Judge tosses hospital’s $2.5M D&O coverage fight with Chubb unit

A federal judge in Chicago on Friday dismissed a not-for-profit hospital’s lawsuit against a Chubb Ltd. unit that sought $2.5 million in directors and officers liability coverage for investigations into its distribution of COVID-19 vaccines in 2021.

U.S. District Judge Jeffrey I. Cummings of the Northern District of Illinois said in Loretto Hospital v. Federal Insurance Co. that the hospital’s breach of contract claim failed because the policy had a $1 million sub-limit on regulatory conduct claims, and the insurer paid that amount in January 2023.

The judge overruled Loretto’s argument that the U.S. Department of Justice and Illinois Attorney General’s Office investigations also triggered other provisions of the $5 million D&O policy.

Loretto began distributing Chicago’s first COVID-19 vaccines to frontline and health care workers in December 2020. In March 2021, local media outlets began reporting that certain Loretto employees, including its then-CEO, chief financial officer and chief transformation officer, held off-site COVID-19 vaccination events at unapproved locations. At those events, dozens of individuals who were not yet eligible for vaccination allegedly received the vaccine, court records show.

In May 2021, the DOJ and Illinois Attorney General’s Office sought records from Loretto about its vaccine distribution program, its operations and dealings for-profit businesses. From May 2021 until June 2023, the DOJ issued 17 additional subpoenas to Loretto, court records show.

Loretto sought coverage from Federal for six of the seven individuals named in the DOJ’s document requests. The hospital sued the Chubb unit in June 2023, saying it breached the policy by only paying $1 million of the defense costs incurred in responding to the investigations.

Representatives for the parties did not respond to requests for comment.