Healthpartners, Inc. v. Am. Guarantee & Liab. Ins. Co.

587 F.Supp.3d 874

HEALTHPARTNERS, INC. et al., Plaintiffs,

v.AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant.

Case No. 21-cv-1375 (SRN/ECW)

United States District Court, D. Minnesota.

Signed February 28, 2022

Rick E. Kubler and Amy E. Erickson, Lathrop GPM LLP, 80 South 8th Street, Suite 500, IDS Center, Minneapolis, MN 55402; and Noah H. Nash, Lathrop GPM LLP, 2345 Grand Boulevard, Suite 2200, Kansas City, MO 64108, for Plaintiffs.

Daniel J. Millea and Akira C. Perez, Zelle LLP, 500 Washington Avenue South, Suite 4000, Minneapolis, MN 55415; Eileen K. Bower, Clyde & Co. LLP, 55 West Monroe Street, Suite 3000, Chicago, IL 60603; and Timothy A. Carroll, Clyde & Co. LLP, 200 Campus Drive, Suite 300, Florham Park, NJ 07932, for Defendant.

ORDER

SUSAN RICHARD NELSON, United States District Judge

This matter is before the Court on the Motion to Dismiss [Doc. No. 41] filed by Defendant American Guarantee and Liability Insurance Company ("AGLIC"). Based on a review of the files, submissions, and proceedings herein, and for the reasons below, the Court GRANTS the motion.

I. BACKGROUND

A. The Parties

Plaintiffs HealthPartners, Inc., Amery Regional Medical Center, Inc., Capitol View Transitional Care Center, Dental Specialties, Inc., Group Health Plan, Inc., HealthPartners Associates, Inc., HealthPartners Central Minnesota Clinics, Inc., HealthPartners RC, HealthPartners Services, Inc., Hudson Hospital, Inc., Hutchinson Health, Lakeview Memorial Hospital Association, Inc., Park Nicollet Clinic, Park Nicollet Healthcare Products, Park Nicolett Health Services, Park Nicollet Methodist Hospital, Physicians Neck & Back Clinics, Regions Hospital, RHSC, Inc., Stillwater Medical Group, TRIA Orthopaedic Center, LLC, and Westfields Hospital Inc. (together, "Plaintiffs" or "HealthPartners") are Minnesota and Wisconsin for-profit, non-profit, and limited liability companies. (Compl. ¶¶ 28–49.)

Defendant AGLIC is a New York corporation with its principal place of business in Schaumburg, Illinois, and is a wholly owned subsidiary of Zurich American Insurance Company, which is also a New York corporation. (Id. ¶ 50.)

B. Factual Background

1. HealthPartners’ Business

Founded in 1957, HealthPartners is the largest consumer-governed non-profit health care organization in the United States. (Compl. ¶ 2.) It is comprised of more than 90 clinics and hospitals in Minnesota and western Wisconsin and "includes a multi-specialty group practice of more than 1,800 physicians and 60 dentists." (Id. ¶ 3.) It also has more than 26,000 employees, who provide care to more than 1.2 million patients. (Id. )

2. The Policy

AGLIC issued a Zurich EDGE Healthcare Policy to HealthPartners, for the policy period February 1, 2020 through April 1, 2021. (Id. ¶ 51, Ex. 1 (the "Policy") at 15.) Plaintiff HealthPartners, Inc. is the "First Named Insured" on the Policy, while the other Plaintiffs are "Insureds." (Id. ¶¶ 52–53; see also id. Ex. 2.)

a. General Coverage

The Policy generally insures against "direct physical loss of or damage caused by a Covered Cause of Loss to Covered Property." (Policy § 1.01 (emphasis in original).) A "Covered Cause of Loss" is defined as "[a]ll risks of direct physical loss of or damage from any cause unless excluded." (Id. § 7.11.) The Policy includes Time Element coverage (i.e., business interruption coverage), provided as follows:

The Company will pay for the actual Time Element loss the Insured sustains, as provided in the Time Element Coverages, during the Period of Liability. The Time Element loss must result from the necessary Suspension of the Insured's business activities at an Insured Location. The Suspension must be due to direct physical loss of or damage to Property (of the type insurable under this Policy other than Finished Stock ) caused by a Covered Cause of Loss at the Location , or as provided in Off Premises Storage for Property Under Construction Coverages.

(Id. § 4.01.01 (emphasis in original).) The Policy also insures the "reasonable and necessary Extra Expenses incurred ... to resume and continue as nearly as practicable the Insured's normal business activities." (Id. § 4.02.03.) The phrase "direct physical loss of or damage to" is not defined by the Policy.

