Inspira Health Network v. Am. Guarantee & Liab. Ins. Co.

• Decision Date: 31 October 2022
• Docket Number: 1:21-cv-11124
• Parties: INSPIRA HEALTH NETWORK, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of New Jersey

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INSPIRA HEALTH NETWORK, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant.

No. 1:21-cv-11124

United States District Court, D. New Jersey

October 31, 2022

Ellis I. Medoway

ARCHER & GREINER, PC

Trevor J. Cooney

ARCHER & GREINER, PC

Charles Andrew Booth, Sr.

FORD MARRIN ESPOSITO WITMEYER & GLESSER, LLP

Wall Street Plaza

John Albert Mattoon, Jr.

FORD MARRIN ESPOSITO WITMEYER & GLESSER, LLP

OPINION

O'HEARN, DISTRICT JUDGE.

This matter comes before the Court on Defendant American Guarantee and Liability Insurance Company's (“Defendant” or “AGLIC”) Motion to Dismiss, (ECF No. 33), the Complaint filed by Plaintiff Inspira Health Network (“Plaintiff”), (ECF No 1-1). The Court did not hear oral argument pursuant to Local Rule 78.1. For the reasons that follow, Defendant's Motion is GRANTED.

I. BACKGROUND

Plaintiff is one of Southern New Jersey's “leading network[s] of healthcare providers, delivering the full continuum of primary, acute and advanced care services.” (Compl., ECF No. 1- 1, ¶ 5). Its system comprises “three hospitals, two comprehensive cancer centers, several multi- specialty health centers and a total of more than 150 access points” (“Insured Location”) throughout Gloucester, Cumberland, Salem, Camden, and Atlantic counties. (ECF No. 1-1, ¶ 5). It employs approximately 7,500 people across its facilities. (ECF No. 1-1, ¶ 7). Among the various healthcare services Plaintiff provides are elective surgical and invasive procedures. (ECF No. 1-1, ¶ 6).

Plaintiff contracted with Defendant, an insurance company, for business insurance coverage under Defendant's “Zurich EDGE Healthcare” plan, securing a policy effective January 1, 2020, through January 1, 2021 (“the Policy”). (Compl., ECF No. 1-1, ¶ 8; Ex. A to Compl., ECF 1-1). Among other terms, the Policy includes “special coverage” for business “interruption by communicable disease,” (“ICD Term”). (Ex. A to Compl., ECF No. 1-1). The ICD Term provides:

The Company will pay for the actual Gross Earnings loss sustained by the Insured, as provided by this Policy, resulting from the necessary Suspension of the Insured's business activities at an Insured Location if the Suspension is caused by order of an authorized governmental agency enforcing any law or ordinance regulating communicable diseases and that such portions of the location are declared uninhabitable due to the threat of the spread of communicable disease, prohibiting access to those portions of the Location.

This Policy also covers the reasonable and necessary cost incurred for the cleanup, removal and disposal of the actual not suspected presence of substance(s) causing the spread of such communicable disease and to restore the locations in a manner so as to satisfy such authorized governmental agency.

This Coverage will only apply when the period of time that access is prohibited exceeds the time shown as Qualifying Period in the Qualifying Period clause of the Declarations section. If the Qualifying Period is exceeded, then this Policy will pay for the amount of loss in excess of the Policy Deductible, but not to exceed the number of consecutive days following such order as stated in the Declarations up to the limit applying to this Coverage.

This Coverage will not apply to loss or damage that is payable under any other provision in this Policy.

(Compl., ECF No. 1-1, ¶ 26; Ex. A to Compl., ECF No. 1-1). The Policy defines “Suspension” as “[t]he slowdown or cessation of the Insured's business activities,” and “Qualifying Period” as “[t]he continuous period of time expressed in hours or days which must be exceeded before coverage under this Policy begins,” which for purposes of the ICD Term is twenty-four hours. (Compl., ECF No. 1-1, ¶¶ 27-29). The Policy further provides a sub-limit for coverage under the ICD Term of $1 million. (Compl., ECF No. 1-1, ¶ 11).

As all are undoubtedly aware, the COVID-19 global pandemic began sweeping the United States, including New Jersey, in early 2020, leading to still-increasing numbers of infections and deaths. (Compl., ECF No. 1-1, ¶¶ 34-44). In response to the crisis, New Jersey Governor Phil Murphy issued Executive Order No. 103, which provided:

I authorize and empower the State Director of Emergency Management, who is the Superintendent of State Police, in conjunction with the Commissioner of DOH, to take any such emergency measures as the State Director may determine necessary, including the implementation of the State Emergency Operations Plan and directing the activation of county and municipal emergency operations plans, in order to fully and adequately protect the health, safety and welfare of the citizens of the State of New Jersey from any actual or potential threat or danger that may exist from the possible exposure to COVID-19.

(Compl., ECF No. 1-1, ¶ 45).

