Froedtert Health, Inc. v. Factory Mutual Insurance Co., No. 22-2577 (7th Cir. 2023)
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When the COVID-19 pandemic began, Froedtert Health faced overwhelming demand to provide lifesaving care, which 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 COVID-19 testing and screening. Froedtert paused nonemergency, elective procedures. Froedtert spent $85 million on COVID-related costs and sought reimbursement under its all-risks policy with Mutual. The insurer determined that the COVID-related losses did not constitute a direct physical loss triggering the general coverage provision and $2 billion limit but paid Froedtert the maximum $1 million sub-limit under a separate, additional coverage provision for losses from communicable disease response.
The Seventh Circuit affirmed the dismissal of Froedert’s subsequent lawsuit, noting the policy’s “dense detail.” The policy’s general coverage is limited by accompanying exclusions, including the broad exclusion for contamination losses. In a later section, the policy then affords certain specified Additional Coverages, including for communicable disease response costs. That additional coverage would not exist if it was not expressly delineated in the Additional Coverages section of the policy.
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