Norwood Hospital, Insurance Firms In Litigation Over Flood Damage

NORWOOD, MA - Steward Health Care, the parent company of Norwood Hospital, and its insurance companies are locked in a legal battle in federal court over how to classify water damages arising from a torrential rainstorm last June that shut down the facility.

The 215-bed hospital has been inoperable since June 28, 2020, when 5.75 inches came down in only 90 minutes. Water simultaneously gushed through the door, came through the walls, ripped the hinges off of doors, and poured down from the roof, causing irreparable damage to the hospital's electical systems along with other issues such as mold. It also critically damaged essential patient care and major diagnostic systems, according to a report on WFXT-TV.

The argument is how to classify the water damage. According to a report on WBZ-TV, the issue revolves around how to classify the water damage. The hospital’s insurance policy had a limit on how much to pay out for flood damage, but no limits for rain damage.

A Boston Business Journal article reported that the lawsuit by Zurich said the hospital and MPT submitted losses totaling $266 million, and had claimed $177 million to repair the property after the catastrophic flood.

Medical Property Trust, which owns the buildings, and Steward, which leases them and operates the hospitals, turned to their Illinois-based insurer, American Guarantee and Liability Insurance Company, a subsidiary of Zurich Insurance Group, to process the claims.

However, the process has been tedious because of the issue of classifying the water damage, according to lawsuits filed by both parties. Zurich's policy has a $100 million limit for flood damage. The total policy limit is up to the $850 million for Steward and $750 million for MTP.

According to the lawsuit, Zurich claimed in December 2020 that the damage could be repaired for $32 million. A month later, the insurance companies claimed that Steward's claim lacked diligence. Steward replied in the lawsuit that the insurance companies ignored the advice of 17 consultants.

Zurich claimed in the lawsuit filed in October against MTP that there were $266 million in losses and $177 million in repairs to the property. According to the property owner and the hospital, there was $83.7 million in flood damage and another $93.9 million resulting from storm damage.

“MPT is classifying damage arising from surface water infiltration from the roof and courtyard as 'storm' damage,” the insurance company said in its lawsuit. “This purported distinction between 'flood' damage and 'storm' damage is unsupported by the policy and appears to be an improper attempt to bypass the $100,000,000 flood limit.”

According to Steward, in December 2020 Zurich made a partial payment of $32 million to MPT that denied 88% of the amounts MPT had claimed. Additionally the insurer has paid $57.5 million to Steward.

Because the case is in litigation, a Steward representative last week said he could not comment on the matter. A representative for Zurich could not be reached for comment.

Last week, a groundbreaking ceremony was held at the Norwood Hospital site. Construction is anticipated to be completed in 2024, but town approval processes need to be completed. Read more about the groundbreaking here.

Residents and town officials had been awaiting answers on Norwood Hospital's fate for a year. Since that time, residents have had to be transferred to other area hospitals, burdening facilities that are already strained by the pandemic.