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Texas Appellate Court wipes away hospital’s claim of Covid property damage

2/24/25

By: Gabriel Canto

Another court of review joined a growing consensus in finding that the presence of the coronavirus (SARS-CoV-2) does not cause “direct physical loss of or damage to” property. In Lloyd’s Syndicate 1967 et al. v. Baylor College of Medicine, 2025 WL 309722, the Texas Fourteenth District Court of Appeals (Houston) reversed a $12 million judgment that followed a jury verdict finding coverage. The court ruled there was legally insufficient evidence to support the verdict. 

The Plaintiff, Baylor College of Medicine, sued its insurers under a so-called “all risks” policy covering physical loss and damage after the insurers denied coverage. Baylor College of Medicine is a medical school and research institution that broadly claimed it could not use its property for its intended purpose during the era of COVID restrictions because the property was physically damaged. Baylor argued it was forced to consistently sanitize physical, and often close, examination rooms. Baylor representatives contended that the time to prepare an examination room increased from no more than 15 seconds to upwards of an hour. This they argued constituted physical damage that resulted in covered loss. 

The court, however, did not buy this characterization of physical damage. Baylor College of Medicine, the court emphasized, produced no evidence that it was forced to discard any property. Though the alleged presence of the virus may have caused the property itself to become momentarily at risk of spreading the virus, the risk subsided and all property remained in use. 

Baylor College of Medicine analogized the damage to that of an arsonist lighting fires on the property, but the court disagreed. The court claimed a more “apt” analogy would be of a patron spilling liquid on the property. Liquid might temporarily cause a piece of property to be out of use to avoid injury but that doesn’t mean the property is damaged. 

Lastly, the court emphasized its intent to keep uniformity with other jurisdictions that similarly assessed similar policy language.

For more information, please contact Gabriel Canto at gabriel.canto@fmglaw.com or your local FMG attorney.