By Daphne Zhang

Law360 (April 2, 2021, 8:31 PM EDT) -- Helicopter services company PHI Group has sued Zurich American Insurance Co. in Louisiana federal court, alleging Friday that its $50 million Zurich policy covers property damage it sustained after staff and passengers brought COVID-19 aboard its aircraft.

PHI, which operates flights for the global oil and gas, medical, and tech industries, said the insurer wrongfully refused to cover its pandemic losses when the Zurich "Edge" policy does not exclude viruses and promised policyholders "higher limits, broader coverage, and greater flexibility."

"Individuals with COVID-19 or otherwise carrying the coronavirus have been physically present at the insured facilities of each PHI location, including the locations of PHI Health," the company said. PHI provides flight services to the health care industry through its Air Medical Group, which operates as PHI Health, according to the suit.

The company said its staff and customers have tested positive, pre-symptomatic or asymptomatic for COVID-19 and unknowingly carried the coronavirus to its aircraft and other properties. The virus, which is spread through droplets, is physically attached to its facilities and can stay on a property surface for days, causing damage, it said.

The helicopter company said it has incurred business interruption losses and physical damage to clean and disinfect surfaces, implement passenger screening measures, and rearrange space to ensure physical distancing.

Additionally, PHI said, the government lockdown orders have contributed to its business suspension and significantly reduced the demand and volume of PHI's flights.

"Because of the dangers posed by the spread of the coronavirus and COVID-19, and to ensure the safety of employees, PHI's oil and gas customers modified their flight schedules to incorporate longer shifts at offshore oil platforms," it said.

Although the policy contains a contamination exclusion, the exclusion does not preclude virus and the insurer specifically took "virus" out of the exclusion under a policy section called "Louisiana Endorsement," the flight services company said.

PHI is alleging breach of contract and good faith, asking the court to hold that its pandemic losses are covered under the policy and seeking damages to be determined in a jury trial.

Zurich has been hit with more than 110 COVID-19 cases, according to data from the University of Pennsylvania's Insurance Law Center. Policyholders are asking the insurer to pay for their pandemic-related losses under their hundreds of millions of dollars worth of policies.

In March, the fashion giant behind Versace, Jimmy Choo, and Michael Kors said its insurers including Zurich owed coverage for the more than $1.2 billion in COVID-19 losses, in part because it suffered physical damages and routine cleaning can't actually kill the virus.

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 Zurich Edge policy after more than 1,300 of its employees were diagnosed with COVID-19.

The owner of Motor City Casino Hotel has also claimed its Zurich affiliate insurer owes it $270 million for COVID-19-related losses. In late February, over a dozen health care service companies told an Illinois federal judge that Zurich must cover their pandemic-related losses. Seven health care companies said they hold total policy limits of $450 million per occurrence, and five said their overall per occurrence policy limits are $250 million with Zurich.

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

PHI is represented by Gretchen Hoff Varner of Covington & Burling and Robert M. Kallam and Brian J. Lindsey of Kean Miller.

The case is PHI Group, Inc. v. Zurich American Insurance Company, case number 6:21-cv-00883, in the U.S. District for the Western District of Louisiana.

--Editing by Amy Rowe.

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