Baylor College Awarded $12 Million for COVID BI Losses, Says Court

They’ve been cropping up since 2020: COVID business interruption claims. Forced shutdowns due to a rising pandemic gave way to organizations looking for compensation for monies lost. But, as we all know, business interruption coverage will only trigger if a physical loss has occurred. 

Typically, anyway. 

In a turn of events, Baylor College has secured BI coverage for its COVID-19 claims. 

The college had $100 million all-risk policies with three insurers: XL Insurance America, ACE American Insurance Co., and Lloyd’s of London. 

When mandatory shutdowns shuttered Baylor’s doors, it alleged more than $69 million in COVID-related business interruption damages. It filed suit with all three insurers. All three denied. 

Baylor filed suit. In 2021, a Texas state court granted summary judgment in favor of XL and ACE, “finding that the insurers owe no coverage because their policies excluded coverage of virus-related losses. Baylor has appealed the ruling,” according to reports. 

Lloyd’s, however, did not have the same stipulation in its policy wording and had to continue to trial. 

In a 2022 jury trial, Baylor argued that the damages and losses it incurred from the coronavirus and subsequent lockdown orders should be covered under the $100 million all-risk policy. According to additional filings, Baylor paid more than $1.2 million for coverage shared by all three insurers. 

Further, Baylor argued, the BI-physical loss requirement was met: It alleged that droplets of COVID-19 from positive staff and students physically damaged its facilities. A medical school, Baylor also alleged that by being forced to pause all non-emergency patient visits, to invest in sanitization and protective measures and to set up a telehealth medical program, it incurred additional expenses outside its normal expenditure. 

In a record turn of events, the jury sided with Baylor. Lloyd’s is on the hook for $12 million to cover pandemic-related BI losses. 

Scorecard: The physical damages alleged by Baylor College held validity in its COVID BI claim. It will receive at least $12 million for its losses. 

Takeaway: Dubbed the first jury trial in the nation to decide a COVID BI claim, this case could set a precedent for future claims. Coupled with social inflation, that could mean, in spite of how BI policies are designed, insurers could be on the hook for millions. &