U.S. Court in New Jersey Rejects Health System’s Bid for Insurance Coverage of COVID-Related Losses
- November 04, 2022
The U.S. District Court for the District of New Jersey held October 31 that Inspira Health Network’s business interruptions policy did not cover more than $20 million in losses the system said it incurred as a result of the COVID-related suspension of elective procedures.
The decision is in line with numerous other federal court rulings rejecting health care providers’ bids to recover under insurance policies for losses stemming from the pandemic.
Between March 27, 2020 and May 26, 2020, Inspira Health suspended non-elective procedures as required by restrictions put in place under an Executive Order issued by the New Jersey Governor because of COVID-19.
Inspira Health submitted a claim to defendant American Guarantee and Liability Insurance Company for the resulting losses in gross revenue under an insurance policy that provided “special coverage” for business “interruption by communicable disease.” Defendant denied coverage.
Inspira Health sued for coverage, and the court granted defendant’s motion to dismiss.
To allege a claim under the policy, Inspira Health had to show that a necessary suspension of its business activities was (1) “caused by order of an authorized governmental agency enforcing any law or ordinance regulating communicable diseases” and (2) “that such portions of the location are declared uninhabitable due to the threat of the spread of communicable disease, prohibiting access to those portions of the location.”
Inspira Health pleaded sufficient allegations as to the first requirement, but not as to the second, the court found. The Executive Order “did not prohibit access” to Inspira Health; rather, it suspended certain activities, i.e., “elective” surgeries.
Thus, Inspira Health was not entitled to recover its losses under the policy, the court held.
Inspira Health Network v. American Guarantee and Liability Ins. Co., No. 1:21-cv-11124 (D.N.J. Oct. 31, 2022).