Las Vegas gaming supplier in legal battle with insurer

Grace Leong

Thursday, Nov. 2, 2000 | 11 a.m.

Acres' quarterly loss

Acres Gaming Inc. of Las Vegas today reported a loss for its first quarter ending Sept. 30 of $1.6 million or 18 cents per share, a big decline from the profit earned in the year-ago quarter of $394,000 or 4 cents.

Revenues plunged from $6.2 million to $2.7 million.

"This quarter's results do not reflect the strength of our business," said Chairman and Chief Executive Bud Glisson. "New orders have been exceptionally strong, but completed installations have lagged. Our backlog for Acres Advantage systems sales is now a record $17.9 million, and actually exceeds last year's total sales. We expect our momentum on new orders to continue and expect revenue from completed installations to dramatically improve in the second quarter and for the balance of the fiscal year."

Acres Advantage systems are casino management products that include slot accounting and player tracking systems.

An insurer is in a legal dispute with Acres Gaming Inc. of Las Vegas over whether Acres is entitled to coverage for two lawsuits involving the company.

Acres sued Fidelity and Guaranty Insurance Co. of West Des Moines, Iowa, on May 15 in Oregon state court to enforce its claims for full defense coverage. Fidelity countersued in June in U.S. District Court in Las Vegas.

Fidelity said Acres was insured from July 1, 1998, through July 1, 1999, for legal actions brought against the gaming equipment maker.

Fidelity alleged it had no obligation to indemnify Acres because it discovered while investigating Acres' claims that the Las Vegas company allegedly failed to disclose on its insurance application the existence of the two lawsuits.

"The predicate acts underlying Acres' coverage claims occurred prior to the inception of the Fidelity policy and are therefore precluded from coverage under that policy," Fidelity said.

Douglas Mitchell, Acres' attorney, disputed Fidelity's claims.

"Acres disagrees strongly and believes Fidelity is obligated under the policies to cover Acres fully."

Acres, which said it filed the suit in Corvallis, Ore., because the policy was issued there, alleged it is entitled to full defense coverage and attorneys' fees. Acres has an office in Oregon.

Mitchell said the Oregon case has been transferred to Nevada and has been consolidated with Fidelity's lawsuit.

The two lawsuits for which Acres is seeking indemnification include one filed by Acres in U.S. District Court on May 19, 1998, to stop its competitors Mikohn Gaming Corp. and Casino Data Systems from infringing on its patent for a networked gaming system called MoneyTime. Casino Data later countersued, alleging "patent misuse" and "attempted monopolization."

The second suit involved Anchor Gaming, Anchor Coin and Spin Wide for Cash Area Progressive Joint Venture. The three companies sued Acres on Feb. 26, 1999, alleging patent infringement and breach of a non-compete agreement.

Fidelity, which also seeks to recover more than $175,000 it initially paid to Acres' counsel for the two lawsuits, said the claims should have been tendered to Acres' other insurer, Atlantic Mutual Insurance Co., because the events preceding the two lawsuits occurred before July 1, 1998.

Atlantic Mutual, which insured Acres from July 1, 1997, through July 1, 1998, provided commercial general liability coverage for lawsuits brought against Acres, Fidelity's lawsuit said.