Norwood Hospital remains shut 18 months after damaging rain burst; owner sues insurers for not paying enough to replace it

Steward Health Care System yesterday sued its insurance companies for allegedly dragging their feet and trying to cheap out on payments to build a brand new Norwood Hospital to replace the one the hospital network says was essentially destroyed by an intense amount of rain one day in June, 2020.

In its lawsuit, filed in US District Court in Boston, Steward alleges that its insurers claim most of the damage was done by a "flood" - basically from a water body overflowing its banks or bursting out of a main - rather than from the effects of 5.75 inches of rain in just 90 minutes on June 28 of that year. The difference is that the insurance policies issued to Steward and to Medical Properties Trust, Inc., the company that owns the hospital buildings and leases them to Steward, have a limit on how much the insurers will pay out for flooding damage while the policies have no set limit for rain damage.

Steward says rain from the storm damaged every floor on all six buildings on its 10.6-acre campus, so much so that the 215-bed hospital has been unable to re-open and will have to replace all the buildings, rather than try to rehab them. "Approximately 369,341 of the 399,833 total square feet of space was damaged," the system alleges.

On June 28, 2020, a weather event produced approximately 5.75 inches of rainfall in 90 minutes, causing catastrophic flood water to penetrate the basement and ground levels of the Hospital. ...Water also immediately impacted the roof systems and envelope of at least two buildings in the complex, catastrophically crippled critical mechanical and electrical systems, and destroyed floors, walls, ceilings, fixtures and finishes throughout the Hospital. Essential patient care systems including the nurse-call communication system and medical gas and vacuum systems were critically damaged, as was diagnostic imaging equipment and other major patient diagnostic and treatment equipment which cannot be placed back into safe and consistently reliable service. In short, every single floor of the Hospital was damaged in some way. As a result of the devastating damage, the Town of Norwood issued a Cease-and-Desist Order restricting all operations on the Hospital campus, which is still in effect.

The hospital and local ambulance services managed to get roughly 160 patients to other facilities.

But from the beginning, Steward charges, American Guarantee and Liability Insurance Co. and Zurich American Insurance Co. tried to evade helping pay the several hundred million dollars reconstruction of the hospital will take.

During an initial visit to the Hospital after the Rain Event, for example, one of Zurich’s representatives commented that "it looks like a dry out and paint job."

Steward says its losses to date from the storm - both to replace damaged equipment and loss of revenue - total $220 million but that the insurers have remitted only $57.5 million. It says that the insurers have paid Medical Properties Trust $27.6 million even though the cost of rebuilding the hospital buildings will total some $180 million.
Medical Properties Trust is not part of the Steward suit, but Steward says the two are inextricably linked - Norwood Hospital cannot resume treating patients without buildings to put them in.

Steward adds the losses go beyond its own - it had to furlough more than half its employees and already stretched Massachusetts hospitals now have to accommodate patients who once would have gone to Norwood:

The Defendants' refusal to effectuate a prompt and reasonable resolution of the claims has needlessly protracted the closure of the Hospital, which has had unquantifiable effects on the Norwood community and surrounding areas resulting in, without limitation: much longer trips for local residents to receive medical services; Emergency Medical Services needing to now bypass the Hospital and transport patients much longer distances; a severely disrupted physician network that will continue to deteriorate over time as physicians and other staff depart for employment opportunities elsewhere; furloughed and relocated employees (of which there are almost 1,000) no longer buying goods and services in the local communities; the Hospital no longer purchasing supplies or other materials locally; the Hospital not consuming water and sewer service from the municipal utility, nor electricity and gas from the local private utilities; and the continued suspension of the Hospital's community benefits program. In addition, the drastic reduction in spending attendant to the Hospital's continued closure has had a multiplier effect on the local economy.

Prior to the Rain Event, and even the pandemic, the Hospital was a critical and necessary component of the overall health care infrastructure in Norfolk County. Steward and MPT have done everything in their power to expedite the adjustment process and restore the Hospital to its previous stature, but they cannot do so alone, especially not when being stonewalled by the Defendants in direct violation of [state consumer-protection and fair-business laws].