Allegheny Health Network says its property insurer refuses to pay up to $1 billion in claims the health network is owed for losses resulting from the COVID-19 pandemic, and it's taking them to court.
The Pittsburgh-based not-for-profit 13-hospital chain asserts that American Guarantee & Liability Insurance Co. is "obligated" to cover those losses and expenses. The company, along with 43 direct and indirect subsidiaries, seeks a jury trial in the Pennsylvania Civil Division's Court of Common Pleas.
Allegheny's allegations mirror those of at least 177 U.S. businesses, many of which are healthcare providers, that are suing the U.S. subsidiary of Zurich Insurance Group over unpaid COVID-19 claims.
"American Guarantee & Liability Insurance Co and the insurance industry at large have denied or sought to minimize any coverage to policyholders like Allegheny Health Network for property damage and business income claims arising from COVID-19...because they have determined that doing so furthers their economic interests," the lawsuit claims.
Zurich Insurance Group, parent company of American Guarantee, declined to comment on the lawsuit.
American Guarantee sold Allegheny its "Zurich EDGE Healthcare Policy," which covers losses from the interruption of business operations by communicable disease, protection and preservation of property, protection of patients and extra expenses at the health system's more than 350 locations, the lawsuit said. The coverage was valid from October 2019 to October 2020 and did not exclude claims from viruses in the final contract provided to the hospital system, according to the lawsuit.
In 2020, Allegheny reported a $136 million operating loss, down $180 million year-over-year due to a decline in elective surgeries, government shutdowns and other pandemic-related expenses. The company said inpatient visits were down 9%, outpatient registrations down 2% and physician visits down 7% compared with 2019. Despite the decline, parent company Highmark Health's insurance and diversified business portfolio more than offset Allegheny's losses thanks, in part, to patients deferring care.
In its complaint, Allegheny Health said it "promptly" notified the insurer of its claim for coverage. In March , the insurer denied coverage for almost all of the health system's losses, offering Allegheny just $100,000. American Guarantee also refused Allegheny's request for an extension of its tolling period beyond June 19, 2021, essentially saying the health system's statute of limitations had ended, the health system alleges.
By failing to adequately investigate and compensate Allegheny for its losses, American Guarantee "unnecessarily exposes businesses to severe financial hardship and potentially bankruptcy, [is] threatening the employment of thousands, and damaging the economic well-being of society as a whole," the lawsuit says.
The health system is seeking a declaratory judgment for its losses, plus with attorneys' fees, interests, and other relief the court deems appropriate.
In March, Roanoke, Virginia-based Carillon Clinic sued American Guarantee, seeking to recoup more than $150 million in COVID-19 losses , according to the Roanoke Times. The same month, Novant Health in Winston-Salem, North Carolina sued American Guarantee for breach of contract, acting in bad faith and violating state law governing unfair and deceptive trade practices. RWJBarnabas Health of West Orange, New Jersey, sued Zurich Insurance Group in March, seeking up to $2.5 billion in claims, according to NJ.com.
At least 177 businesses nationwide have sued Zurich Insurance Group for COVID-19 losses making it the second-most common insurer sued, behind Hartford Financial Services Group, according to the most recent data from the University of Pennsylvania's COVID Coverage Litigation tracker. Across industries, ambulatory healthcare companies filed the second-most suits against property insurers, behind food service companies, with 240 cases alleging insurers failed to adequately compensate providers for coronavirus losses. At least 36 hospitals also sued their property insurers.
Federal judges dismissed policyholders' claims in approximately 92% of these cases, University of Pennsylvania researchers found.
