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No MDL for COVID-19 Business Interruption Insurance Lawsuits

Hundreds of lawsuits from businesses suing their insurers over breach of contract for not covering COVID-19-related business interruption insurance claims will not be centralized because doing so will not promote a quick resolution, the Judicial Panel on Multidistrict Litigation ruled Aug. 12. But the panel did say the possibility remains that some smaller multidistrict litigations (MDLs) may be created for certain insurance companies.

The seven-member panel found that the cases shared “only a superficial commonality,” and actually involved more than 100 different insurance companies. Further muddling the matter, the plaintiffs had “different insurance policies with different coverages, conditions, exclusions, and policy language, purchased by different businesses in different industries located in different states.” Plus, many of the restaurants, bars and salons suing their insurance agencies are “on the brink of bankruptcy” due to government-mandated closures to stop the spread of the coronavirus, and, as a result, time isn’t on their side.

But the panel did indicate that it may still entertain creating smaller MDLs for certain insurance companies, specifically The Hartford Financial Services Group Inc., Cincinnati Insurance Co., Lloyds of London, and Society Insurance Co. Those companies have been asked to submit filings by Aug. 26.

Two separate groups of policyholders had lobbied for centralization of their cases — one involving federal business interruption cases that sought centralization in the Northern District of Illinois in Chicago, and the other seeking centralization in the Eastern District of Pennsylvania in Philadelphia.

The businesses are suing their insurance providers for rejecting their COVID-19-related business interruption claims. Business interruption insurance is part of a business owner’s insurance policy. It provides coverage of operating expenses like payroll and bills in the event a business must temporarily close due to a disaster. Businesses are arguing that they were forced to close under state orders in light of the pandemic — a global disaster. But their insurers claim that viruses are not covered. Many businesses aren’t accepting no for an answer and have filed lawsuits against their insurers.

Beasley Allen lawyers are actively investigating and filing claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in multidistrict litigation (MDL). Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.

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