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Recent Updates

 

34.41   Covid-19

The Department has published on its website a summary of the rules and exemptions that apply during the Covid-19 alert levels.  The key points include...

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32.05   Section 308 Prosecution - Failing to Use Policy

The requirement to “use” the policy includes a requirement to act in accordance with the policy terms, and to take steps that are reasonable in implementing the policy (common sense matters that arise naturally and matters that are in accordance with prevailing industry standards or in the training that is provided).  However, there is no obligation to take steps that are not plainly self-evident or not indicated as mandatory in the training.

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29.00   Three-Year Licences

In the 30 June 2021 edition of Gambits, the Department advised that it had made the decision to stop offering three-year licences, effective immediately.   This decision was challenged via judicial review.  Following receipt of the judicial review proceedings, the Department acknowledged that its decision that three-year licences cannot even be considered, was an unlawful fettering of the section 53(1A) discretion.  Accordingly, the Department acknowledged that societies remain free to apply for a three-year licence if they wish.

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25.06   Club Merger Examples

New example included.

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16.09   Primary Activity and Alcohol Licences

The Alcohol Regulatory and Licensing Authority has become concerned that venues with gaming machines are being subject to alcohol licence objections based on matters relating to gaming machine activity, rather than issues that relate to the risk of alcohol-related harm.  The Authority has stated that gaming-related objections are use of the Act for a “collateral purpose” and as such are an “abuse of process”.

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24.01   9 and 18 Machine Limits

The requirement to obtain territorial authority consent to increase the number of machines listed in the schedule is a departure from the standard practice that has been in place.  The Gambling Commission has acknowledged that its April 2021 decision clarifying when territorial authority consent is required has the potential to cause serious consequences for societies and venues.  The Commission therefore held that societies may restore their machine number entitlements.  This can be done by filing a licence amendment to add additional machines to the schedule, in order for the number in the schedule to match or exceed the maximum number condition.  The Commission has indicated that such an amendment should be filed before the society’s next licence renewal. 

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24.04   When Does the Unlicensed Period Start?

If a venue licence is surrendered via a surrender letter, the six-month period does not start on the date specified in the surrender letter; the six-month period starts on the following day.  For example, if a surrender letter stated that the society surrendered its venue licence on 11 December, the six-month period would start on 12 December.

 

The six-month period starts on the day following the date in a surrender letter, not on the day the Department processes and actions the surrender in its licensing system.

 

If the Department generates a licence in its licensing system (for administrative reasons such as the removal of machines listed in the schedule, or in error), but does not issue the licence to the society, the new licence generated does not result in the six month period restarting.

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24.05   Backdating of Licences

Delays due to the Covid-19 alert level restrictions, and delays in assessing third party services immediately following the end of the Covid-19 alert level restrictions, are relevant to the exercise of the discretion.

 

In Air Rescue Services Limited decision GC26/10, the Commission referred to the sort of difficulties that are inevitably created when a venue undergoes redevelopment and stated that there is nothing objectionable in principle in seeking a licence for premises which are undergoing renovation.  In Pub Charity Limited decision re Matata Hotel GC03/21, the Commission backtracked from these comments, stating that an applicant who decides to undertake a major renovation elects to run the risk that the renovation will result in the ability to operate more than 9 machines being lost.

 

Although it is not essential that a formal request be made to backdate the venue licence, the failure to expressly make such a request is relevant to the exercise of the discretion.

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31.02   Extension Applications

If the Department refuses to grant an extension, no immediate right of appeal exists.  If a society wishes to challenge the correctness of a refusal decision, the correct process is to not surrender the licence and for the society to advise the Department that it regards the refusal to be in error and that it intends to challenge any decision which is made in reliance upon it.  The society then waits until the Department takes venue licence cancellation action, and then lodges an appeal against the cancellation.

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31.03   Inactivity Applications and Gaming Machine Fees

Prior to April 2021, there was an established practice of filing a licence amendment to reduce the number of gaming machines listed on the licence when a venue was inactive, to reduce the machine licensing fees payable. Following the decision Pub Charity Limited decision re Matata Hotel GC03/21, such action should not be taken.  Removing the machines from the schedule would result in the need to obtain territorial authority consent to restore the machines. 

