Overview of the Case
A federal judge in Chicago dismissed a lawsuit filed by a not-for-profit hospital seeking $2.5 million in directors and officers liability coverage from a Chubb Ltd. unit. The case revolved around investigations into the hospital’s COVID-19 vaccine distribution in 2021.
Judicial Decision
U.S. District Judge Jeffrey I. Cummings of the Northern District of Illinois ruled in Loretto Hospital v. Federal Insurance Co. that the hospital’s breach of contract claim was invalid. The policy had a $1 million sub-limit on regulatory conduct claims, which the insurer had already paid in January 2023.
The judge dismissed Loretto’s argument that other provisions of the $5 million D&O policy were triggered by investigations from the U.S. Department of Justice and Illinois Attorney General’s Office.
Background
Loretto Hospital began distributing Chicago’s first COVID-19 vaccines to frontline and healthcare workers in December 2020. By March 2021, local media reported that some Loretto employees, including its then-CEO, chief financial officer, and chief transformation officer, conducted off-site vaccination events at unapproved locations. Allegedly, individuals not yet eligible for vaccination received the vaccine at these events.
Investigations and Coverage Request
In May 2021, the DOJ and Illinois Attorney General’s Office requested records from Loretto regarding its vaccine distribution program and other operations. Between May 2021 and June 2023, Loretto received 17 additional subpoenas from the DOJ.
The hospital sought coverage from Federal for six of the seven individuals named in the DOJ’s document requests. Loretto filed a lawsuit against the Chubb unit in June 2023, claiming breach of policy for only paying $1 million of the defense costs involved in the investigations.
Conclusion
Representatives for the parties were unavailable for comment.
