Hurricane Insurance and Related Accounting Matters

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Hurricane Insurance and Related Accounting Matters
The Company maintains an aggregate of $400 million of property insurance, including business interruption coverage. This insurance is comprised of multiple layers of coverage underwritten by 11 separate carriers or syndicates, all of which are currently rated A- or better by a major rating agency. The insurance provides $400 million of coverage per occurrence for a “Weather Catastrophe Occurrence” and at least $100 million on an annual basis for flood coverage. As previously disclosed, the Company was preliminarily advised by one of its carriers (Westport Insurance Corporation) that it believes that Hurricane Katrina was a flood occurrence. 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. Westport has since paid the Company the entire $25 million of coverage under the policy underwritten by that carrier and agreed that such payment does not diminish the Company’s flood coverage under that carrier’s policy. The Company has reserved all rights to sue that or any other carrier for “bad faith” or any other reason in asserting its full rights under law and under its insurance policies.
At this time, the Company intends to file both a property damage and business interruption insurance claim related to its Casino Magic Biloxi property. In accordance with GAAP, the Company wrote down by $57.6 million the book value of assets that were impaired by the storm, and recorded a corresponding insurance receivable. Such amount is based on the book value of property as built or acquired many years ago and depreciated since its construction or acquisition. This has no relevance to the actual insurance claims, which are based on the cost in future periods of building a new property of…...

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