more, said José F. Anderson, a law professor at the University of Baltimore School of Law.

If a policy covers “broad” loss of business and does not clearly exclude a pandemic, “then it might be that the policies should cover the loss,” Anderson said. “A pandemic is unique, and insurance companies calling such events uninsurable is a perspective that may be justified, but the reality is the company paid for something when it paid for a premium.”

A jury would need to decide whether it is reasonable or unreasonable for the insurance company to claim the losses are not covered.

Besides the Hanover casino, the Cordish insurance policy with Affiliated FM covers 32 other Maryland properties, part of 97 total nationwide.

The Cordish policy offers “broad coverage” with limits of $1 billion and business interruption coverage for lost profits, rental income and extra expense, the lawsuit says.

The policy, for which Cordish says it has paid nearly $2 million in premiums, covers losses incurred when a civil authority order prohibits access to a property. It also should cover losses caused by the loss or damage to a nearby property that attracts business to one of the Cordish developments, the lawsuit argues.

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Entertainment venues such as Texas Live! in Arlington, Texas; Kansas City Live! in Kansas City, Missouri, and Ballpark Village in St. Louis have been hurt by the closures of nearby sports venues that bring business to the entertainment centers, the court filing says.

Oriole Park at Camden Yards and M&T Bank Stadium in Baltimore and Arundel Mills mall and BWI Marshall Airport in Hanover are also listed in the policy as attractions that could have an impact on Cordish’s covered properties.

In addition, Cordish operates dozens of retail strip centers, where stores have lost sales and been unable to pay rent.

The lawsuit, which seeks a jury trial, argues that the policy covers the time period required for business to return to normal.

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