Northwell Health Inc., in a motion for partial summary judgment, said the two exclusions don't remove coverage for its losses under time element and communicable disease provisions. The health care provider with a network of 23 hospitals said it was hit hard by orders suspending ambulatory physician practices and elective procedures and transforming its property to accommodate COVID-19 patients.
The first exclusion, which wasn't relied upon in the insurers' denial letter, addresses losses caused by traditional environmental or industrial pollutants and contaminants, according to Northwell, not the coronavirus. The second contamination exclusion, which was added in an endorsement, applies only to out-of-pocket costs paid for contamination but not business interruption losses, the policyholder said.
"A pandemic exclusion for first-party property policies was available in the marketplace for use at the time defendants issued Northwell's policies," the health care provider said. "Defendants cannot now seek to rewrite the policies to exclude Northwell's losses from the COVID-19 pandemic, after collecting substantial premiums for policies that do not exclude losses from viruses or pandemics."
Northwell sued the insurers in February, alleging the pandemic and shutdown orders caused losses at its 23 hospitals in New York City and the surrounding area. The health care provider said devoting its resources to fight the pandemic caused it to lose revenue from nonessential medical procedures.
Last month, Lexington and Interstate asked the Southern District of New York to toss the suit, arguing that the health provider can't claim its switch in services was a business interruption loss. They said Northwell's business wasn't suspended when its hospitals were "inundated" with COVID-19 patients. Even if there was a "direct physical loss," the policies specifically exclude losses by viruses, the insurers argued.
On Friday, Northwell also responded to the insurers' bid to kick the suit. There isn't any requirement to show a complete shutdown, the health care provider said, arguing that the government orders said the hospitals were uninhabitable due to communicable disease and prohibited access to the properties.
"Northwell negotiated for communicable disease coverage precisely because it operates hospitals and other medical facilities, and the notion that it should be denied that coverage now during the worst health care crisis the world has seen in over a century defies Northwell's reasonable expectations," it said.
Northwell also argued the presence of the coronavirus, "a dangerous substance" in the air that attaches to surfaces, caused a "direct physical loss of or damage" to its hospitals. The policies don't require a physical alteration to the property, the policyholder said, arguing its properties were "unfit and unusable." And New York law doesn't require a physical change for coverage to be triggered, Northwell said.
"The policies do not have a 'virus' exclusion intended to exclude coverage for losses arising out of a pandemic, despite the insurance industry claiming that it drafted just such an exclusion for that purpose in 2006," Northwell said, arguing that the contamination exclusions don't preclude coverage.
Counsel for Northwell declined to comment.
Representatives for the insurers didn't respond to requests for comment.
Northwell is represented by Robin L. Cohen, Alexander M. Sugzda and Cynthia M. Jordano of Cohen Ziffer Frenchman & McKenna LLP.
Lexington is represented by Michael B. Carlinsky and Maaren A. Shah of Quinn Emanuel Urquhart & Sullivan LLP and Keith Moskowitz of Dentons.
Interstate is represented by Michael D. Hynes of DLA Piper.
The case is Northwell Health Inc. v. Lexington Insurance Co. et al., case number 1:21-cv-01104, in the U.S. District Court for the Southern District of New York.
--Editing by Haylee Pearl.
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