Insurer Asks Judge To Scotch Colleges' Virus Loss Claims

By Daphne Zhang
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Law360 (April 26, 2021, 9:38 PM EDT) -- Factory Mutual Insurance Co. has urged a Missouri federal judge to reject COVID-19 claims brought by two universities under their nine-figure policies, saying the schools are only entitled to $1 million each in communicable disease coverage.

The insurance carrier asked the court on Friday to dismiss Rockhurst University and Maryville University's claims seeking property damage, business interruption, and civil authority closure-related losses stemming from the pandemic. The policies' "loss of use" and contamination exclusions also preclude coverage, the carrier said.

"An avalanche of decisions from this Court and courts all over the country has made clear that the presence of the novel coronavirus or the COVID-19 disease cannot constitute physical loss or damage as a matter of law," the insurer said.

Rockhurst University and Maryville University sued Factory Mutual last July, seeking a declaration that their policies should cover their millions in financial losses amid COVID-19. The two schools are not affiliated but are represented by the same attorneys.

Rockhurst, a private Jesuit university in Kansas City, has said it has refunded $2.2 million in dorm fees to students. The university, which serves more than 3,000 students on its 55-acre campus, holds a $278 million policy with Factory. Maryville in St. Louis, which holds a $314 million policy with Factory, said it has reimbursed students more than $2 million for room and board.

The two universities said that Factory had met with them in March 2020 and "actively" discouraged them from filing claims. The schools reached out to the insurer last June to request coverage, and were told that Factory would only consider the communicable disease provision of their policies, which has a coverage limit of $1 million.

In its Friday motion for summary judgment, Factory Mutual said the colleges' argument that COVID-19 physically attaches to wood and metal surfaces and causes property damage is too vague. The schools failed to show their properties experienced any tangible change or harm as required for coverage under the policy, it said.

Even if the coronavirus caused a physical alteration to their properties, the schools failed to show how such alteration would need repair or replacement to their insured properties, Factory Mutual said, and the schools have acknowledged that the virus can be removed with routine cleaning, so there is no need for repairs.

Additionally, the universities never lost access and use of their properties because students and essential workers were allowed to enter and remain in the buildings during the pandemic, and the policy's "loss of use" exclusion strictly bars coverage, the insurer added.

The policy also excludes any costs and losses due to contamination caused by a virus, Factory Mutual contended. "The unambiguous language of the policies makes clear that, at most, Plaintiffs are entitled to the coverages they purchased for Communicable Disease," the carrier said, asking the court to toss all the schools' other claims except those relating to the policy's communicable disease provision.

Representatives for the parties could not be immediately reached for comment on Monday. 

The schools are represented by Patrick J. Stueve, Bradley Wilders, Todd M. McGuire, Abby McClellan and Christopher Curtis Shank of Stueve Siegel Hanson LLP, John J. Schirger, Joseph M. Feierabend and Matthew W. Lytle of Miller Schirger LLC, Dawn Marie Parsons, Richard F. Lombardo, Michael Barzee and Rachael D. Longhofer of Shaffer Lombardo Shurin PC and J. Kent Emison of Langdon & Emison.

Factory Mutual is represented by Brian Richard Markley and Madison A. Perry of Spencer Fane LLP and Elizabeth J. Ireland, George Mastoris, Harvey Kurzweil, Kelly A. Librera and Matt Stark of Winston & Strawn LLP.

The case is Rockhurst University et al. v. Factory Mutual Insurance Co., case number 4:20-cv-00581, in the U.S. District Court for the Western District of Missouri.

--Editing by Jill Coffey.

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