Healthcare providers are leaving no stone unturned when it comes to recouping pandemic-related financial losses.

They’ve had success with the federal government, which has doled out more than $160 billion in stimulus grants and counting. But legal efforts like those from big names like Northwell Health, RWJBarnabas Health and Carilion Clinic to force property insurers to pay hundreds of millions in claims for business lost during the COVID-19 crisis so far haven’t gotten a positive reception from judges.

It’s been an uphill battle for the hundreds of hospitals, surgery centers, medical practices and dentists who are trying to recover what they deem to be money owed under sections of their policies that reimburse for business interruptions. Government-mandated shutdowns forced them to suspend elective procedures, services like hip replacements and heart surgeries that tend to carry the highest margins.

They’re hardly alone. Businesses of all stripes—restaurants, gyms and hotels, among others—have filed almost 1,600 lawsuits against property insurers contesting coverage denials. So far, federal judges agreed to insurers’ requests to dismiss in 91.5% of cases, according to the COVID Coverage Litigation Tracker, a database operated by Penn Law School and others. The odds are better in state courts, where judges have dismissed 52% of lawsuits. There are many more federal cases than state ones, however.

The tides could still turn in favor of provider plaintiffs once judges rule on their appeals, said Tom Baker, the Penn Law School professor who created the litigation tracker.

“It’s still incredibly early days,” Baker said.

Almost 200 of the lawsuits were filed by ambulatory healthcare providers, the second-largest category, the tracker shows. Another 19 are from hospitals. Restaurants and bars have brought far more lawsuits than any industry, having filed almost 600 cases.

Insurers have been unified in their argument that property insurance policies simply aren’t designed to protect against pandemics. They cover physical damage from catastrophic events like fires and floods, qualifying events that are required to trigger payouts for business interruption, according to insurers.

In addition to the COVID-19 pandemic, last year saw record hurricane and wildfire seasons, said Scott Holeman, a spokesperson for the Insurance Information Institute.

“We’ve got money to pay those claims,” he said. “If you start taking money for things that have actually been planned for, then you’re going to bankrupt the insurance companies. Then nobody will have insurance.”

That’s an interesting point, but it’s not a legal argument, Baker said. The cases really come down to what the actual words in the policies say, he said.

The lawsuits have been even harder for businesses to win if their insurance policies include so-called “virus exclusions,” which specifically call out viruses as not eligible for coverage. When that exclusion was in the policy, judges granted insurers’ dismissal motions in 96% of federal cases and 65% of state cases, according to Penn’s litigation tracker. When there wasn’t a virus exclusion, judges dismissed 85% of federal cases and just 30% of state cases.

Providers declined to comment on their cases, citing an inability to discuss ongoing litigation.

The terms for accepting federal stimulus grants under the Provider Relief Fund hold that providers can’t be reimbursed by another source for the lost revenue or increased expenses they’re attributing to the pandemic. That means healthcare providers would have to report any claims paid by their property insurers to offset business interruptions, and potentially would have to accept less grant money in proportion to their insurance payment.

That said, there may be some latitude around whether the insurance payments would need to be reported if they’re triggered by a lawsuit settlement after the PRF funds were reported, Anna Stevens, partner-in-charge of healthcare services at the Texas-based national accounting firm Weaver, wrote in an email.

Roanoke, Virginia-based Carilion Clinic estimates in its complaint that it lost more than $150 million as a result of the pandemic, mostly from suspending elective procedures between March 25 and May 7. Carilion says its property insurer, American Guarantee and Liability Insurance Company, hasn’t fully investigated the health system’s losses, although it has not officially denied Carilion’s claim. AGLIC declined to comment through its parent company, Zurich American Insurance Company, which is fielding more than 110 such cases, per the litigation tracker.

Carilion said while its policy through AGLIC requires “physical loss of or damage” to property, exactly what that means is not defined. The system argued in its complaint that it met that threshold through the presence of COVID throughout its hospitals, clinics and wellness centers. It also cited the government-mandated shutdowns and the fact that the pandemic forced people to avoid confined indoor spaces and congregating with others to reduce the likelihood of transmission.

