Sure, Steward Health Care has created a public health care emergency, but at least it has prevailed in an insurance coverage dispute.
A storm in June 2020 caused an accumulation of rainwater on a rooftop courtyard and on roofs of Norwood Hospital. The rainwater seeped into the interior of the hospital buildings, causing significant damage.
Norwood Hospital’s owner, Medical Properties Trust, Inc., which is insured by Zurich, and Steward, the hospital’s operator, insured by AGLIC, sought coverage from their respective insurers.
Both policies had sublimits for damage caused by “Flood,” which the policies defined as “a general and temporary condition of partial or complete inundation of normally dry land areas or structures caused by the unusual and rapid accumulation or runoff of surface waters.”
The insurers and insureds disagreed about whether water that accumulated on roofs and infiltrated the buildings was “surface water” and therefore subject to the flood sublimits.
The insureds argued that the plain meaning of “surface waters” is waters at ground level or on a ground-level surface — waters on the surface of the earth. The insurers argued that the phrase means waters accumulating naturally on any surface whether or not at ground level.
In Zurich Am. Ins. Co. v. Medical Properties Trust, Inc., __ N.E.3d __, 2024 WL 3504060 (Mass. 2024), the Supreme Judicial Court of Massachusetts held that the meaning of “surface waters,” and therefore of “Flood,” under the policies is ambiguous with respect to accumulation of rainwater on roofs. As ambiguous terms are interpreted in favor of policyholders, the court held that there was coverage for the loss.