The coronavirus pandemic has cost Carilion Clinic more than $150 million in lost business, forced it to impose costly safety measures and infected more than 1,300 of its employees.
Those figures are included in a lawsuit filed by Carilion against its insurance provider, claiming that its losses were not covered.
In the face of one of the worst public health and economic catastrophes in the past century, American Guarantee and Liability Insurance Co. “turned its back on Carilion” by declining to fulfill its obligations under a property insurance policy, the lawsuit states.
Filed Thursday in U.S. District Court in Roanoke, the lawsuit also accuses American Guarantee’s parent company, Zurich American Insurance Co., of waging “a public relations campaign to discourage and deter policyholders from bringing business interruption claims” such as the one filed by Carilion.
A spokeswoman for Zurich declined to comment Monday; Carilion officials said they could not talk in detail about the lawsuit.
“We didn’t want to make this move,” Chris Turnbull, senior director of corporate communications for Carilion, 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.”
The 51-page lawsuit contains perhaps the most detailed public accounting to date of COVID-19’s financial toll on Carilion, which provides health care to nearly 1 million patients in Southwest Virginia and beyond.
As the virus spread, it contaminated Carilion’s facilities “just as if asbestos, ammonia fumes or a salmonella outbreak was in the air or on the surfaces of the premises,” the lawsuit states.
Zurich’s policy covered “physical loss of or damage” to Carilion’s property that was experienced in at least four ways, the health system maintains: through the transmission of the virus in its hospitals, clinics and other settings; through government orders that temporarily prohibited elective surgery and other services; through required precautions such as social distancing; and through the need to disinfect door handles, bedsheets, hospital gowns, medical equipment and other surfaces.
The insurance companies have asserted that virus-related losses are excluded from the policy, according to the lawsuit.
COVID-19 does not cause a physical loss or damage to property in the same way as other forces — such as fires, floods or hurricanes — that are covered by its insurance, American Guarantee has reportedly said.
Carilion, however, maintains that it should be covered by a policy that costs $874,863 a year.
The lawsuit seeks a jury trial on the questions of whether Zurich and American Guarantee are obligated to pay Carilion’s losses, and if so, in what amount.
Zurich has been slammed with lawsuits from other policyholders seeking coverage for COVID-19 related losses, according to Law360. The cases include a hotel in Michigan and more than a dozen healthcare companies in Illinois, the news service reported last week.
Julian Walker of the Virginia Hospital and Healthcare Association said Monday that he was not aware of similar lawsuits filed in the state.
More than 1,300 of its employees have contracted the virus, Carilion’s lawsuit states. That’s about 10% of the workforce at the system’s seven hospitals and more than 250 physician practices, complementary medical services and fitness centers.
The lawsuit does not assign an economic cost to the sick employees. Rather, it says they provide proof of the “actual, certain presence of the coronavirus on Carilion Clinic’s property.”
It wasn’t clear Monday whether Carilion’s stated losses of more than $150 million accounted for all of the financial damage inflicted by COVID-19, or to what degree that figure was offset by state and federal aid, such as the CARES Act.
Virginia hospitals have incurred revenue losses of more than $1.8 billion attributed to the pandemic, including a temporary halt of non-emergency procedures and sharp declines in patient visits due to stay-at-home orders, Walker said. A breakdown by hospital was not available.
Carilion never received an outright denial to its insurance claim, which was made last spring.
But according to the lawsuit, American Guarantee did not send an adjuster to the health system’s Roanoke headquarters to investigate the claim. And last April, it issued a letter reserving its right to deny coverage.
Zurich issued a news release in May stating that virtually all of its policies issued in the United States excluded virus-related losses.
Also included in the lawsuit is the allegation that Zurich and its affiliates, including American Guarantee, knew before the virus struck that their insurance policies would cover just such an unlikely disaster.
In December 2019, shortly after the first COVID-19 cases were reported in China, Zurich filed a regulatory request to modify the language. “Buried in the edits, and without reference to the significance of the change, Zurich’s filing sought to add an exclusion for viruses,” the lawsuit states.