In June 2021, Baylor submitted a claim for business interruption costs caused by COVID-19, totaling over $192 million. The subsequent lawsuit filed in February 2022 was dismissed by U.S. District Judge Sean D. Jordan in April 2022.
Texas Health System COVID-19 Suit: Appeal and Ruling
On appeal, Baylor argued that the contamination exclusion in the policy should not apply to COVID-19 as it would conflict with the communicable disease coverage. Judge Ramirez, however, referenced multiple Fifth Circuit decisions favoring insurers in pandemic coverage claims.
“The question at issue is not whether a communicable disease that causes ‘physical loss or damage’ triggers coverage under the policy, but rather whether COVID-19 causes such ‘physical loss or damage,'” she emphasized.
Baylor’s assertions that COVID-19 causes tangible alterations to property were also dismissed, with Judge Ramirez noting the circuit’s consistent ruling that COVID-19 does not physically affect property under property insurance policies as a matter of law.
Dissenting Opinion
U.S. Circuit Judge Jennifer Walker Elrod dissented, stating that Baylor’s detailed scientific allegations about COVID-19’s impact on property were distinct from previous cases. “The amended complaint cites to research from peer-reviewed scientific journals such as Nature and Virology Journal in support of this allegation,” she pointed out. Judge Elrod argued that the factual question of whether COVID-19 can tangibly alter property warrants further consideration.
Texas Health System COVID-19 Suit: Legal Representation
Baylor Scott & White is represented by Ernest Martin Jr., Natalie DuBose, and Andrew Guthrie of Haynes and Boone LLP. Factory Mutual is represented by Shannon Marie O’Malley of Zelle LLP and Jeffrey S. Levinger of Levinger PC.