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16.09   Primary Activity and Alcohol Licences

If a venue does not fall within the definition of a “tavern”, “restaurant”, or “hotel”, the venue has the option of applying for a generic or “not otherwise specified” alcohol licence.  A venue does not need to fall within the traditional definition of a “tavern”, “restaurant” or “hotel” to qualify for an alcohol licence.

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2.37   Is Amateur Sport a Charitable Purpose?

New non-charitable sport examples included (New Zealand Rowing Association, Northern Region Equestrian Trust, and Youth Glide New Zealand)

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22.05   Relocating Under the Waikiwi Tavern Precedent

New relocation examples added.

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18.17   Clubs and End User Trusts – Undistributed Net Proceeds – Working Capital

Regulation 11A, which allows societies that mainly distribute net proceeds to retain enough gross proceeds to enable them to maintain a ratio of current assets to current liabilities of up to a maximum of 1.5:1 (calculated as current assets divided by current liabilities) does not apply to societies that mainly apply funds (typically clubs): regulation 9 of the Gambling (Class 4 Net Proceeds) Regulations 2004.  A club is, however, free to apply to have a licence condition included on its licence that mirrors regulation 11A, in order to enable a larger amount of proceeds to be retained as working capital.  The Commission has confirmed that such a licence condition can be lawfully imposed and would be reasonable.  The Commission considered that applying societies should not be subject to greater restrictions on the retention of net proceeds for working capital purposes than distributing societies: Youthtown Inc decision GC26/20.

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19.01   The Legal Test For Financial Viability

While section 52(1)(c) requires satisfaction that the applicant’s proposed gambling operation is viable, the financial viability assessment includes consideration of the financial viability of the applicant itself (the club generally, when a club is the applicant): Waitara Town & Country Club decision GC21/20.

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19.02   Forward Focused Test

The financial viability assessment is not limited strictly to the term of the prospective licence.  The applicant’s financial position at the end of the prospective licence period and beyond is relevant: Waitara Town & Country Club decision GC21/20.

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28.37   The Treaty of Waitangi

The Commission has no obligation to consider applications and appeals by reference to Treaty principles.  There is no express reference to the Treaty or its principles in the Gambling Act 2003 and no apparent basis to imply an obligation to observe or apply Treaty principles.

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18.01   Regulation 10 – Obligation to Generate 40% of Gross Proceeds

Following the Covid-19 pandemic, the minimum authorised purpose requirement was suspended for each licence holder’s financial years ending in 2020 and 2021.  This means that societies that are unable to meet a 40% return to the community will not be penalised for the 2020 and 2021 financial years.  The suspension does not remove the general ongoing obligation to minimise costs and maximise community returns.

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18.10   Regulation 11 - Obligation to Distribute or Apply All or Nearly All Net Proceeds

Following the Covid-19 pandemic, the obligation to distribute or apply net proceeds was suspended for each licence holder’s financial years ending in 2020 and 2021.  The suspension of regulation 11 provides societies with an opportunity to accumulate adequate working capital to achieve financial viability.

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18.14   Regulation 11A – Retention of Net Proceeds

Regulation 11A enables societies to retain enough gross proceeds to enable them to maintain a ratio of current assets to current liabilities of up to a maximum of 1.5:1 (calculated as current assets divided by current liabilities).  The retention is permitted solely for the purpose of satisfying the requirement in section 52(1)(c) that a society’s gambling operation must be financially viable.  Regulation 11A does not affect the requirement on societies to distribute a minimum of 40% of the gross proceeds to authorised purposes for the financial year ended 2022 and subsequent years.

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24.05   Backdating of Licences

New commentary and new examples following two new successful Gambling Commission appeals.

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24.04   When Does the Unlicensed Period Start?

Liquidation does not automatically terminate a venue licence.  Clear and unqualified communication is required to surrender a venue licence.  No particular form or wording is required.  An email is sufficient.  Anything in the communication which indicates that the advice is preliminary or provisional and will be followed by further communication, should be taken as an indication that the communication does not constitute a surrender.  Mere advice that the venue has been placed into liquidation and ceased operating is insufficient to constitute a licence surrender: Youthtown Inc decision GC10/20.

