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Best of Liz Benston

Gaming Guru

Liz Benston
 

Pinnacle in Dispute with Insurer

30 September 2005

LAS VEGAS -- Pinnacle Entertainment, left with three damaged casinos in the wake of Hurricanes Katrina and Rita, is headed for a dispute with one of its insurance carriers that believes Pinnacle is entitled to less money than the company has previously disclosed.

One of the company's insurance carriers, Westport Indemnity Corp., has defined the hurricanes as a "flood occurrence" instead of a "weather catastrophe occurrence," which would entitle the casino company to significantly more insurance coverage.

Westport advised Pinnacle that the company is entitled to a maximum of $25 million annually for flood coverage instead of $25 million "per event," Pinnacle said in a filing with the Securities and Exchange Commission Thursday.

Pinnacle said the damage sustained at its Boomtown New Orleans, Casino Magic and L'Auberge du Lac riverboat casinos were caused by a "weather catastrophe," which entitles the company to $400 million of insurance coverage for each "occurrence."

A 3 percent deductible would apply to damage sustained in a "weather catastrophe," whereas Westport is arguing that Pinnacle pay a 5 percent deductible under the flood definition, Pinnacle said in the filing.

"The company intends to vigorously oppose any effort by any of its insurance carriers to limit their obligations under the policies by improperly characterizing the losses sustained by the company," the filing said.

Pinnacle executives were unavailable to comment on the company's filings, but a competitor's top communications executive said the Gulf Coast's casino operators had different types of insurance coverage.

MGM Mirage spokesman Alan Feldman said it's still "too early" to assess how much insurance money the company will receive. The company hasn't yet made a claim or formal presentation to its insurance carriers on the damage sustained to its Beau Rivage resort in Biloxi, Miss.

"You're going to find that everyone's coverage is a little bit different," Feldman said. "For some companies that had business interruption insurance they may not have specified what caused the interruption. Others would have had some sort of disaster insurance for flood or wind damage or some combination of both. These aren't one-size-fits-all circumstances."

Mississippi's Attorney General is already suing insurance companies to get them to pay for hurricane damage, such as flooding, that the insurers claim are not covered by the terms of their policies. Part of the problem policyholders have is that the hurricanes caused wave, flood and wind damage.