Jury awards Baylor College of Medicine $48.5M in COVID business interruption claim

Texas jury awards $48,529,961 in damages due to COVID-19 at Baylor College of Medicine in Houston, in what appears to be the jury’s first verdict in a lawsuit seeking to pay for lost business revenue and other damages caused by the virus Damages are covered by insurance.

A verdict form released online Tuesday by Harris County’s 295th Judicial District showed that 10 members of a 12-member jury ruled against Lloyd’s of London, which sold an all-insurance commercial property policy to Baylor. ruling. The jury awarded $42,855,000 in lost net profits, $3,365,661 in additional costs, and $2,309,300 in research project expenses.

Plaintiffs’ attorney Robin O’Neil, a partner at law firm Fogler, Brar, O’Neil Gray, said Baylor’s lawsuit is different from many of the hundreds of other cases brought against policyholders to date. The Baylor-run hospital has remained open throughout the pandemic and has taken out a policy that doesn’t usually exclude the virus.

“I do think Baylor’s location is somewhat unique because we can determine whether the property has the virus throughout the insurance period,” she said.

Robin O’Neal

While Baylor isn’t shutting down completely because of the pandemic, it’s necessary to limit operations and incur additional costs, O’Neal said. For example, hospitals have had to invest in video equipment to implement “telemedicine programs.” The college also had to limit research services because human subjects were no longer able to participate. Clinics, classrooms and laboratories are forced to operate at reduced capacity.

Baylor named four insurers in its original petition filed in September 2020, but Judge Donna Ross dismissed Ace American Insurance Co. and XL Insurance America as defendants because the policies they issued contained contamination exclusion clauses that did not allow coverage damage caused by the virus.

“Her ruling was very insightful,” O’Neal said.

She said Baylor is seeking $59 million in business interruption costs, $7.1 million in additional costs and $2.3 million in lost research functions.

Few, if any, COVID-related business interruption claims have been brought to a jury. According to a lawsuit tracker maintained by the University of Pennsylvania, hundreds of lawsuits against insurers have been dismissed by trial courts that held that the virus would not cause physical loss or damage covered by insurance policies. The tracker lists no trial court rulings in favor of policyholders, and only two trial court rulings in insurers.

Most appeals courts that have heard COVID business interruption cases also ruled not to report. State Supreme Courts in Massachusetts, Iowa, South Carolina and Wisconsin have ruled that SARS-CoV-2 does not cause direct bodily loss or damage.

There are notable exceptions:

  • California’s Second Appeals District overturned a Los Angeles County Superior Court decision that dismissed a business interruption lawsuit brought by Irving Hotels.
  • The 4th Louisiana Court of Appeals held that Oceana Grille’s coverage should be attributed to Oceana Grille.
  • The first part of the New York Court of Appeals ruled in favor of the New York Botanical Garden because of the unusual policy wording, which included coverage for “communicable diseases.”

O’Neill said if Lloyd’s appealed the Harris County ruling, she believed her client would prevail as well. According to the UPenn lawsuit tracker, a Texas appeals court has yet to rule on whether the virus will cause direct bodily loss or damage.

“We feel good about our chances,” O’Neal said.


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