Dive Brief:

• Johnson & Wales University filed a lawsuit against its insurer, American Guarantee & Liability Insurance Co., saying it did not process claims for pandemic-related expenses and lost revenue that should have been covered by policies the university purchased.
• The private, nonprofit university absorbed losses totaling "many millions of dollars" because of closures and restrictions affecting its on-the-ground operations during the pandemic, according to the lawsuit, filed in U.S. District Court in Rhode Island. Losses ranged from canceled classes to refunded tuition revenue. They also included expenses like the cost of COVID-19 testing and improvements for remote instruction and remote work.
• Johnson & Wales is asking the court to state that the insurance policies in question cover its losses. It also is seeking damages, interest and reimbursement for legal costs.

Dive Insight:

Colleges found themselves being served with legal papers after the coronavirus shuttered campuses in the spring of 2020 and students and families sued, seeking to have tuition or room and board refunded. But Johson & Wales' suit falls under another swelling category — organizations filing against their insurers, seeking reimbursement for losses tied to shutdown orders and COVID-19 mitigation measures.

The university purchased $500 million in commercial property and business interruption insurance policies from American Guarantee. They were to cover the period from May 2019 to May 2020 and May 2020 to May 2021, providing "broad 'all-risk' coverage," the university's lawsuit said. The 2019-20 policy explicitly covered losses related to communicable diseases, subject to a sublimit, it said.

The policies in question didn't exclude losses because of viruses, according to the lawsuit, which said other policies the company sold included such an exclusion.

Like other colleges, Johnson & Wales moved many of its in-person operations online and started implementing mitigation measures after the coronavirus began to spread. It then asked American Guarantee to cover financial losses it absorbed under its policies, according to the lawsuit. 

The university notified the insurer of its losses in April 2020. But it didn't receive a response until September that year, the lawsuit said. 

When it did respond, American Guarantee said that it "does not appear that the presence of the COVID-19 virus constitutes direct physical loss or damage to property." It also said the coronavirus counted as contamination that was excluded from coverage, even though the university's policy removed references to pathogens and viruses from the definition of contamination, the lawsuit said.

American Guarantee told the university that it would provide updates as it investigated. It asked for additional information at several points, which the university provided, according to the lawsuit. But by the end of August 2021, the insurer allegedly went several months without giving updates to the university. Johnson & Wales filed suit in Providence County Superior Court, and the venue was changed to district court last month.

"Instead of honoring its obligations under the Policies and the law, American Guarantee has thus far wrongfully withheld the policy benefits to which JWU is entitled," the lawsuit said. It alleges breach of contract, a breach of good faith, breach of fair dealing and bad faith by the insurer.

It argues the university's coronavirus-related losses fall under the policies' coverage because the virus caused "a distinct, demonstrable, physical alteration to property" and posed "an imminent and severe risk to human health."

The insurer's parent company does not "provide information related to topics in litigation," a spokesperson said in an email Tuesday evening. Johnson & Wales does not comment on pending litigation, a spokesperson said.

Other universities have filed lawsuits against their insurers over similar language in all-risk policies. Rockhurst University and Maryville University filed a class-action complaint against their insurer, FM Global, ABC News reported in April. Institutions in Ohio also filed a similar lawsuit against Lloyd's of London.

Johnson & Wales enrolls more than 9,000 students between in-person and online operations. It has campuses in Providence, Rhode Island and Charlotte, North Carolina, as well as classes at an equine center in Massachusetts. It closed campuses in Denver and North Miami, Florida, in May after deciding they could not be self-sustaining.