Two Missouri Universities Claim Factory Mutual Insurance Company Refused to Cover COVID-19-Related Losses

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Rockhurst University and Maryville University have filed a proposed class action lawsuit against Factory Mutual Insurance Company over claims that the insurer has refused to pay for covered losses after the schools’ respective campuses were forced to close due to the COVID-19 pandemic.

The lawsuit alleges that although the two Missouri universities purchased “materially identical” all-risk commercial property insurance policies from Factory that, in both cases, provided a coverage limit of roughly $300,000,000, the defendant has maintained that coverage is limited to only two communicable disease policy provisions that share a $1,000,000 sublimit. Additionally, the case says, Factory has unreasonably required that the schools provide a positive COVID-19 test as proof that the virus was present on their properties and evidence that the government orders to close down their campuses were issued as a direct result of the virus’s presence.

Although the plaintiffs both submitted claims for coverage under their policies, the defendant has “not paid any funds to date,” per the complaint.

The lawsuit argues that measures the plaintiff schools have taken to combat COVID-19 have had a “devastating financial impact” on the two universities, noting that room-and-board reimbursements, lost revenue from canceled on-campus events and summer programs, and the increased cost of cleaning and disinfecting campus facilities, to name a few expenses, have totaled in the millions of dollars.

According to the lawsuit, the plaintiffs’ policies specifically provided coverage for communicable disease response and interruption by communicable disease. In particular, the case states, the communicable disease provisions of the plaintiffs’ policies apply when an insured property “has the actual not suspected presence of communicable disease and access to such location is limited, restricted or prohibited by” a government order or decision by an officer of the insured as a result of the disease.

The plaintiffs claim they’ve been restricted or prohibited from access to their properties due to decisions made by the school’s officers as well as state-mandated stay-at-home orders issued in response to the COVID-19 pandemic, thereby triggering coverage under their policies.

Per the case, the closures of the plaintiffs’ campuses have also triggered coverage under the policies’ decontamination costs, time element, extra expense, civil or military authority, and ingress and egress coverages, among several other types of coverage that the plaintiffs argue apply to their losses.

Though the plaintiffs each submitted timely claims to Factory, the insurer indicated that the only bases for coverage under the policies are the two communicable disease provisions, whose $1,000,000 sublimit is “far less than Plaintiffs’ total losses from COVID-19 and the overall limits of liability under the Policies,” according to the lawsuit.

The case argues that Factory’s position runs contrary to the language of the policies, adding that the defendant has further indicated that in order for coverage to apply, the two schools must produce a positive COVID-19 test from someone who was on campus and prove that the test was the reason for the officers’ and government’s decisions to restrict access to campus.

“Thus, Defendant has made clear that it will not provide the full extent of coverage under the Policies for losses due to COVID-19,” the complaint scathes.

The case adds that the defendant’s position appears to reflect the entire insurance industry’s approach to the pandemic—to uniformly deny coverage even when the policies at issue do not exclude virus- or pandemic-related losses. Moreover, the suit notes that as far back as March 2020, Factory began meeting with representatives of colleges and universities to discourage them from submitting claims for coverage.

The lawsuit looks to represent all institutions of higher education that are covered by one of the defendant’s policies in effect during the COVID-19 pandemic, with a proposed subclass of those who purchased their policies in Missouri.

ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.

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