Jury awards $48.5 million to Baylor College of Medicine for COVID business interruption claim

Jury awards .5 million to Baylor College of Medicine for COVID business interruption claim


A Texas jury awarded Baylor College of Medicine in Houston $48.529,961 in damages from COVID-19 in what appears to be the first verdict from the jury in a lawsuit that sought insurance coverage for lost work income and other damages from the virus.

A judgment form posted online by Harris County’s 295th District Court on Tuesday shows that 10 of the 12-member jury ruled against Lloyd’s of London that sold Baylor an all-risk business property policy. The jury awarded $42,855,000 for lost net earnings, $3,365,661 for additional expenses and $2,309,300 for research project expenses.

The plaintiff’s attorney, Robin O’Neill, a partner at the Vogler-Brar O’Neill Gray Law Firm, said Baylor’s lawsuit differs from many of the hundreds of other cases that have been decided against policyholders to date. Baylor runs a hospital that has remained open throughout the pandemic and has purchased a policy without the usual virus exclusion.

“I think the Baylor site was somewhat unique because we were able to establish the presence of the virus on the property throughout the coverage period,” she said.

Robin O’Neill

O’Neill said that while Baylor has not been completely closed due to the pandemic, it has been required to restrict operations and incur additional expenses. For example, the hospital had to invest in video equipment to implement a “telehealth program”. The college also had to restrict research services because human subjects could no longer participate. Clinics, classrooms and laboratories were forced to operate at reduced capacity.

Baylor named four insurance companies in her original complaint filed in September 2020, but Judge Donna Roth dismissed Ace American Insurance and XL Insurance America as defendants because the policies they issued with pollution exemptions prevent coverage for damage caused by viruses.

“She was very discriminating in her judgments,” O’Neill said.

It said Baylor has requested $59 million in business interruption costs, $7.1 million in additional expenses and $2.3 million in compensation for its research functions.

Very few, if any, COVID-related business interruption claims have reached the jury. Hundreds of lawsuits against insurance companies have been dismissed by trial courts that have found that the virus cannot cause material loss or damage covered by insurance policies, according to litigation trackers maintained by the University of Pennsylvania. The tracker does not list any lower court decisions in favor of insurance policyholders and only two decisions of the lower court in favor of the insurance company.

Most of the appellate courts that have heard COVID business interruption cases have ruled against coverage. State Supreme Courts in Massachusetts, Iowa, South Carolina and Wisconsin have ruled that SARS-CoV-2 cannot cause direct physical loss or damage.

There were notable exceptions:

  • The California Second Circuit of Appeals overturned a ruling by the Los Angeles County Supreme Court dismissing a business boycott lawsuit brought by the Irwin Hotel.
  • The 4th Court of Appeals in Louisiana found that coverage was due to Oceana Grille.
  • The New York Division of Appeals’ First Circuit ruled in favor of the New York Botanic Garden because of unusual policy language that included coverage of “infectious diseases.”

O’Neill said she was confident her client would also prevail if Lloyd’s appealed the Harris County ruling. Texas appeals courts have yet to rule on whether the virus could cause direct material loss or damage, according to litigation tracker UPenn.

“We feel good about our chances,” O’Neill said.

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