Nat'l Fire & Marine Ins. Co. v. Genesis Healthcare, Inc.

641 F.Supp.3d 139

NATIONAL FIRE AND MARINE INSURANCE COMPANY v. GENESIS HEALTHCARE, INC.

CIVIL ACTION NO. 22-1500

United States District Court, E.D. Pennsylvania

Filed November 16, 2022

Louis H. Kozloff, Kelsey Knish, Sean Patrick Mahoney, Thomas J. Seery, Kennedys CMK LLP, Philadelphia, PA, Karen J. Anderson, Kennedys CMK LLP, Chicago, IL, Max W. Gershweir, Kennedys CMK LLP, New York, NY, for National Fire and Marine Insurance Company.

Fiona Hogan, Jason E. Kosek, Anderson Kill PC, New York, NY, Pamela Dianne Hans, Anderson Kill P.C., Philadelphia, PA, Rhonda D. Orin, Anderson Kill L.L.P., Washington, DC, John P. Lacey, Jr., Anderson Kill P.C., Newark, NJ, for Genesis Healthcare, Inc.

MEMORANDUM

KEARNEY, District Judge

The COVID-19 pandemic beginning here in early 2020 permeated our businesses, schools, and health care facilities. We are not aware of an immune population. Businesses, including nursing homes, established procedures to mitigate the risk but we are not aware, before an early 2021 vaccine, of steps which significantly impaired the spread of COVID-19 in a closed facility.

Genesis Healthcare, Inc. owns hundreds of companies which individually own and manage nursing homes and health care facilities. Thousands of nursing home residents, like many persons not in nursing homes, contracted COVID-19 in 2020. Genesis claims to have adopted largely undisclosed protocols to mitigate the spread of COVID-19 in the facilities managed by its operating companies. But its alleged protocols did not stop residents from contracting COVID-19. Genesis's operating companies, as well as Genesis to a lesser extent, faced twenty-three lawsuits and twenty pre-suit notices from residents who contracted COVID-19 during 2020. The claims vary. But the parties adduce no evidence of more than one resident claiming the operating companies violated one identified Genesis protocol or more than one resident citing a specific Genesis protocol would have stopped COVID-19. Claims differ by how the operating company attempted to mitigate COVID-19 in the facility it owned and managed.

Genesis purchased insurance coverage for the 2020 policy year to pay for its losses above a $3,000,000 self-insured retention which it incurred in defending and satisfying a claim arising from a single health care event. Genesis sought coverage in December 2021 for losses above $3,000,000 by characterizing all the COVID-19 lawsuits and claims in the 2020 policy year as one claim. Genesis argues the residents' claims arising from COVID-19 is a single health care event and it need only exhaust one $3,000,000 self-insured retention in defending and satisfying all the claims. Genesis spent approximately $1.3 million as of the close of discovery six weeks ago. It expects to spend another $300,000 in the next five months.

The insurer sued Genesis asking us to declare its coverage obligations begin after Genesis incurs more than $3,000,000 on each of the separate health care events depending on where and how the resident contracted COVID-19. Both Genesis and its insurer ask us to decide, before Genesis incurs $3,000,000 in losses, whether the COVID-19 injuries in the forty-three claims arise from one health care event for purposes of defined terms in the insurance policy or the defense costs and settlements in the variety of contexts should be considered separate health care events.

We find the case or controversy is justiciable even though Genesis has not yet exhausted one-half of the $3,000,000 self-insured retention. We also find the claims connected with the operating companies' COVID-19 responses do not constitute one health care event as defined by the insurance policies purchased by Genesis given the wide variety of facts and attributed causes in the forty-three claims arising so far during the 2020 Policy period. The great variety of alleged conduct is not the same or related acts or omissions as defined in the purchased insurance policy. We grant the insurer's Motion for summary judgment and deny Genesis' Motion for summary judgment.

I. Undisputed material facts¹

Genesis Healthcare, Inc. owns approximately 400 companies which provide health care services.² Each of the companies operates a long-term care and/or a nursing home facility.³ Genesis does not operate the facilities.⁴ It owns the membership or shareholder interests in each of the approximately 400 operating companies.

Genesis purchases insurance from National Fire in place during 2020 COVID-19.

