Massachusetts hospital wins COVID coverage appeal

A federal appeals court Wednesday partially overturned a lower court and ruled that a Lawrence, Massachusetts, hospital is owed insurance coverage for COVID-19-related losses under an endorsement it purchased from a unit of CNA Financial Corp.

In Lawrence General Hospital v. Continental Casualty Co., the 1st U.S. Circuit Court of Appeals ruled – like many other appeals courts in COVID-19 cases – that the hospital had not suffered “direct physical loss of or damage to property” so its business interruption coverage was not triggered for the “tens of millions of dollars” in losses it claimed. However, the hospital was covered for losses incurred when it complied with government decontamination orders under a separate health care endorsement it bought from Continental.

Under the endorsement, the hospital would be covered for losses or costs incurred in the event that it were: subject to “an evacuation or decontamination order”; the losses occurred at a covered location; the order was issued by the Centers for Disease Control and Prevention, a health official or government authority; and there was a “threat of the spread of a communicable disease,” court papers say.

In contesting the claims, Continental focused on whether the hospital was subject to a decontamination order, arguing that various orders issued by the government for hospitals to cease elective procedures did not amount to a decontamination order.

The hospital contended that among the various orders from authorities was a requirement for cleaning and disinfection before it could restart elective procedures, but Continental argued that the hospital could have remained open only for nonelective procedures or waited for authorities to change requirements for elective procedures.

The appeals court sided with the hospital.

“As LGH convincingly argues, the ‘choice’ to comply with the stated conditions or forgo the ability to treat ‘the vast majority of its patients’ for an indefinite period is no choice at all,” the ruling states.

The appeals court remanded the case for further proceedings.

CNA declined to comment on the ruling.