AU Health has filed a civil lawsuit accusing its Rhode Island-based insurance company Affiliated FM Insurance Company of acting in bad faith and breach of contract.
According to AU Health’s complaint, the plaintiffs purchased an all-risk policy with a coverage period that ran from July 1, 2019 through June 30, 2021. AU Medical Center and AU Medical Associates are co-plaintiffs in the lawsuit.
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The policy insured the plaintiffs’ property against physical loss or damage stemming from business interruption caused by communicable disease and civil authority. It also provides for the recovery of gross earnings and profits losses and includes an extended one-year period of liability to cover “what is required to restore the insured’s business operations to the condition that would have existed had the loss not occurred,” according to court documents.
AU Health claims it began experiencing COVID-19-related business interruptions in March 2020. Georgia and South Carolina’s state of emergency orders directly affected the ability to provide certain healthcare services. Due to the pandemic, the medical trio incurred “enormous” expenses, including more than $120,000 in cleaning services, $32,654 in reputation management costs and more than $4 million in disaster pay.
Additionally, the plaintiffs suffered more than $1 million in expenditures for equipment and renovations needed to treat and isolate COVID-19 patients. Expenditures for protective, disinfectant and lab testing equipment amounted to more than $9 million.
The plaintiffs argue in the complaint that various civil authority and executive orders prevented them from “generating millions of dollars in earnings they would have received for service lines that were suspended.” Reallocation of resources and medical personnel interrupted the production of revenue. Personnel who treated COVID-19 patients required time-off, further hampering the plaintiffs’ abilities to generate revenue customarily produced, according to the court documents.
AU Health presented AFM Insurance with a sworn Statement of Notice of Claim of Loss in April of last year and supplemented the claim in June. The plaintiffs say the insurance company rejected their claim without explanation.
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The plaintiffs are asking for damages, a declaratory judgment and recovery under Georgia insurance law, which provides for the insurer to pay not more than 50 percent of the liability for losses or $5,000, whichever is greater, when claims are not paid within 60 days and it is determined the refusal is an act of bad faith.
AFM Insurance which operates an office in Alpharetta, Ga, has not filed an answer to the complaint. Legally, the insurance company has 21 days after service to respond.
AU Health declined to comment on the pending litigation. Christen Engel, AU Health’s associate VP of communications said in general, additional expenses, coupled with less revenue postponed elective surgeries, have resulted in operating losses for hospitals nationwide.
“Health systems nationwide have incurred unplanned costs associated with staffing, drugs, equipment and supplies needed to safely care for COVID-19 patients,” Engel said. “These additional expenses also extend to non-COVID patients as hospitals provide added protections for patients and visitors entering clinical facilities.”
AU Health is fighting to lessen the burden of hospitalizations across the CSRA by testing, vaccinating and providing monoclonal antibody treatment, she said.
Atlanta-based firm Robert Threlkeld, Morris, Manning and Martin, LLP represents AU Health and its affiliates.
Shellie Smitley is a staff writer for The Augusta Press. Reach her at shellie@theaugustapress.com
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