Court Opinion

ID: 6332270
Source: CourtListenerOpinion
Date Created: 2022-04-15 20:00:32.81932+00
Date Added: 2024-06-11T09:23:18.137109
License: Public Domain

NOT FOR PUBLICATION                             FILED
                    UNITED STATES COURT OF APPEALS                         APR 15 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

CIRCUS CIRCUS LV, LP,                           No.    21-15367

                Plaintiff-Appellant,            D.C. No. 2:20-cv-01240-JAD-NJK

 v.
                                                MEMORANDUM*
AIG SPECIALTY INSURANCE
COMPANY,

                Defendant-Appellee.

                   Appeal from the United States District Court
                             for the District of Nevada
                   Jennifer A. Dorsey, District Judge, Presiding

                       Argued and Submitted March 9, 2022
                                Phoenix, Arizona

Before: HAWKINS, PAEZ, and WATFORD, Circuit Judges.

      Plaintiff Circus Circus, LV, LP (“Circus Circus”), a 2.8 million square-foot

casino in Las Vegas, Nevada, appeals the district court’s order dismissing its

insurance coverage claims against AIG Specialty Insurance Company (“AIG”).

We have jurisdiction under 28 U.S.C. § 1291. We review de novo, L.A. Lakers,

Inc. v. Fed. Ins. Co., 869 F.3d 795, 800 (9th Cir. 2017), and we affirm.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      Circus Circus seeks coverage under an “all risks” insurance policy (the

“Policy”) for economic losses it sustained during the COVID-19 pandemic. The

Policy provides coverage against “all risks of direct physical loss or damage to

[the] Insured Property [i.e., the entire casino complex] from a Covered Cause of

Loss.” The Policy defines the term “Covered Cause of Loss” as a “peril or other

type of loss, not otherwise excluded under this policy.”

      At 12:01 a.m. on March 18, 2020, “Circus Circus closed its doors” as a

result of “COVID-19 and [local Stay at Home] Orders.” Among other matters,

Circus Circus alleges that the “Stay at Home Orders have caused and are

continuing to cause the necessary partial or total interruption of Circus Circus’s

business operations” and that the Orders and physical loss of its property “caused

by those Orders has had a devastating effect on [its] business.”

      “On March 20, 2020, Circus Circus notified AIG that it had experienced . . .

a covered loss as a consequence of the physical loss and damage caused by

COVID-19 and the resulting Stay at Home Orders and other civil authority orders.”

AIG denied the claim, and this lawsuit ensued.

      Because this lawsuit concerns a dispute over the interpretation of an

insurance contract, the analysis is governed by Nevada law. If there are no Nevada

Supreme Court decisions directly on point, the court “must predict how the highest

state court would decide the issue using intermediate appellate court decisions,

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decisions from other jurisdictions, statutes, treatises, and restatements as

guidance.” S.D. Myers, Inc. v. City and County of San Francisco, 253 F.3d 461,

473 (9th Cir. 2001) (citation and internal quotation marks omitted). Where Nevada

law is lacking, this court may “look[] to the law of other jurisdictions, particularly

California, for guidance.” Eichacker v. Paul Revere Life Ins. Co., 354 F.3d 1142,

1145 (9th Cir. 2004) (citation and internal quotation marks omitted).

1.    The district court correctly held that Circus Circus does not plausibly allege

that it suffered direct physical damage to its property under the terms of the Policy.

Despite Circus Circus’s allegation that the COVID-19 virus was present on its

premises, it has not identified any direct physical damage to its property caused by

the virus which led to the casino’s closure. Rather, the allegations surrounding

Circus Circus’s closure are based on the local Stay at Home Orders. See Inns-by-

the-Sea v. California Mut. Ins. Co., 71 Cal. App. 5th 688, 699 (2021), review

denied (Mar. 9, 2022). These very allegations were recently rejected by the

California Court of Appeal in a factually similar lawsuit. Id. at 699-705. As

Nevada courts often rely on California law for guidance, there is no reason to

believe the Nevada Supreme Court would rule differently. See Eichacker, 354

F.3d at 1145.

2.    Circus Circus likewise fails to allege that it suffered a direct physical loss of

its property under the Policy. Circus Circus’s argument that the presence of the

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virus rendered its property uninhabitable improperly “collapses coverage for

‘direct physical loss’ into ‘loss of use’ coverage.” Inns-by-the-Sea, 71 Cal. App.

5th at 705. Indeed, this court in Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15

F.4th 885 (9th Cir. 2021), rejected an insured’s argument that “direct physical loss”

of property merely requires that the property no longer be suitable for its intended

purpose. Id. at 891. Rather, the loss must be due to a “distinct, demonstrable,

physical alteration of the property.” Id. (citation omitted).

      The Policy’s reference to the period of “interruption” further supports the

logic that a loss of use requires a “distinct, demonstrable, physical alteration of the

property.” The Policy covers actual losses of income sustained by the insured

during a “Period of Interruption” which begins at the time of the “direct physical

loss or damage” and ends either when: (1) normal operations resume; or (2) when

“physically damaged buildings and equipment could be repaired or replaced and

made ready for operations under the same or equivalent physical and operating

conditions that existed prior to such loss or damage,” whichever is less. “The

Policy’s focus on repairing, rebuilding, or replacing property . . . is significant

because it implies that the ‘loss’ or ‘damage’ that gives rise to Business Income

coverage has a physical nature that can be physically fixed.” Inns-by-the-Sea, 71

Cal. App. 5th at 707; see also Mudpie, 15 F.4th at 892. Here, although the “Period

of Interruption” clause in the Policy is worded slightly different than the clauses in

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the policies involved in the above-mentioned cases, the concepts are the same and

the same conclusion follows.

      Circus Circus also does not allege that it was permanently dispossessed of its

property. Mudpie, Inc., 15 F.4th at 892 (reasoning that Mudpie failed to allege a

direct loss of its property because “Mudpie’s complaint does not identify a

‘distinct, demonstrable, physical alteration of the property,’ . . . and it does not

allege that Mudpie was permanently dispossessed of its property.”).1

      AFFIRMED.

1
 In light of our disposition, we deny Circus Circus’s request that we certify two
questions to the Nevada Supreme Court as unnecessary.

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