Law360 (November 14, 2022, 3:10 p.m. EST) – A federal judge in Virginia has sided with American Guarantee and Liability Insurance Co. in a COVID-19 business interruption case brought by two center operators doctors, concluding in an order issued on Monday that they could not obtain coverage for loss of income due to government orders that postponed elective procedures.
In dismiss a partial summary judgment at Danville Regional Medical Center LLC and Clinch Valley Medical Center Inc., U.S. District Judge Thomas T. Cullen joined what he called a “chorus of courts” concluding that government shutdown orders do not not trigger coverage under Communicable Disease Interruption Riders similar to the Medical Centers policy.
The Communicable Disease Approval clearly states that government orders must declare part of the property “uninhabitable” and deny access in order to trigger coverage, which the Virginia order at the center of the claim did not. fact, Judge Cullen found. Instead, he only required medical providers to postpone any procedures that could be safely rescheduled in order to retain personal protective equipment, he said.
“It’s not the first time this court has been asked to decide whether the COVID-19 pandemic – and accompanying government shutdown orders – involved an insurance policy, and it surely won’t be the case. last,” Judge Cullen wrote. “With respect to the policy currently before the court, the clear terms of the parties’ agreement simply do not cover the restrictions imposed on the plaintiffs’ hospitals.”
In his order, Judge Cullen cited cases such as St. Tammany Parish Hospital Service District No. 2 c. Zurich American Insurance Co. et al.in which a Louisiana federal court found in March, no coverage for two healthcare providers under an identical endorsement because they were not barred from accessing any of their facilities.
The medical centers argued that the “deny access” language could also be interpreted to mean simply restricting access to their facilities rather than preventing it altogether, but they had to use “loose dictionary definitions” and violate the “fundamental principles of interpretation of contracts” to achieve this, Judge Cullen said. The only reasonable interpretation of the policy wording is that its terms of coverage were not met by the order, he found.
“The plain words of the insurance policy contract control, not how those words are understood when used in other contexts,” Judge Cullen wrote. “While the court understands and is sensitive to the financial strains imposed on hospitals by the COVID-19 pandemic, this sympathy cannot go so far as to distort the plain language of the policy.”
Danville Regional, which operates medical centers in Danville and Martinsville, Va., and Clinch Valley, which operates in the city of Richlands, sued AGLIC in March 2021, claiming that virus droplets were attached and damaged their property, according to the documents filed in the case. Both organizations are named as insured under a $650 million property insurance program underwritten by Zurich’s unit Liberty Mutual Fire Insurance and Lexington Insurance, according to filings.
In February, Judge Cullen denial of coverage at centers under the bioburden and decontamination provisions of their policy for failing to demonstrate physical loss or damage to their property, but allowed their communicable disease claim to proceed because the endorsement did not include of similar requirement. As part of that claim, the couple requested coverage for lost earnings up to the rider’s $1 million sublimit, according to filings.
According Law360 COVID-19 Insurance Case Tracker. 20% of pandemic lawsuits filed in federal courts have been voluntarily dismissed, the tracker says, although about 26% have yet to be fully decided.
Representatives for Danville Regional, Clinch Valley and American Guarantee did not immediately respond to requests for comment.
Danville Regional and Clinch Valley are represented by John N. Ellison, Luke E. Debevec, Andrew M. Barrios and Noah S. Oberlander of Reed Smith LLP.
American Guarantee is represented by Patrick F. Hofer and Gabriela Richeimer of Clyde & Co. LLP and Rosalie Pemberton Fessier of TimberlakeSmith.
The case is Danville Regional Medical Center LLC et al. vs. American Guarantee and Liability Insurance Co., Case Number 4:21-cv-00012, in the U.S. District Court for the Western District of Virginia.
— Additional reporting by Ganesh Setty, Eli Flesch and Ben Zigterman. Editing by Neil Cohen.
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