Multiple Claims Against Insured Related to COVID-19 Outbreak Constitute Separate Claims

The United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, has held that multiple COVID-19 claims against an insured arise from separate “health care events” such that they constitute separate claims, each subject to a separate self-insured retention. Nat’l Fire & Marine Ins. Co. v. Genesis Healthcare, Inc., 2022 WL 16963999 (E.D. Pa. Nov. 16, 2022).

During the early stages of the COVID-19 pandemic, the insured health care organization notified its professional liability insurer that circumstances surrounding the pandemic could give rise to a claim. The policy provided claims-made and reported coverage for loss and claims expenses arising from a “health care event.” “Health care event” was defined as “any event in the rendering of, or failure to render, professional services that results in injury.” The policy further provided that “[a]ll injuries arising out of, or in connection with, the same or related acts or omissions in furnishing professional services shall be considered one health care event.”

Upon receipt of the insured’s notice of circumstances, the insurer stated that “all the COVID cases have only 1 [self-insured retention].” Eventually, the insured provided information to the insurer regarding 23 lawsuits, 20 pre-suit claims, and “thousands of individual residents who contracted COVID-19” at numerous facilities it owned and managed. After receipt of this additional information, the insurer changed its position, stating that “all claims and potential claims arising from the reported COVID-19 Incidents are not subject to a single per event self-insured retention.” The insurer filed suit for a declaratory judgment that the underlying claims arose from separate “health care events” at each facility location, and the insured filed a counterclaim for a declaratory judgment that all of the matters, at all facilities, constituted a single “health care event,” subject to a single retention of $3 million. The parties filed cross-motions for summary judgment.

As an initial issue, the court determined that the matter was justiciable even though the insured’s self-insured retention had not yet been satisfied. The court considered three factors when exercising its discretion “in determining ripeness of an action seeking declaratory relief: (1) the adversity of the interest of the parties; (2) the conclusiveness of the judicial judgment; (3) and the practical help, or utility, of the judgment.” The court determined that the parties were sufficiently adverse in light of amounts the insured had already spent and its internal reserve, which exceeded the amount of the retention. The court also ruled that a judgment would be conclusive because the insured’s exhaustion of the retention was “substantially likely” and would be practically useful because the parties would “likely act differently” depending on whether a single retention or separate retentions apply.

The court found that “the COVID-19 claims involve multiple health care events and thus the single $3 million self-insured retention does not apply.” The allegations “arise from operating companies’ varied responses to COVID in different facilities operated by different operating companies at different locations. The claims do not involve the same professional services in response to an undefined pandemic. The allegations involve separate and unrelated acts or omissions made by the thirty-two distinct operating companies and their employees.”

The court further held that the insurer’s change of position regarding the claims’ relatedness and the applicable retention did not alter the court’s analysis because the insurer’s course of performance can “only be used to interpret, but not supplement, the terms of an existing agreement,” and here, the policy language was “unambiguous.”