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15.01   Liquor Licences are not Required

In Grassroots Trust Limited decision GC09/20, the Department insisted on a liquor licence being granted as a prerequisite for a venue licence being issued.  The Department failed to have regard to whether there was other evidence that class 4 gambling would not be the primary activity at the venue, including the floor plan and lease.  The Department also failed to consider whether the venue licence could be issued before the liquor licence, with appropriate licence conditions being imposed.  The Commission reiterated that it had previously held that an issued liquor licence is not a precondition to a venue licence application being considered or approved, where other evidence is available to satisfy the requirement that the venue will not be used mainly for operating gaming machines.  The Commission noted that the additional delay caused by insisting on the issue of a liquor licence was a relevant factor in considering whether a venue licence should be backdated to preserve the right to operate 18 machines.

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4.02   Onus of Proof When Determining Suitability
Any doubts about the person’s suitability result in a finding of unsuitability.
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3.05   Venue Key Persons
An ability to “exercise soft power” or “exercise soft influence” via relationships or due to senior hierarchy status has been previously held to be sufficient to fall within the venue key person definition.

 

The reference to having an “ability” to exert a significant degree of influence over the management or operations of a venue operator does not require a current practice of actual influence, nor an immediate legal ability to act. The term “ability” does, however, imply that a person must be able to take an action lawfully, if certain steps were put in place.
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3.09   What Amount is “Significant”?
A “significant interest” in the management or operations of a venue operator exists where the person controls the financial or other benefits from the venue. Control extends to being able to direct or ensure that the benefits are received by another person.
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12.02   Obligation on Society to Disable Machines and Notify the Department

The Department’s March 2020 Late-banking of Gaming Machine Profits Policy advises that…

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12.06   Late Banking Penalty – Section 104

In March 2020, the Department updated its late banking policy.  The action taken by the Department following a late banking will depend on whether the Department assess the incident of late banking to be high-risk or low-risk.

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5.04      Section 113(1)(a)

Venue key persons cannot provide grant application forms (grant forms from any gaming society): s 113(1)(a)

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34.26   Record Keeping - Venue Records

All records completed by venues (as per the game rules) must be retained at the venue for one month: regulation 5(7) of the Gambling (Class 4 Net Proceeds) Regulations 2004.  Redeemed tickets must be stored at the venue for a minimum of 90 days: clause 7.6 of the Minimum Technical Requirements for Class 4 De-Centralised Off-Line Cash-In Ticket-Out Systems.

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32.05   Exclusion Order Start Date/Time and End Date/Time

If the exclusion order reads “this exclusion order shall remain in force for a period of two years from 10 March 2020 to 9 March 2022” then the exclusion order does not take effect until 11 March 2020 and ceases to have effect on 10 March 2022.

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34.16   Multiple Class 4 Venues in One Place

In New Zealand Racing Board decision GC24/19, the Commission allowed a new class 4 venue to be established in the same building as an existing class 4 venue on the condition that the internal access way connecting the two venues be removed.  The large building included three tenancies: TAB Newtown; the Zoo Bar (an existing class 4 venue); and a Thai restaurant.  All three tenancies were located on the same large certificate of title and had the same landlord.  TAB Newtown and the Zoo Bar were independent businesses.  The Zoo Bar’s venue licence showed the large building with all three tenancies, but had the TAB Newtown and Thai restaurant tenancies crossed out.  Both venues had separate primary activities.  TAB Newtown’s primary activity was race and sports betting (the venue was alcohol free).  The Zoo Bar’s primary activity was the sale of alcohol (the venue licence described the venue as a tavern). 

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28.33   Costs – New Zealand Racing Board Example

In New Zealand Racing Board decision GC24/19, the New Zealand Racing Board sought costs against the Department for failing to honour a venue licence pre-approval that was given and delay in decision making (four and a half months).  The Commission declined to make an award of costs, stating that the matter was not an exceptional case that justified an award. 