“The presence of the coronavirus in the air and on surfaces made Carilion Clinic’s facilities uninhabitable, unsafe and unfit for their intended uses—just as if asbestos, ammonia, fumes or a salmonella outbreak was in the air or on surfaces of the premises,” the provider’s complaint said.

Carilion said it paid $1 million in premiums for the policy, which was effective from June 1, 2019 to June 1, 2020 and provided $1.3 billion in property damage and business interruption coverage.

“We didn’t want to make this move,” Chris Turnbull, a Carilion spokesperson, said in a statement. “This legal action was necessary to preserve our rights under the policy. Our hope is that AGLIC will take another look at the claim and engage in a meaningful conversation with us.”

Northwell, New York’s largest private employer, argued in a federal lawsuit it filed in February against two property insurers, Lexington Insurance Co. and Interstate Fire & Casualty Co., that their policies are designed to cover “exactly” the type of losses it sustained during the pandemic. Northwell, which treated more than 100,000 COVID-19 patients, lost almost $247 million on operations in the first nine months of 2020. Neither Northwell nor its attorneys agreed to comment.

RWJBarnabas’ complaint against Zurich American Insurance says that its all-risk policy doesn’t have a virus exclusion because the insurer agreed to remove it when the health system bought the policy. RWJBarnabas’ policy provides $2.5 billion in coverage. Neither RWJBarnabas nor its attorneys returned requests for comment.

Linda Kornfeld, a partner at Blank Rome who specializes in insurance recovery and is advising healthcare providers on such cases, said as providers’ legal teams are increasingly learning more about the policies through the ongoing cases, they’ve been finding that even unseen viruses that invade a building’s airspace and render it dangerous to inhabit constitute physical loss of property. Healthcare providers might have an even easier time with that than other types of businesses, since they can prove COVID was on their properties.

“The insurer strategy of shutting these cases down before policyholders can access their files has worked in many of these cases, but I believe that as more information about these policies and their meaning becomes available, more policyholders will prevail,” Kornfeld said.

Insurance law is determined by state courts, so any federal courts have to follow what state judges decide. Right now, though, there’s very little state law precedent on the COVID business interruption question because it’s such a new issue, said Baker, of Penn Law.

That means that even if there were 50 federal court decisions in favor of insurance companies in cases concerning California healthcare providers, just one state appellate court ruling in favor of the healthcare providers would become the law of the land, Baker said.

“Because we have state trial judges indicating they feel differently about these cases and we know it’s state law that’s in charge, then it seems like it’s too soon to say insurers will win all these cases,” he said.

Kornfeld pushed back against the notion that property insurance is only meant to cover damage from disasters like fires, floods or hurricanes. That was the case decades ago, but now they’re more commonly sold as “all risks” policies that are more inclusive.

When the law aimed at cleaning up environmental contamination sites known as Superfund sites was enacted in 1980, insurers similarly denied polluting companies’ claims to cover the cleanup costs, Kornfeld noted. Early on, courts ruled in favor of the insurers. That is, until more sophisticated analysis of the policies determined their coverage was broader than insurers were making them out to be.

“As information is slowly coming out, we’re finding the same kinds of things that we found in the environmental wars, where you’re starting to see information that shows there is another story here than the ones the insurers are arguing in their motions to dismiss that they’re filing everywhere,” Kornfeld said.

Baker said many insurance policies have time limits on when lawsuits can be filed. He encouraged healthcare providers to preserve their rights to file claims if need be, especially if their policies do not have virus exclusions. He said the perils covered under property insurance have indeed expanded over the years, so a building that was contaminated with COVID and couldn’t be used in the same way could be eligible for coverage.

“If someone came in and sprayed ammonia all over your building and you couldn’t use it, I think that would be covered,” Baker said. “The question is, is COVID like that or not like that?”

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