The Policy further provides civil authority coverage. Specifically, the Policy covers Time Element loss "resulting from the necessary Suspension of the Insured's business activities ... if the Suspension is caused by order of civil or military authority that prohibits access to the Location ." (Id. § 5.02.03.) To apply, there must be "direct physical loss of or damage" to nearby property that is not owned by HealthPartners. (Id. )

b. Special Coverage

The Policy provides special coverage for certain losses resulting from an Interruption by Communicable Disease ("ICD"). (Id. § 5.02.35.) Unlike the Policy's general coverage, the ICD coverage does not require "direct physical loss of or damage to" covered property. Instead, ICD coverage applies as follows:

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 .

(Id. ) This coverage extends to "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." (Id. ) It does not cover "loss or damage that is payable under any other provision" in the Policy. (Id. )

3. The Pandemic

In December 2019, a novel coronavirus, SARS-CoV-2, known as COVID-19, began to infect individuals throughout the world. (Compl. ¶ 4.) By January 2020, the United States reported its first cases of the virus. (Id. ¶ 5.) On February 5, 2020, the first positive case was announced in Wisconsin, and about one month later, Minnesota announced its first positive COVID-19 case. (Id. ) In response to the unprecedented and mushrooming COVID-19 outbreaks across the nation, the governors of Minnesota and Wisconsin issued emergency executive orders ("Government Orders"). (Id. ¶¶ 125–31.)

a. Government Orders

On March 12, 2020, Minnesota Governor Walz declared a peacetime emergency in response to the spread of COVID-19 and issued several emergency executive orders. (Compl. ¶¶ 126–28; see also Declaration of Akira Céspedes Pérez [Doc. No. 44-1] ("Céspedes Decl.") Ex. 1 at 2–35.) Emergency Executive Order 20-09 ordered that, beginning on March 23, 2020, "all non-essential or elective surgeries and procedures, including non-emergent or elective dental care, that utilize PPE or ventilators must be postponed indefinitely." (Céspedes Decl. Ex. 1 at 2; Compl. ¶ 127.) This order was effective until May 10, 2020. (Céspedes Decl. Ex. 1 at 6; Compl. ¶ 128.)

Similarly, on March 24, 2020, Wisconsin Governor Evers issued Emergency Executive Order 12, called the "Safer at Home Order." (Céspedes Decl. Ex. 1 at 36–51; Compl. ¶ 130.) Although the order encouraged individuals to stay at home, it did permit them to "leave their residence to work for or obtain services at any Healthcare and Public Health Operations," which included "hospitals," "medical facilities," and "clinics." (Id. at 40.) It also provided that "Healthcare and Public Health Operations shall be broadly construed to avoid any impediments to the delivery of healthcare, broadly defined." (Id. at 41.) However, it did not include "fitness and exercise gyms." (Id. ) This order remained effective until May 26, 2020. (Compl. ¶ 130.) In addition, the Wisconsin Department of Health Services "recommended that dental practices postpone all elective and non-urgent care treatment." (Id. ¶ 132.)

b. Impact on HealthPartners

HealthPartners alleges that the Government Orders (1) "forced [it] to suspend its elective, non-essential medical and dental services at all locations throughout Minnesota and Wisconsin," (2) "required HealthPartners to close specific properties," and (3) even after those properties re-opened, HealthPartners "continued to limit operations and require extensive ongoing and repeated remediation." (Id. ¶¶ 135, 142–43.) HealthPartners further asserts that the remediation and limitations on operations have resulted in "losses to date in excess of $430 million." (Id. ¶ 144.)

Despite those limitations, HealthPartners also alleges that it "has remained—and continues to remain—fervent to its commitment to providing safe and innovative medical treatment to patients in Minnesota and Wisconsin." (Id. ¶ 14.) Given this commitment, HealthPartners has "provided medical and dental care to tens of thousands of patients" since late-March 2020. (Id. ¶ 137.) And it has done so even though "over 51,000 patients within HealthPartners’ care system had confirmed COVID-19 diagnoses" and "at least 2,240 employees tested positive for COVID-19." (Id. ¶¶ 137–38.)

4. HealthPartners Submits an Insurance Claim

On May 7, 2020, AGLIC received HealthPartners’ insurance claim seeking reimbursement for losses due to COVID-19 and the Government Orders. (See id. ¶¶ 147–48.) After reviewing the claim, AGLIC paid HealthPartners $45,726 for losses sustained at three fitness centers¹ that were required to close under the Government Orders. (See id. ¶¶ 153–54.) But it denied HealthPartners’ claim relating to any other alleged losses. (Id. )

C. Procedural Background

On June 10, 2021, HealthPartners filed the Complaint, alleging claims for breach of contract and breach of the covenant of good faith and fair dealing, and seeking declaratory and monetary relief. (Id. ¶¶ 158–75.) In response, AGLIC filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),...