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38.20   Online Gambling, Gambling Apps, Text, and Phone Gambling

Remote interactive gambling is defined as including “gambling by a person at a distance by interaction through a communication device”.  A “communication device” is defined as “a machine, device, or thing for communicating at a distance and using any technology (including telecommunication, radio-communication, and broadcasting technology)”.  Undertaking an activity such as the sale of lottery tickets via the post is not considered to be remote interactive gambling, as there is no use of a communication device.

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36         Sales Promotion Schemes

The requirement for all online sales promotion schemes to be in the form of a lottery prohibits an instant win being offered via a remote interactive method (where there is no element of remote interactive gambling whatsoever involved, instant win games and prize competitions are still legitimate forms of sales promotion schemes).  Scratch and win games (scratchies), lucky dips, and mystery envelopes are examples of instant win events.

 

The requirement for all online sales promotion schemes to be in the form of a lottery prohibits the outcome of an online promotion being determined partly by knowledge or skill (when the outcome is determined partly by knowledge or skill, the event is a “prize competition”, not a “lottery”).

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28.13   At What Point is There a Decision Which May be Appealed?

A decision is appealable once it has been formally communicated in a way indicating that it is not provisional or preliminary, or otherwise indicating that it is final.  While such communication will usually take the form of a notice complying with section 67(2), full compliance with section 67(2) is not essential for a decision to be appealable.  A notice that does not fully comply with section 67(2) will give rise to a right to appeal if it is given in final terms.

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37.15   SkyCityCasino.com Example

In August 2019, SkyCity Entertainment Group launched its online gambling site – skycitycasino.com.  To avoid breaching New Zealand law, the website is operated via a Maltese subsidiary, using a platform, gaming content, managed services and front-end developed by Malta-based Gaming Innovation Group.

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34.26   Record Keeping - Venue Records

The Department’s expectation is that venue records are retained by the venue for at least one month, and then by the society for not less than seven years.  This includes the retention by the society for seven years of cancelled credit forms, short pays and refill reports, gambling equipment fault/player dispute reports and unpaid prize reports.

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28.03   Judicial Review and the Limits on Judicial Review Challenges and Other High Court Proceedings – Section 235A

Section 235A only prevents judicial review or other relief once a decision has been made and is capable of appeal.  It does not prevent a judicial review application seeking to have a decision made in the first place.

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12.14    GMP Write Off Applications - Prior Examples

New example included.

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25.06    Club Merger Examples

New example included.

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12.02    Obligation on Society to Disable Machines and Notify the Department

In a March 2019 banking audit report, the Department advised that notifying of a late banking six days after the event, was outside the expected timeframe.

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34.40    Gambling Advertising Code

The Advertising Standards Authority updated its Gambling Advertising Code in early 2019.  The code applies to both pay-to-gamble and free-to-gamble activities.  The code requires gambling advertisements to be socially responsible and truthful.

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37.05    The Pokerstars, Jackpot City and Spin Palace Examples

The Gambling Advertising Code was amended in 2019.  The updated code requires advertisements for free-to-play online gambling websites to clearly display a URL website address.

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22.05   Waikiwi Tavern Precedent Restored

The fact that the local territorial authority may have adopted a relocation policy under section 97A, which provides that relocations are not permitted, does not affect the ability to undertake a relocation under the Waikiwi Tavern precedent: New Zealand Community Trust decision GC04/19.

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28.33   Costs – NZCT - Counties Inn Example

In New Zealand Community Trust decision GC04/19, New Zealand Community Trust sought costs against the Department for delay in decision making (six months two weeks), failing to follow an existing High Court precedent, failing to follow its own precedents, and adopting an unreasonable interpretation of section 98.

 

The Commission gave serious consideration to awarding costs, but ultimately declined to do so.  The Commission declined to award costs despite the fact that it considered the Department’s position to be premised on a weak and contrived interpretation of the Act.  The Commission also commented that the Department showed a curious reluctance to apply a binding High Court decision (the Waikiwi Tavern decision).

