Rockhurst University Sues Its Insurance Company Over Coronavirus-Related Losses
The case is among hundreds filed on behalf of retailers, restaurants and other businesses claiming their business interruption insurance policies should cover losses they sustained from having to shut down.
Two Missouri universities have filed a class action lawsuit against their insurer, claiming it declined to honor their claims resulting from the COVID-19 pandemic.
Rockhurst University in Kansas City and Maryville University in St. Louis say that Factory Mutual Insurance Co. refused to pay for their losses. The two institutions are seeking to represent universities across the country whose claims were also denied by Factory Mutual.
“Obviously, COVID-19 has had a devastating financial impact on colleges and universities,” said Pat Stueve, a lawyer representing Rockhurst and Maryville. “They’ve shut down dorms and dining halls, reimbursed students for unused room and board. For many universities, that’s in the millions of dollars. And obviously, there’s the future impact because of the increasing spread of the virus.”
Stueve, along with other lawyers, filed similar lawsuits earlier this year on behalf of Sportsman Cap & Bag, a promotional merchandise company in Lenexa, and KC Hopps, a Kansas City restaurant group. Both companies claim their business loss claims were denied by Cincinnati Insurance Co. The cases are pending.
Stueve said he believed the Rockhurst/Maryville lawsuit is the first to be brought by universities anywhere in the country for non-payment of pandemic-related claims.
The cases are among hundreds across nationwide filed on behalf of retailers, restaurants and other businesses claiming their business interruption insurance policies should cover the losses they have sustained from having to shut down.
Insurers argue that such policies only cover physical damage of the kind inflicted by storms and floods, and that a viral pandemic was never intended to be covered by business interruption insurance.
A pending bill in Congress, the Pandemic Risk Insurance Act, would require insurance companies offering business interruption insurance to cover losses incurred due to pandemics. It would also establish a Pandemic Risk Reinsurance Program under which private insurance companies and the federal government would share the responsibility to pay claims.
Rockhurst, a Jesuit university in midtown Kansas City with more than 3,000 students, shut down its campus in mid-March. The lawsuit says it has since refunded $2.2 million to students in room, board and fees.
Maryville, a private university with more than 10,000 students, also shut down its campus in mid-March. The lawsuit says it has likewise refunded more than $2 million to students.
Factory Mutual is a 185-year-old property and casualty insurance company based in Johnston, Rhode Island, with clients around the world. The company’s revenues last year were $6.7 billion and its earnings totaled nearly $2.5 billion.
Steve Zenofsky, a spokesman for the insurer, said the company could not comment "because of the legal nature of the matter.”
Rockhurst and Maryville’s lawsuit says that Factory Mutual told the universities that it would limit payments for pandemic-related claims to “communicable disease” provisions in their insurance policies. The suit says those are far lower than the universities’ expected losses.
“The insurance industry — and this Defendant in particular — appears to be taking a uniform approach to the current pandemic: deny coverage even when the policy they drafted and offered to insureds, and the policy paid for by the insureds, does not contain an exclusion for pandemic- or virus-related losses,” the suit states.
Rockhurst and Maryville are asking the court to certify the lawsuit as a class action on behalf of similarly situated universities — which could number in the hundreds — and to find that their policies do cover pandemic-related losses.