Universities, other institutions suing insurers for not covering COVID-19 losses

As the novel coronavirus pandemic spread across the country last year, Rockhurst University in Kansas City faced an unprecedented financial crisis. With students suddenly being sent home and major school events canceled, the virus halted the major revenue stream that kept the university afloat.

After the university refunded more than $2 million in room and board expenses for last year's spring semester, the school continued to suffer significant financial losses and added expenses related to the virus.

Yet school officials remained optimistic. Despite losses in the millions, they were hopeful that the university would recover some of what it lost because it had purchased an "all risks" insurance policy from FM Global that included specific coverage for losses due to "communicable diseases."

Now, more than a year later, the university is among several institutions and many large businesses that are battling their insurance companies in court to recover losses suffered during the pandemic.

Terry Hartle of the American Council on Education, which advocates on behalf of higher education institutions, told ABC News that he's not surprised by the emerging lawsuits.

"The pandemic had a devastating effect on the budget of almost every college and university, as it did with many other businesses across the U.S.," said Hartle, the organization's senior vice president of government relations and public affairs. "When revenues go down and expenses go up, it creates a serious problem for any business, and it certainly did for college and universities."

The organization has estimated that the total financial impact of the pandemic on colleges and universities is about $120 billion, Hartle said.

In a copy of their complaint provided to ABC News, Rockhurst University detailed the losses they say prompted them to file a class action suit along with Maryville University in St. Louis. According to the complaint, the school incurred additional expenses ranging from disinfecting supplies to virtual learning equipment, all of which contributed to a significant financial hit as a result of the pandemic.

"Apart from the nightmarish logistical challenge, and the serious disruption to their core mission of education, the measures colleges and universities have taken due to the Coronavirus and the ongoing pandemic have had a devastating financial impact," the complaint said.

Like other disputes between institutions and insurers over reimbursement for COVID-related losses, the lawsuit focuses on the precise language of the schools' insurance policies. In the complaint, Rockhurst and Maryville assert that the losses they have suffered fell within their policies' coverage of "physical loss or damage to covered property and resulting business interruption." They also point to provisions in their policies specifically including property damages and losses due to "communicable disease."

In its answer to the complaint, FM Global contends that the losses claimed by the schools do not constitute "physical loss," "damage to property," or a "business interruption" resulting from such loss or damage. They also cite a provision in the policies that specifically excludes losses due to "contamination" unless the contamination is caused by covered physical damage. The coronavirus falls within the definition of a "contaminant" and therefore losses allegedly attributable to it are not covered, FM Global asserts.

A spokesperson for FM Global said the insurance company stands by its decision to deny Rockhurst's claim.

"FM Global values the long-term relationships we have with our policyholders and we are proud in leading the industry for claims service," said spokesperson Steven Zenofsky. "It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided."

Tom Baker, a University of Pennsylvania law professor who has created a litigation tracker to follow unfolding insurance litigation related to the pandemic, said that he expects to see more cases and class action lawsuits being filed by larger businesses in the coming months. The database currently has 1,600 cases.

"If you think about it, that number is actually small," Baker told ABC News. "I think that for every lawsuit there is, there are more businesses and people who are sitting and waiting to see the outcome of the other cases."

Early in the pandemic, most lawsuits were filed by smaller businesses and had an "air of desperation," Baker said. But many of the most recent cases are being brought by larger, more robust businesses in a "thoughtful and measured way," he said.

"For large companies, some of these policies are worth half a billion dollars or more -- some are even over a billion dollars," said Michael Levine, a Washington, D.C., attorney who represents a number of businesses that are suing their insurance companies. "So you're seeing a deliberate hold-back to watch and wait to see how the other cases play out."

So far, insurance companies have overwhelmingly come out on top in these kind of cases, Levine said. As a result, he said, businesses are taking their time to "get everything in order before bringing a lawsuit."

In Ohio, a similar lawsuit has been filed by a group of four schools against their insurance company, Lloyd's of London, after Lloyd's refused to compensate them for their significant COVID-related losses, saying they were not covered by their policies.

"We took significant and costly steps to protect the safety and well-being of our students, employees, and wider community. And we implemented costly and extensive measures to mitigate our losses," said a statement to ABC News from Kenyon College, Denison University, Ohio Wesleyan University and the College of Wooster. "Yet, despite these efforts, our insurance companies refused to fulfill their promise to protect us from the significant costs associated with maintaining operations through the pandemic."

Asked by ABC News about the Ohio schools' coverage, a spokesperson for Lloyd's of London said, "We do not have any specific information on individual policies or law suits and in any event are not authorized to comment on matters in Litigation."

A spokesperson for the Hartford Financial Services Group, a business insurance company that is facing 230 lawsuits according to the University of Pennsylvania's COVID-19 litigation tracker, told ABC News that viruses are not typically covered in insurance policies.

"We pay often and a lot -- when there is a storm, fire or anything else that is covered by a customer's insurance policy," spokesperson Matthew Sturdevant said in a statement. "Unfortunately, viruses are generally outside the scope of business interruption coverage. These policies do not cover this exposure and, accordingly, premiums were never collected for it."

But Levine, the attorney representing some plaintiffs, told ABC News that insurance companies are just "looking after their own bottom line."

"They sold the contract they agreed to, and they need to stand behind that contract and pay certain losses," Levine said. "You pay three or four million dollars a year for decades and the moment you need your insurance, you don't get anything."