After the World Health Organization also designated COVID-19 as a global pandemic and the President of the United Stated declared it a national emergency, (Compl., ECF No. 1-1, ¶¶ 46-47), Governor Murphy issued a series of further orders aimed at stopping the spread of the disease. (Compl., ECF No. 1-1, ¶¶ 48-49). Executive Order No. 104, dated March 16, 2020, restricted gatherings to fifty persons or fewer and ordered closures, or restrictions, of certain establishments but expressly excluded “healthcare facilities and ancillary stores within healthcare facilities” from the Order.^[1] (Morris Decl. Ex. 2, ECF No. 33, p. 5-7). Thereafter, Executive Order No. 107 ordered that all New Jersey residents “shall remain home” unless they are “seeking medical attention,” among other exceptions, and required “[t]he brick-and-mortar premises of all non-essential retail businesses must close to the public as long as this Order remains in effect.” (Compl., ECF No. 1-1, ¶¶ 48-49; Morris Decl. Ex. 3, ECF No. 33, p. 5-6). The Order, however, expressly stated “[n]othing in this Order shall be construed to limit, prohibit, or restrict in any way the provision of health care or medical services to members of the public.” (Morris Decl. Ex. 3, ECF No. 33, p. 12).

Most relevant here is Executive Order No. 109, which suspended all elective surgeries and invasive procedures performed on adults in the state:

Beginning at 5:00 p.m. on Friday, March 27, 2020, all “elective” surgeries performed on adults, whether medical or dental, and all “elective” invasive procedures performed on adults, whether medical or dental, are suspended in the State. An “elective” surgery or invasive procedure, for purposes of this Order, is defined as any surgery or invasive procedure that can be delayed without undue risk to the current or future health of the patient as determined by the patient's treating physician or dentist. An “elective” surgery or invasive procedure does not include the administration of vaccines.

(Compl., ECF No. 1-1, ¶ 51). Governor Murphy issued the Order, in part, to “take additional steps to preserve our health care system's capacity to treat those who require emergency or intensive care,” limit “exposure of healthcare providers, patients, and staff to COVID-19,” and conserve critical medical resources to combat the spread of the virus. (Morris Decl. Ex. 4, ECF No. 33, p. 3). In compliance with this Order, Plaintiff ceased all elective procedures at the appointed time. (Compl., ECF No. 1-1, ¶ 56). This work did not resume until May 26, 2020, after Governor Murphy rescinded Executive Order No. 109. (Compl., ECF No. 1-1, ¶ 59; Morris Decl. Ex. 5, ECF No. 33).

During this interruption, Plaintiff alleges that it endured a significant loss of gross earnings: more than $20 million. (Compl., ECF No. 1-1, ¶ 63). Accordingly, Plaintiff filed a claim with Defendant on April 14, 2020, seeking coverage under the Policy's ICD Term. (Compl., ECF No. 1-1, ¶ 67). In a May 5, 2020 letter, Defendant stated that it needed time to investigate Plaintiff's claim. (Compl., ECF No. 1-1, ¶ 68). On March 8, 2021, Defendant communicated via e-mail that it would deny coverage. (Compl., ECF No. 1-1, ¶ 70). Plaintiff responded by filing suit. (Compl., ECF No. 1-1).

II. PROCEDURAL HISTORY

On March 30, 2021, Plaintiff commenced this action in the Superior Court of New Jersey, Gloucester County, seeking a declaratory judgment that Defendant must cover Plaintiff's losses up to $1 million as contemplated by the ICD Term of the Policy. (Compl., ECF No. 1-1). The New Jersey Department of Banking and Insurance accepted service on Defendant's behalf on April 12, 2021. (Notice of Removal, ECF No. 1, ¶ 3). Defendant timely removed the case to this Court on May 12, 2021, under 28 U.S.C. §§ 1441 and 1446, invoking this Court's diversity jurisdiction under 28 U.S.C. § 1332. (Notice of Removal, ECF No. 1).

After the grant of a series of extensions of time for Defendant to respond to Plaintiff's Complaint (ECF Nos. 4, 6), the parties submitted a joint request for a sixty-day stay of proceedings in this matter on June 8, 2021, to explore settlement. (ECF No. 9). The parties also requested that if the Court granted the stay, it should still allow the filing of a Motion for Remand that Plaintiff intended to submit in the days to follow. (ECF No. 9). The Court granted both requests on June 9, 2021, (ECF No. 10), and Plaintiff's Motion to Remand was filed the next day, (ECF No. 11).

After the parties were unable to resolve this matter within the original sixty-day stay of proceedings, the Court granted a series of extensions. (ECF Nos. 21, 23, 26). Unfortunately the parties remained unable to come to an agreement, and the matter was returned to active status on February 4, 2022. (ECF No. 28). On March 21, 2022, the Court denied Plaintiff's Motion for Remand. (ECF No. 31). Defendant thereafter filed the...