Genesis purchased a senior care liability insurance policy for it and its operating companies from National Fire and Marine Insurance Company for the policy period December 1, 2019 to December 1, 2020 (the Primary Policy).⁵ National Fire, under the defined terms of the Primary Policy, agreed to provide Genesis and its operating companies with claims-made and reported professional liability and general liability coverage.⁶ Genesis also purchased an excess senior care liability insurance policy from National Fire for the same period (the Excess Policy).⁷ Genesis is listed as the first named insured and its operating companies are additional named insureds.⁸

National Fire, consistent with the Primary Policy, will pay all loss and claims expenses on behalf of Genesis subject to a self-insured retention and up to its limits of liability arising from a "health care event."⁹ National Fire's Primary Policy confirms all claims and potential claims for damages arising out of, or in connection with the same "health care event" are deemed to have been made on the date the first claim is made against Genesis, or the date Genesis discovers the first potential claim, whichever date is earlier.¹⁰

National Fire and Genesis agreed to define a "health care event" as "any event in the rendering of, or failure to render, professional services that results in injury. All injuries arising out of, or in connection with, the same or related acts or omissions in furnishing professional services shall be considered one health care event."¹¹ An "event" is defined as "an accident."¹² "All injuries arising out of, or in connection with: (1) the same or related acts or omissions; or (2) the continuous or repeated exposure to substantially the same harmful conditions; will be considered one event."¹³ "Professional services" include "treatment[s]" such as medical, surgical, dental, mental health, and nursing services.¹⁴

But coverage does not begin with dollar one. Genesis and National Fire agreed to "Self-Insured Retentions" where National Fire is not responsible to pay for losses until Genesis incurs expenses more than:

• $3,000,000 per event for all locations except Kentucky;

• $5,000,000 per event for all Kentucky locations; and

• $160,000,000 aggregate for all locations.¹⁵

Genesis is responsible for defending claims or potential claims until it exhausts its self-insured retentions.¹⁶ After Genesis exhausts the $3,000,000 self-insured retention "per event" (or $5,000,000 if the event occurred in Kentucky), then National Fire is obligated to assume Genesis's defenses in the underlying lawsuits, claims, and potential claims.

The Excess Policy provides excess professional liability coverage on a claims-made and reported basis in the amount of $20,000,000 per event and $20,000,000 in the aggregate for losses in excess of the coverage under the Primary Policy's limits.¹⁷ The Excess Policy does not contain a separate self-insured retention (as it has been exhausted through the Primary Policy terms). The Excess Policy contains the same definition of a "health care event" as the Primary Policy.¹⁸

Genesis's response to the COVID-19 pandemic.

The United States Secretary of Health and Human Services declared a national public health emergency regarding COVID-19 on January 13, 2020.¹⁹ The Centers for Medicare and Medicaid Services and the Centers for Disease Control and Prevention issued guidance and directives to nursing homes on how to operate during the COVID-19 pandemic.²⁰ Genesis, guided by these directives, created a coronavirus response team to implement protocols for its operating companies to respond to COVID-19.²¹ Genesis's Deputy General Counsel Susan Overton swore the Genesis response team's protocols tried to prevent residents from contracting COVID-19 and included "many aspects of how to care for and treat and assess patients at the bedside."²² Genesis developed these alleged internal protocols for use "across the organization."²³ The protocols seemingly generally addressed "all aspects of nursing home operations" including protocols related to: visiting the nursing homes; allowing non-essential personnel's ability to access the nursing homes; scheduling communal activities in the nursing homes; screening and testing for COVID-19; using personal protective equipment; communicating COVID-19 cases to residents, family members, and governmental agencies; and grouping residents.²⁴ Residents still contracted COVID-19 and some became severely ill and died.²⁵

Genesis notifies National Fire of potential COVID-19 claims.

About 12,000 residents contracted COVID-19 in the facilities owned and managed by the operating companies in the nine months after the United States declared a national public health emergency.²⁶ Genesis sent National Fire's appointed agent MedPro Group a letter on September 21, 2020 giving "notice of circumstances related to the COVID-19 pandemic which could give rise to a claim."²⁷ Genesis stated "Genesis' Professional Liability policies may be implicated if residents and/or their families seek to criticize Genesis' policies, procedures, and actions taken during the pandemic."²⁸ Genesis also added "on a precautionary basis" how its reporting of these incidents or potential claims "could potentially be batched under the Professional Liability coverage part and considered a single health care event subject to a single retention, to the extent that Genesis's acts or omissions in providing professional services in...