By Daphne Zhang

Law360 (July 23, 2020, 8:34 PM EDT ) A group of Midwestern colleges slapped Zurich American Insurance Co. and Factory Mutual Insurance Co. with two proposed class actions Thursday, seeking a declaration that their policies worth upwards of $300 million should cover their millions in financial losses amid COVID-19.

The three private colleges said the insurers have indicated that virus-related losses are not covered, while their all-risk commercial property policies do not have a virus or pandemic exclusion. The two proposed class actions are filed by the same firms in Missouri and Kansas federal courts.

Rockhurst University, Maryville University, and Benedictine College claimed they have incurred substantial economic losses from shutting down campus activities, sports events, and student dorms in mid-March. The institutions said they also lost revenue from canceled summer camps and disinfecting campus facilities.

The three colleges said their policies specifically provide coverage for "decontamination costs," and the civil authority coverage should also apply because they were required to shut down campuses because of state-mandated orders.

Rockhurst, a private Jesuit university in Kansas City, Missouri, said it has refunded $2.2 million in dorm fees to students. The university, which serves over 3,000 students in its 55-acre campus, holds a $278 million policy with Factory. Maryville of St. Louis, Missouri, which holds a $314 million policy with Factory, said it has reimbursed students over $2 million for room and board.

The two universities said that Factory met with them in March and "actively" discouraged them from filing claims. The schools reached out to the insurer in June, requesting coverage, and were told that Factory would only consider the communicable disease provision of their policies, which has a coverage limit of $1 million.

The insurer told the two schools that the communicable disease coverage would only apply if the universities could show positive COVID-19 test results from someone on campus, and demonstrate that the positive test results are the reason a governmental authority restricted access to the campuses.

Rockhurst and Maryville called the Factory's consideration "improperly narrow." The two universities said they have confirmed the presence of COVID-19, and "it is more likely than not" that people infected by COVID-19 were on campus by at least early March.

But when asked whether they had confirmed positive COVID-19 test results and provided them to the insurer, the universities' attorney Patrick Stueve said they have no further comment other than what they alleged in the complaint.

Rockhurst and Maryville contended that the potential $1 million communicable disease coverage is much lower than the amount of loss they incurred and the overall $300 million overage limit of their policies.

The two universities argued that government orders explicitly acknowledge that the novel virus causes direct physical damage, claiming that Kansas City's stay-at-home order was issued to protect property, among other things, from the spread of COVID-19. And Johnson County, Kansas, has also stated that COVID-19 "endangers property," they said.

The third school, Benedictine College of Atchison, Kansas, which serves over 2,300 students, told a Kansas federal judge that Zurich said in May the policy does not cover pandemic-related losses. The private liberal arts college holds a $100 million policy with Zurich.

Like the two Missouri universities, Benedictine said it has suffered significant financial losses from shutting down campus activities and dorms. The college refunded over $1 million in room and board fees to students, according to its proposed class action.

Benedictine said its all-risk policy does not contain any exclusions for pandemics, communicable disease, or virus. Although the Zurich policy excludes "contamination due to presence of virus," the college argued, the policy's "amendatory endorsement" specifically cut the word "virus" from the definition of "contamination" and that of "contaminant."

"The decision by defendant to explicitly remove the word 'virus' from the contaminants exclusion evinces a clear intent by defendant to provide coverage for viruses, like COVID-19, under the policy," Benedictine contended.

In the two proposed class actions, the three midwestern colleges said that "it is still unclear whether students will be permitted to return to campus for the fall semester." While Rockhurst's website said that fall 2020 classes are scheduled to take place on campus, Maryville's website said it would hold both on-campus and online classes, and Benedictine said it will offer in-person classes and athletic competition in the fall semester.

Rockhurst and Maryville are seeking to represent a nationwide class and a Missouri subclass of all higher institutions covered by Factory's policies during the pandemic. Benedictine is looking to represent a national class and Kansas subclass of all higher institutions covered by Zurich's policies during COVID-19.

Zurich and Factory could not be immediately reached for comment on Thursday. 

Counsel information for the insurers could not be immediately determined.

The schools are represented by Patrick J. Stueve, Bradley Wilders, Todd M. McGuire, Abby McClellan, and Christopher Curtis Shank of Stueve Siegel Hanson, LLP; John J. Schirger, Joseph M. Feierabend, and Matthew W. Lytle of Miller Schirger, LLC; Dawn Marie Parsons, Richard F. Lombardo, Michael Barzee, and Rachael D. Longhofer of Shaffer Lombardo Shurin, PC; J. Kent Emison of Langdon & Emison - Lexington.

The cases are Rockhurst University et al v. Factory Mutual Insurance Co., case number 4:20-cv-00581, in the U.S. District Court for the Western District of Missouri; and Benedictine College v. Zurich American Insurance Co., case number 2:20-cv-02361, in the U.S. District Court for the District of Kansas. 

--Editing by Amy Rowe.

For a reprint of this article, please contact reprints@law360.com.