More than 700 lawsuits have been filed in federal court against insurance companies that have denied business interruption claims from businesses seeking relief from COVID-related shutdowns – equal to more than a decade’s worth of major natural disaster-related lawsuits combined.

Using legal analytics software that surveys the federal docket system, a University of Pennsylvania insurance law and policy expert said the number of business-interruption lawsuits filed amid the coronavirus pandemic has “exceeded the norm by two or three times all the nat cats (natural catastrophes).”

Before Professor Tom Baker’s research was finished last week, he identified a total of 694 COVID-19 business interruption insurance coverage lawsuits. But on the day he presented his findings in a webinar, another 69 new cases appeared.

‘A big deal’

Prof. Baker said that the number of lawsuits filed by businesses seeking relief for economic losses from the pandemic-related shutdowns is “a big deal” because it far surpasses the number of business interruption lawsuits filed in the wake of Hurricanes Ike, Irma, Harvey, and Sandy between 2009 and 2020.

The analytics software Prof. Baker used only goes back to 2009 but he speculated that lawsuits filed after Hurricane Katrina in 2005 would be larger than all those subsequent storms, but still nothing “like COVID-19,” he explained, according to Insurance Journal.

Moreover, there are no signs that the COVID-driven litigation is slowing down, he said.

Consolidating cases

Unlike storm-related insurance lawsuits, which are generally confined to specific storm-damaged regions, the sprawling coronavirus-driven business insurance litigation covers the entire U.S. and names as defendants several national and multinational insurance companies.

For this reason, three teams of lawyers are trying to have the cases consolidated for multidistrict litigation (MDL). The teams are competing to have the cases grouped and tried together in Florida, Illinois or Pennsylvania. A judicial panel on multidistrict litigation (JPML) will consider the arguments for consolidation. If the panel of judges finds there are enough similarities between federal cases to try them as a group, it will decide which court will oversee the multidistrict litigation.

More lawsuits to come

According to Insurance Journal, Chris Cheatham, the CEO and co-founder of insurtech RiskGenius, detected patterns in lawsuit filings that indicate a one-month lag between spikes in COVID infections and an increase in the number of business interruption lawsuits filed.

But Prof. Baker told Insurance Journal that the real peak “doesn’t come until one year” out. He noted that the spike in cases after Hurricane Ike came in a 1-2 year timeframe after the storm. After Hurricane Sandy, cases peaked in three years.

“To the extent that COVID-19 cases follow that pattern, which it’s too soon to tell because we’re not even six months out really, then that suggests that there’s a lot more lawsuits to come,” Prof. Baker concluded, according to Insurance Journal.

Has your business interruption claim been denied?

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 an 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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