Lindenwood Female College of Saint Charles, Missouri, said it has sufficiently alleged that the COVID-19 virus physically existed on and damaged its property. The policy's contamination exclusion does not include "virus" as an excluded cause of loss, so Zurich cannot deny coverage by asserting the exclusion, the college said.
Zurich specifically removed "virus" from the contamination exclusion through a "virus deletion endorsement" when it issued Lindenwood the Zurich Edge policy, which promised policyholders broad and flexible coverage, the school said.
According to the response, Zurich was approved to add a Louisiana geographical limitation into its virus deletion endorsement last fall, and the insurer has tried to impose that limit to argue that the endorsement only applies to Louisiana policyholders.
But the carrier cannot use the newly approved language to limit coverage to policies it issued before the approval, the school said.
"This geographically limiting language is absent in the Virus Deletion Endorsement contained in Lindenwood's Policy and other Edge Policies for which Zurich has denied coverage across the country," the college said. "When insurers like Zurich fail to use geographically limiting language in the endorsement itself, courts consistently refuse to read that limitation into the policy."
At a minimum, the court should hold that the virus deletion endorsement is ambiguous and construct it in favor of policyholders, Lindenwood said. Even if the virus deletion only applies to Louisiana policyholders, the contamination exclusion does not bar contamination losses but only decontamination costs, the school said, citing Thor Equities LLC v. Factory Mutual Insurance Co.
Last week, a New York federal judge said a contamination exclusion, which bars pollution caused by a virus, under a Factory Mutual Insurance Co.'s policy is ambiguous as to whether it precludes contamination or decontamination costs.
The judge found Thor Equities' interpretation, that its policy's contamination exclusion only precludes contamination-induced costs, such as money spent to clean and disinfect a surface but not losses resulting from the contamination, was reasonable.
"Had Zurich intended for the contamination exclusion to apply to 'loss,' it could have specified that scope, just as it did in other policy exclusions. But Zurich did not, and this Court should not rewrite the Policy to do so now," Lindenwood said Wednesday.
The college also argued that it has plausibly alleged both direct physical loss of and damage to property by showing that the virus was physically present on its campus and facilities. Lindenwood announced its first confirmed case of COVID-19 last March after a student who tested positive visited the campus. The college then shut down campus activities and dorms and refunded over $5 million in room and board fees to students, according to the suit.
Zurich has been hit with a number of proposed class actions from Midwestern colleges seeking millions to cover their financial losses amid the pandemic. Last July, Rockhurst University, Maryville University and Benedictine College filed two separate proposed class actions in Missouri and Kansas federal courts.
The schools contended that because their all-risk commercial property policies do not have a virus or pandemic exclusion, Zurich was obligated to cover their losses under their policies worth upward of $300 million.
Counsel for the parties could not immediately be reached for comment.
Lindenwood is represented by Patrick J. Stueve, Bradley Wilders, Todd M. McGuire and Christopher Curtis Shank of Stueve Siegel Hanson LLP and Brett A. Emison of Langdon & Emison.
Zurich is represented by Bronwyn F. Pollock, Douglas A. Smith, Evan T. Tager, Archis A. Parasharami and Debra Bogo-Ernst of Mayer Brown LLP and Patrick Florian Hofer and Gabriela Richeimer of Clyde & Co. US LLP.
The case is Lindenwood Female College v. Zurich American Insurance Company, case number 4:20-cv-01503, in the U.S. District Court for the Eastern District of Missouri.
--Editing by Gemma Horowitz.
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