Hunton Andrews Kurth Secures Sanction Award on Behalf of Treasure Island LLC

Hunton Andrews Kurth LLP’s insurance team has secured a sanctions award, including recovery of its attorneys’ fees and costs associated with preparing the relevant sanctions motion and an order of preclusion, against insurer Affiliated FM Insurance Company (“AFM”) for impeding discovery by failing to produce clearly discoverable documents based on their unilateral determination of those documents' relevance.

The firm represents Treasure Island LLC, a Las Vegas strip casino, in litigation against AFM, its property insurer, styled Treasure Island, LLC v. Affiliated FM Ins. Co., No 2:20-cv-00965-JCM-EJY (D. Nev.). The lawsuit seeks to enforce Treasure Island’s all-risk insurance policy for business interruption losses sustained due to the sustained presence of COVID-19 that disrupted the casino’s business operations.

At issue in Treasure Island’s motion for sanctions is AFM’s failure to produce relevant portions of their insurance claim procedures, and specifically the text of Loss Code 60, which states: “Physical loss or damage which results from the actual presence of a communicable disease and the associated business interruption as defined in the policy.” AFM failed to produce the text of Loss Code 60 in response to Treasure Island’s discovery requests, arguing that Treasure Island’s requests were overly broad and burdensome, and that Loss Code 60 was not relevant to AFM’s defensive theories at trial.  AFM’s primary defense is that a communicable disease, like COVID-19, cannot cause “physical loss or damage” to property.

In partially granting Treasure Island’s motion for sanctions, the court found that AFM “hid” the information, noting that AFM may not unilaterally determine what discovery is relevant in a given matter and the “calculated ambiguity” of its response inappropriately impeded the discovery process. The court awarded Treasure Island attorneys’ fees and costs associated with preparing and responding to the sanctions motion and reply, and also ordered that AFM be precluded at trial from arguing that physical loss or damage cannot be caused by a communicable disease or that there is no circumstance under which AFM may find coverage reaches physical loss or damage arising from a communicable disease.

The Hunton Andrews Kurth team representing Treasure Island is led by partners Michael S. Levine and Christopher J. Cunio, with assistance from counsel Nicholas D. Stellakis and special counsel Harry L. Manion, III.

The order can be viewed here.