The District of New Hampshire recently held that Fireman’s Fund Insurance Company (“Fireman’s Fund”) did not wrongfully deny coverage for certain losses after a Catholic Medical Center (“CMC”) neurological patient was diagnosed with a communicable disease several months after surgery, necessitating the destruction of potentially contaminated instruments and causing temporary suspension of the CMC’s neurosurgery program. Catholic Medical Center v. Fireman’s Fund Insurance Company, No. 14-cv-180-JL (D.N.H. June 1, 2015). The court’s decision turned on its conclusions that the instruments did not constitute “premises” within the meaning of the subject policy.
On May 24, 2013, CMC performed neurosurgery on a patient who was later diagnosed with Cruetzfeldt-Jakob Disease (“CJD”). CJD is a communicable and incurable neurological disease and is ultimately fatal. In August 2013, CMC became aware that the patient had CJD. CMC notified New Hampshire Health and Human Services (“HHS”) and representatives of both parties formulated a response.
CMC owned two sets of neurosurgical kits at the time of the surgery and was unable to determine which kit was used to operate on the patient. CMC had performed eight other neuro surgeries since May 24, and was unable to tell if CMC had used the contaminated kit to operate on those patients. CMC quarantined the kits and shut down their neurosurgery program. They voluntarily complied with HHS throughout the entire process. HHS determined that since the contaminated kit was unidentifiable both kits needed to be decontaminated. Decontamination required that the kits be destroyed. HHS could have issued a formal order requiring decontamination but because CMC was voluntarily complying chose not to do so. HHS did not require, and CMC did not take, any further action regarding their operating rooms or equipment. On February 24, 2014, CMC was able to reopen their neurosurgery program after purchasing new neurosurgery kits.
CMC notified its commercial property insurer, Fireman’s Fund of a potential claim. Fireman’s Fund ultimately denied coverage. CMC filed suit and the parties filed cross-motions for summary judgment. In its motion for summary judgment, Fireman’s Fund argued that there was no coverage under the policy because the incident was not a “communicable disease event” within the meaning of the policy nor a covered crisis event. The district court agreed with Fireman’s Fund and granted summary judgment in its favor.
The policy contained Communicable Disease Coverage which provided coverage for: “Direct Physical loss or damage to Property Insured caused by or resulting from a covered communicable disease event at the premises described in the Declarations.” This Coverage included necessary costs incurred to:
- Test, monitor, contain, treat, detoxify, disinfect, and neutralize Property Insured;
- Cleanup, remove, and dispose of the debris of Property Insured.
- Replace consumable goods at the premises described in the Declarations which are declared contaminated by the local public health authority.
“Communicable disease event” is a defined term under the policy and means an event where, “a public health authority has ordered that the premises…be evacuated, decontaminated, or disinfected due to the outbreak communicable diseases…” Fireman’s Fund argued and the court agreed that there was “communicable disease event” as there was no action to evacuate, decontaminate, or disinfect the premises, the incident was never considered an outbreak, the HHS never ordered CMC to take any action, and there was no direct physical loss or damage to insured property.
The policy also contained a Crisis Management Extension Endorsement which provided
Necessary closure of your covered premises due to any sudden, accidental and unintentional contamination or impairment of the covered premises or other property on the covered premises which results in clear,identifiable, internal or external visible symptoms of bodily injury, illness, or death of any person(s). This includes covered premises contaminated, by communicable disease, Legionnaires’ disease, but does not include premises contaminated by other pollutants or fungi.
CMC argued that they were required to temporarily suspend their neurosurgical operations because of the CJD diagnosis and therefore coverage was triggered. The Court disagreed, holding that the suspension of surgery without an evacuation, decontamination, or disinfection at the premises was insufficient to trigger coverage. The court further held that because were not decontaminated, there was no covered crisis event which would trigger coverage for the surgical kits. CMC has yet to file an appeal.