This story first ran on BizWest.com, a BusinessDen news partner.
The University of Colorado Board of Regents has filed a lawsuit against its insurance company alleging that the insurer has failed to pay claims related to losses sustained from the COVID-19 pandemic.
The claim, potentially worth more than a billion dollars, seeks to force Factory Mutual Insurance Co., which does business as FM Global, to respond to the university’s claim and pay damages under multiple provisions of the university’s “all risks” insurance policy.
The suit was filed Wednesday, March 10, in order to be within the policy’s stated one-year period of time in which to file suit. Claims were filed with the insurer March 12, 2020.
The university’s four major campuses at Boulder, Denver, Colorado Springs and the Anschutz campus are insured by Factory Mutual.
The suit says that “FM has failed for nearly a year to both honor its coverage obligations and to conduct a reasonable investigation of the claim. FM’s unreasonable delay and refusal is particularly egregious because the policy specifically covers ‘Communicable Disease Response’ and ‘Interruption by Communicable Disease,’” the university said.
The suit also alleges that “FM’s course of conduct … is consistent with FM’s unreasonable litigation positions taken across the country with similarly situated policyholders …” Further, “the Regents believe that FM adopted these untenable litigation positions out of corporate necessity, rather than out of a good faith reading of its own policy language.” The suit goes on to say that the insurer’s position contradicts positions it took with similar but lesser-insured liabilities.
The claims alleged by the university list loss of gross earnings from tuition, loss of use of campus buildings, and losses sustained from extra expenses incurred responding to the pandemic. Because Colorado law requires insurers doing business in the state to respond without unreasonable delay, the university seeks damages equal to two times covered benefits, as well as court costs and legal fees.
CU estimated in April 2020 that budget losses could reach $1.1 billion because of the COVID-19 pandemic, depending on the level of remote learning that was required.
The CU Board of Regents in June 2020 reduced the 2021 fiscal budget by $250 million from the prior year, including a $41.1 million decrease in CU Boulder’s budget. CU Boulder said in December that the general-fund revenue shortfall had increased to $96.6 million by that date, with auxiliary operations losing $115 million in the 2021 fiscal year.
The university’s law firm of Perkins Coie LLP filed the action.
Multiple calls to the Factory Mutual office in Johnston, Rhode Island, were not answered.