Business interruption insurance claims amid the COVID-19 pandemic have been discussed widely since March of this year. Though many have filed claims due to government-mandated business closures, insurers have managed to deny them. It’s not just retailers and restaurants feeling these pressures, as hospitals and medical facilities across the nation are also seeking coverage under specialized business interruption insurance policies. Knowing whether these insurance claims will be covered and what hospitals can do if their claims are denied can help protect these facilities that we rely on now more than ever before.
Hospital Business Interruption Insurance Claims
As many businesses continue to fight for business interruption coverage, hospitals are proving to be no different. Since healthcare facilities have been inundated with COVID-19 patients since March, many have had to cut back on the services that keep them in operation in order to prevent the virus from spreading, including surgeries, non-emergency care, as well as any elective procedures.
According the Harvard Business Review, Beaumont Health CEO John T. Fox estimated that by canceling around 80% of hospital surgeries and imaging volume, his facility’s revenue will fall by $1 billion to $2 billion in 2020. This figure represents roughly 20% to 40% of the hospital’s total annual revenue, as hospitals shift from higher revenue surgical procedures to caring for an ever-increasing number of inpatients where reimbursement is typically lower. These aren’t new calculations either. According to a 2011 study by the Healthcare Cost And Utilization Project, which reviewed the financial importance of surgical patients to hospitals, while only 29% of American hospitalizations involved surgery, these cases accounted for 48% of hospital costs – and therefore potentially an even greater percentage of revenue.
Although many hospitals and medical facilities can now perform some surgical procedures, many will likely continue to grapple with the financial impacts of not being able to operate on non-COVID-19 related cases for several months. Because of this, several hospitals across the nation have filed claims for business interruption coverage only to be denied by insurers.
Denials of Hospital Business Interruption Coverage
Many U.S. hospitals have already filed claims for business interruption coverage due to losses sustained during the COVID-19 pandemic; but, just as many have unfortunately been denied as well.
In states like New York – the first epicenter of the pandemic back in March – a hospital is currently pursuing litigation against its insurer for denying its business interruption claim. Northwell Health sued its insurer in late July concerning its healthcare premises pollution liability policy.
Despite the hospital claiming the policy straightforwardly provides coverage for ‘remediation costs,’ ’emergency response costs,’ and ‘decontamination costs’ associated with ‘facility-borne illness events’ and ‘pollution conditions,’ as well as business interruption caused by ‘covered pollution conditions,” its insurer denied its claim. While this case is ongoing, unfortunately this won’t be the last time a U.S. hospital pursues litigation for denied business interruption claims.
Specialized Business Interruption Insurance Coverage for Hospitals and Medical Facilities
Hospitals and medical facilities make up a portion of the nation’s critical infrastructure. The critical infrastructure consists of any assets, systems, and networks – whether physical or virtual – that are vital to the United States. Businesses essential to the nation’s critical infrastructure have remained open during government mandated stay-at-home orders. Despite this, there have been various disruptions to their operations, which have affected their revenue streams greatly, often resulting in operating at a very limited capacity.
Despite insurers potentially not covering economic losses due to the suspension of operations due to COVID-19, specialized plans are available to those within the critical infrastructure, including hospitals. It is recommended that these policies be closely reviewed in order to determine whether or not coverage is available.
For instance, in order for coverage to be triggered, business interruption losses must be caused by a covered peril like physical damage. Within such polices, leader or attraction property endorsements can be included to provide coverage to the insured for a direct physical loss, damage, or destruction to business property. The subject property can be a separate business located within a specified distance of the insured’s property that attracted business for the insured.
Contingent business interruption coverage is another avenue that can protect against the loss of revenue a business suffers when a third-party supplier, distributor, or another key element it relies upon to produce a product or service suffers a loss. Meaning, the coverage is contingent upon losses suffered by a different but related business. For hospitals in particular this can directly correlate to losses that a product manufacturer may suffer in the event personal protective equipment (PPE) or other necessary equipment needed to treat COVID-19 patients is compromised or destroyed.
The need for direct physical loss or damage is an incredibly common requirement of business interruption policies and has become a major point of contention for businesses filing claims with their insurers. Contingent business interruption coverage differs slightly in that the physical damage must occur specifically at what the policy defines as a dependent location that isn’t the actual location of the covered business, which could potentially allow coverage to those within the critical infrastructure.
COVID-19 Business Interruption Attorneys
Hospitals are unfortunately feeling the blows of lost revenue due to COVID-19 just like countless other businesses across the country. At Raizner Law, we understand your frustrations – especially as the pandemic continues its spread – and claims continue to be denied and/or contested by insurers. Our seasoned business interruption attorneys have successfully handled incredibly complex cases against some of the world’s leading insurance carriers. In the event your claim has been wrongfully denied, delayed, or even grossly underpaid, contact us today to see how we can best assist you.