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Health care system’s COVID-19 business interruption suit can proceed


A federal judge in North Carolina has refused to dismiss COVID-19 business interruption litigation filed by a health care system against a Zurich Insurance Group unit, ruling the system has adequately established physical losses, despite the coverage’s virus exclusion.

Winston-Salem-based Novant Health Inc., which operates about 700 health care centers, including 15 hospitals, had sued Zurich unit American Guarantee and Liability Insurance Co., seeking coverage under its all-risk policy, according to last Thursday’s ruling by the U.S. District Court in Greensboro in Novant Health Inc. v. American Guarantee and Liability Insurance Co.

“Novant has alleged that COVID-19 is present and continually re-introduced to its properties, despite its best efforts, and that COVID-19 has caused physical damage and losses potentially covered by the Policy,” the ruling said.

“Whether COVID-19 has resulted in direct physical damage or loss to Novant, and if so to what extent, are questions better evaluated on a developed factual record,” said Judge Catherine C. Eagles’ ruling. “Novant has adequately alleged direct physical damage or loss, and dismissal on this basis is inappropriate” at this stage.

The ruling said “there is a question as to whether the virus exclusion is part of the policy” and that American Guarantee “has the burden to show the exclusion applies.”

The ruling said the insurer’s claim that a communicable disease provision in the policy should be dismissed “is not ripe for resolution.”

Attorneys in the case did not respond to requests for comment.

In July, a federal district court in New York dismissed COVID-19 business interruption litigation filed by New Hyde Park, New York-based hospital system Northwell Health Inc. against American International Group Inc. and Allianz SE units, stating the losses had not been caused by direct physical loss or damage as required by the coverage.