The largest nonprofit health system in Texas, Baylor Scott & White Holdings, will not receive coverage for COVID-19-related business interruption losses amounting to over $192 million, as per a Fifth Circuit decision. This ruling underscores prior circuit precedent that COVID-19 does not cause “physical loss or damage.”
Texas Health System COVID-19 Suit: Case Background
A split three-judge panel on Thursday dismissed Baylor Scott & White’s coverage suit against Factory Mutual Insurance Co. Baylor had contended that its policy was unique, covering “physical loss or damage” caused by communicable diseases. However, the court concluded that Baylor did not “adequately distinguish” its case from existing precedent.
“The alleged uniqueness of the policy’s language does not change that we have determined, as a matter of law, COVID-19 does not cause physical loss or damage to property,” wrote U.S. Circuit Judge Irma Carrillo Ramirez for the two-judge majority. “Absent a decision to the contrary by the Supreme Court of Texas or our en banc court, existing circuit precedent controls.”
Policy and Claims
Baylor’s commercial property policy with Factory Mutual included communicable disease provisions, offering up to $5 million for reasonable cleanup and public relations costs due to the presence of a communicable disease at its insured locations. The parties agreed that these provisions did not require “physical loss or damage” to be applicable, and Factory Mutual had already paid the $5 million limit.