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22.05   Waikiwi Tavern Precedent – Accurate Distance Measurement

The new location was separated by just one section from the land on which the tavern was currently sited.  The venue moved from 35 Gimblett Street, Waikiwi to 181 North Road, Waikiwi, a move of 226 metres, measured via measuring wheel from the prior main entrance to the new main entrance.  The distance from the prior main entrance to the new rear gaming entrance, measured via measuring wheel, was 198 metres.  The distance measured as the crow files was 174 metres.

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22.05   Waikiwi Tavern Precedent – Counties Inn Example

Counties Inn relocated under the Waikiwi Tavern precedent in March 2019.  Counties Inn remained on the same main road, relocating from 17 Paerata Road, Pukekohe to 25 Paerata Road, Pukekohe.  The venue moved 130 metres.  The new building had a smaller footprint.  The old site contained a large accommodation and conference centre offering that was not transferred to the new site.  The venue had a very large and loyal base of local customers. 

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2.39      Grant Related Criminal Prosecutions

New example included.

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5.08      Venue Key Persons Receiving Grants

There is nothing in the Gambling Act 2003 which expressly and directly prohibits a society making a grant to one of its venue operators or any other venue key person. 

 

The Gambling (Venue Payments) Regulations 2016 prohibit a society making any other payment to a venue operator apart from the prescribed commission-based venue payment.  In late 2018, the Department indicated that the venue payment regulations prevent grants being made to a venue operator as the grant was a “payment”.  It is questionable whether the Department’s interpretation of the venue payment regulations is correct, given that the regulations were not intended to introduce any new requirement in relation to grants.

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16.09   Primary Activity and Alcohol Licences

In Re Kaiti Club Hotel Ltd [2018] NZARLA 225, the revenue breakdown was not considered detailed enough to assist in determining whether the venue was a tavern, due to the inability to apportion the revenue that did not come from gaming machine venue payments and TAB commission payments.  In this case, the Authority found that the premises were not a tavern, but primarily a gaming venue, based on the venue’s layout, the public perception, and the nature of the entertainment offered.

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34.13   Credit Betting, Cheques and the Use of Credit Cards

The section 15 prohibition is not, however, limited to gambling operators such as casinos, gaming societies, and venue operators.  Section 15(1) uses the term “person” and is therefore intended to be broader in scope.  Any person who is conducting gambling is captured by the prohibition.  In Xiao v Sun [2018] NZHC 536 [26 March 2018], the court noted that conducting gambling included “distributing the turnover of gambling” and held that a gambler who was gambling on behalf of another person, and sharing the gambling profits with that person, was caught by the prohibition on providing credit.

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35.01   Gambling Contracts Authorised by an Act are Enforceable

Gambling contracts authorised by or under the Gambling Act 2003 are enforceable: s 14(2) of the Gambling Act 2003.  Betting contracts authorised by or under the Racing Act 2003 are enforceable: s 64 of the Racing Act 2003.

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35.02   Illegal Contracts

Examples of illegal contracts include loans made by TAB agents to gamblers for the purpose of making a bet (credit betting) and claims for gaming machine winnings by an underage gambler or excluded gambler.

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22.03   Relocating 18 Machines to an Existing 9 Machine Site

It is possible to relocate a venue under section 97A to a site that already holds a gaming licence.  For example, it is possible to relocate an 18 machine licence to a site that already holds a 9 machine licence (effectively increasing the number of machines by 9).  All that is required is for the existing venue licence to be surrendered 24 hours before the new relocated licence is granted.  An example of an 18 machine licence being relocated to an existing 9 machine site, is The Flying Mullet Ale House (GMV 1445) relocation that took place on 13 June 2018.

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22.05   Relocating Under the Waikiwi Tavern Precedent

Additional examples of successful and unsuccessful relocations under the Waikiwi Tavern precedent have been included.

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12.14   Obligation to Account for Profits Following a Robbery

In June 2018, the Department approved in part an application to write off a $1,000.00 insurance excess following an armed robbery.  The money stolen was located in both the venue’s safe and the gaming till.  The Department did not consider that the money in the gaming till was covered by the policy as it was deemed to be the venue operator’s float, not GMP.  Because the insurance excess related to both the stolen GMP and the stolen float, the Department allowed a percentage of the excess to be written off, using the following formula: amount of GMP stolen divided by the total amount stolen multiplied by 100. 

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