A Texas jury awarded Baylor College of Medicine in Houston $48,529,961 in damages caused by COVID-19, in what appears to be the first jury verdict in a claim to cover lost business income and other losses caused by the virus.
A verdict form posted online by the 295th Judicial District of Harris County on Tuesday shows that a 10-member jury of 12 ruled against Lloyd’s, a London syndicate that sold Baylor a full-risk commercial property policy. The jury awarded $42,855,000 for lost net profit, $3,365,661 for incremental expenses, and $2,309,300 for research project expenses.
Plaintiff’s attorney Robin O’Neil, a partner at the law firm Fogler, Brar, O’Neil Grey, said Baylor’s lawsuit is unlike many of the hundreds of other cases that have so far been pending against policyholders. Baylor operates the hospital, which has remained open throughout the pandemic and has acquired a policy without the usual virus exclusion.
“I really think Baylor was in a unique location because we were able to establish the presence of the virus in the area during the entire coverage period,” she said.
Although Baylor did not close completely due to the pandemic, O’Neill said it had to limit operations and incur additional costs. For example, the hospital had to invest in video equipment to implement a “telemedicine program”. The college was also forced to limit research services because people could no longer participate. Polyclinics, classrooms and laboratories were forced to operate at reduced capacity.
Baylor named four insurers in its original September 2020 complaint, but Judge Donna Roth dismissed Ace American Insurance Co. and XL Insurance America as defendants because their policies contained pollution exceptions that prohibited coverage for damage caused by viruses.
“She was very shrewd in her decisions,” O’Neill said.
She said Baylor was seeking $59 million in business interruption compensation, $7.1 million in incremental expenses and $2.3 million in damages to its research functions.
Very few, if any, COVID-related business interruption suits have made it to jury trial. Hundreds of lawsuits against insurers have been thrown out by trial courts, which have concluded that the virus cannot cause physical loss or damage covered by insurance policies, according to a lawsuit-tracking system maintained by the University of Pennsylvania. In the tracker, there are no decisions of the court of first instance in favor of the policyholders, and only two decisions of the court of first instance in favor of the insurer.
Most of the appellate courts that have heard COVID-related business interruption cases have also ruled against coverage. State supreme courts in Massachusetts, Iowa, South Carolina, and Wisconsin have ruled that SARS-CoV-2 cannot cause direct physical harm or damage.
There were notable exceptions:
- The California 2nd Circuit of Appeals overturned the Los Angeles County Superior Court’s decision to dismiss the Erwin Hotel’s suspension action.
- The 4th Louisiana Court of Appeals ruled that insurance coverage must be provided by Oceana Grille.
- Division One of the New York City Division of Appeals ruled in favor of the New York Botanical Gardens due to unusual policy wording that included “communicable disease” coverage.
O’Neill said she was confident her client would also win if Lloyd appealed the Harris County decision. According to UPenn’s litigation tracking system, Texas appeals courts have yet to rule on whether the virus could cause direct physical loss or damage.
“We’re confident in our chances,” O’Neill said.
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