Univ. Hospitals Say Positive COVID-19 Tests Trigger Coverage

By Daphne Zhang
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Law360 (April 2, 2021, 6:18 PM EDT) -- A group of Augusta University hospitals has asked a Georgia federal judge to hold that the COVID-19 virus was physically present on its properties after it treated thousands of patients who tested positive for the virus, saying COVID-19 was a communicable disease, a precondition for coverage under its policy.

In a Thursday motion, the university's hospitals asked for partial judgment on their pleadings for COVID-19 related loss coverage against Affiliated FM Insurance Co., arguing that the carrier owed coverage under the communicable disease provisions of its policy.

"AFM simply cannot deny that COVID-19 is actually present at the AU Insureds' locations," the health system said.

The university's health system maintained that despite its repeatedly giving AFM evidence showing it had tested and treated thousands of COVID-19 patients, the insurer has "stubbornly" insisted that AFM is not sure whether the virus was present on the hospitals' properties.

According to the suit, Augusta's medical centers were instructed by the Peach State to offer COVID-19 testing and hospitalizations in Richmond County, Georgia. As of July 15, 2020, they had tested around 29,000 patients, with 2,150 positive tests, and 55 of its staff tested positive from March to June 2020 for the virus.

The health system's officials also ordered physical isolation for patients who showed symptoms of COVID-19, limiting the number of families and guest visits, and prohibited access to staff with similar systems starting last March. The orders curtailed patient and staff access to the AU hospitals, the health system said.

Additionally, the system said, the hospitals' orders were issued to curb the outbreak as a result of the presence of the coronavirus in the hospitals, leaving no question that the coronavirus physically affected its properties.

The health system's suit joined a wave of hospitals, medical centers, and health care providers bringing insurers to court and seeking pandemic loss-related coverage. Last month, several New Jersey hospitals slapped Zurich American Insurance Co. with two suits in state courts, alleging the carrier wrongfully denied benefits when the policy specifically deleted "virus" from policy exclusions.

Also in March, Carilion Clinic and its affiliated hospitals in Virginia, West Virginia, Tennessee, and North Carolina asked Zurich to cover its over $150 million pandemic losses under its $1.3 billion policy after more than 1,300 of its employees were found to have COVID-19.

In late February, over a dozen health care service companies urged an Illinois federal judge to rule that their pandemic-related losses are covered under their hundreds of millions of dollars worth of policies.

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

The health system is represented by Edgar Dennis Bueno and Robert C. Threlkeld of Morris, Manning & Martin, LLP

The insurer is represented by James V. Chin and Nicholas A. Dolejsi of Zelle LLP

The case is AU Health System, Inc. v. Affiliated FM Insurance Company, case number 1:21-cv-00019, in the U.S. District for the Southern District of Georgia.

--Editing by Peter Rozovsky.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

AU Health System, Inc. v. Affiliated FM Insurance Company

Case Number



Georgia Southern

Nature of Suit



J. Randal Hall

Date Filed

February 04, 2021

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