By Melissa Angell

Law360 (April 19, 2021, 7:03 PM EDT) -- Novant Health Inc. says its $1.5 billion policy provision with a Zurich subsidiary should cover hundreds of millions in losses from various cancellations and postponements amid the COVID-19 pandemic, according to a suit removed to North Carolina federal court on Friday.

The North Carolina-based healthcare company argues that Zurich insurance subsidiary American Guarantee and Liability Insurance Company breached their contract when the insurer purportedly refused to pay the healthcare company for losses and expenses Novant incurred during the pandemic.

Novant first filed suit against its insurer on March 10 in North Carolina state court, alleging that it experienced a direct physical loss to its property because the presence of the coronavirus impacted its business.

The Zurich subsidiary agreed to insure Novant from February 2020 to Febuary 2021 in exchange for an approximate $2.2 million in premium, according to the complaint.

The healthcare company says that it implemented costly preventative measures in an attempt to curb the spread of COVID-19, such as screening patients, implementing respiratory assessment centers and turning over air in operating rooms.

Still, Novant claims that people infected with the coronavirus, from patients and guests to visitors and employees, were present at its locations. Novant's network includes more than 1,600 physicians and 29,000 employees across roughly 700 locations, according to the complaint.

Novant says that it had to pause a number of elective procedures, which resulted in thousands of procedure cancellations "and the inability to use its property for its intended purpose," court documents say.

As a result of suspending non-essential surgeries and other procedures, Novant says it lost hundreds of millions of dollars.

Novant filed its initial notice of its claim to Zurich last March, insisting that the policy's "all risks" coverage is triggered and that the company also continues to suffer "time element loss" since it was required to suspend business activities due to COVID-19.

The insurance policy contains a $1.5 billion cap for property damage and time element loss, court documents say.

But the insurer allegedly denied the claim, citing a contamination exclusion.

Novant, however, disputes this and argues that there are no applicable exclusions that preclude coverage for its losses.

"Zurich's actions related to the 'Contamination' exclusion, among other things, demonstrate its improper handling of Novant's claim," the complaint says. "It is one thing to disagree about how policy terms should be interpreted but misrepresenting what the terms are is quite another."

Novant alleges that the contamination exclusion does not apply to its claim, arguing that the coverage loss it seeks is covered under the policy's "Time Element section," which it says the contamination exclusion does not apply to.

Novant adds that it is not asking Zurich to cover contamination, but to cover losses and expenses.

The healthcare company also accuses its insurer of failing to fully investigate its claim.

"Zurich's 'investigation' solely consisted of excessive and repetitive document requests at a time when Novant's operations were under an unparalleled strain due to the urgent challenges of COVID-19 patient care," the complaint says.

Counsel for the parties did not immediately respond to requests for comment on Monday.

Novant is represented by A. Todd Brown Sr. and Syed S. Ahmad of Hunton Andrews Kurth LLP.

The insurer is represented by William A. Bulfer and Daniel T. Strong of Teague Campbell Dennis & Gorham LLP.

The case is Novant Health Inc. v. American Guarantee And Liability Insurance Company, case number 1:21-cv-00309, in the U.S. District Court for the Middle District of North Carolina.

--Editing by Ellen Johnson.

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