A federal appeals court has overturned a decision that could have cost skilled nursing provider Genesis Healthcare millions of dollars in COVID-19 claims not covered by its insurer.
The case revolves around National Fire & Marine Insurance’s attempt to have individual COVID claims considered separate healthcare events for legal purposes. A late 2022 interpretation by the US District Court for the Eastern District of Pennsylvania would have forced Genesis to pay $3 million in self-insurance fees in each case related to COVID before getting any relief from its insurer.
Genesis, which court records described as having aout 400 nursing homes and assisted living facilities in the US, quickly escalated that decision to the US Court of Appeals for the Third Circuit.
On Monday, a three-judge panel ruled that the lower court had erred in even considering National’s request for a quick, summary judgment, saying the full extent of possible payouts by Genesis hadn’t become clear yet.
In legal terms, that made the case “not ripe” for review.
“That is because Genesis is far short of meeting its $3 million threshold on a single SIR [self-insured retention] — let alone on multiple SIRs,” write judges Kent A.Jordan, Stephanos Bibas and David J. Porter.
In late 2022, Genesis said it had paid $1.3 million in covered expenses and anticipated an additional $300,000 over the ensuing five months for all COVID claims against the company. In an update requested by the appeals panel, Genesis put its to-date costs at just over $2 million, which the judges noted was still “far short” of the $3 million threshold.
“At this stage of the case, we fail to see how there is any ‘real and substantial threat’ of harm if a declaratory judgment is not entered,” the judges wrote. “Many COVID-related claims against Genesis already are barred by the statute of limitations in many states. So the likelihood of Genesis’ costs exceeding $3 million any time soon — if ever — does not constitute a substantial threat of real harm.”
A request for comment from a Genesis spokeswoman was not immediately returned Tuesday.
The judges ruled that the District Court lacked subject-matter jurisdiction over the controversy and erred in its earlier ruling for National. It vacated that judgment and returned the case to the lower court for further proceedings.
Genesis faced at least 46 COVID-related claims, according to court documents. It took out its additional policy with National Fire & Marine in the fall of 2020, with a coverage period that was supposed to be retroactive to December 2019. While Genesis agreed to pay the first $3 million in defense costs, settlements or judgments for each healthcare event up to $160 million total, it viewed COVID as a single event.
Had National been victorious, it would have covered none of the costs associated with claims against Genesis during the policy period.
As it is, the insurer may remain virtually unaffected by Monday’s ruling.
Before the 2022 ruling, Genesis was subject to 41 unsettled lawsuits and would have to incur about $41,000 in costs each to cross the $3 million total at the heart of the case. But National conceded that only 17 of those 41 lawsuits were currently in litigation.
A call seeking comment from the National Indemnity Company, which owns National Fire & Marine Insurance Company, was not returned Tuesday.
