Insurance Coverage

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7^th Circuit Court of Appeals

Case Name: Froedtert Health, Inc. v. Factory Mutual Insurance Company

Case No.: 22-2577

Officials: Hamilton, Scudder, and Jackson-Akiwumi, Circuit Judges.

Focus: Insurance Coverage

When the COVID-19 pandemic began, Froedtert Health, a Wisconsin-based healthcare system, found itself facing urgent and overwhelming demand to provide lifesaving care. Meeting that demand required substantial investments in personal protective equipment, waste disposal mechanisms, and cleaning and sanitation supplies. Froedtert also modified its emergency room layout and adapted its facilities to provide testing and screening for COVID-19. Like many other hospitals, Froedtert changed the scope of available services, including by pausing nonemergency, elective procedures. In total, Froedtert spent $85 million on these COVID-related costs.

This is an appeal presenting a difficult question of insurance coverage. Froedtert seeks reimbursement for $85 million in costs incurred during the early months of the COVID-19 pandemic under an all-risks insurance policy issued by Factory Mutual Insurance. The Factory Mutual policy is complex in its structure and contains language in one place broadly excluding COVID-related losses while, in another place, supplying limited coverage for portions of those same losses. In the end, the Seventh Circuit agrees with the district court that Froedtert failed to state a claim for coverage beyond the $1 million it received under a limited coverage provision for communicable diseases.

Affirmed.

Decided 06/02/23

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