New Jersey health system sues insurer over $2.5B policy payout

RWJBarnabas Health sued an insurance carrier for allegedly refusing to cover the West Orange, N.J.-based system's pandemic-related losses, according to NJ.com

The health system is suing Zurich American Insurance Co. for breach of contract, alleging the company refused to honor its obligations under a $2.5 billion "Zurich Edge Healthcare Policy." 

The health system, which treats 3 million patients annually, claims Zurich's policy should cover losses caused by illnesses like COVID-19. The lawsuit, filed March 19, alleges Zurich failed to acknowledge COVID-19 caused property damage after employees and patients died from the virus in its facilities, according to Law360. 

"Zurich has known, or should have known, for decades that its policy could be called upon to pay up to its full limits — here $2.5 billion dollars — to RWJBarnabas for losses associated with viruses and pandemics," the lawsuit states. 

Ridgewood, N.J.-based Valley Health System is also suing Zurich, alleging the insurance company wrongfully denied covering its losses tied to the pandemic under a $550 million policy, according to Law360

A Zurich spokesperson declined to comment on RWJBarnabas' lawsuit, telling NJ.com that it is not the company's practice to comment on pending litigation. 

In Virginia, Carilion Clinic filed a similar lawsuit against its insurance provider, American Guarantee and Liability Insurance Co., on March 18. The Roanoke, Va.-based system says it lost more than $150 million because of the pandemic, and the insurance company allegedly refused to provide coverage or properly investigate its losses. 

"To cushion the impact of the coronavirus and COVID-19, Carilion Clinic turned to its property insurer, AGLIC, to whom Carilion Clinic had paid nearly $1 million in premiums in exchange for $1.3 billion in property damage and time element (also known as business interruption) coverage effective June 1, 2019 to June 1, 2020," the lawsuit states. "AGLIC, however, declined to fulfill its obligations to Carilion Clinic under the policy." 

Carilion is seeking damages for breach of contract and a judgment declaring the scope of American Guarantee's obligation to cover the losses under the policy.

Read the full NJ.com article here

Read the full Law360 article here

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