Months into the coronavirus pandemic, business interruption insurance claims seeking relief from government-ordered shutdowns are piling up in courts across the U.S., leaving the Judicial Panel on Multidistrict Litigation (JPML) to consider how best to organize the complaints.
Two petitions seeking consolidation of pandemic-related business interruption insurance cases filed in federal court agree that centralizing the claims would be the most efficient way to handle the sprawling litigation, which is expected to cover thousands of claimants.
All of the pro-consolidation petitioners are policyholders whose business interruption claims have been denied by their insurers, which maintain that the policies exclude shutdowns triggered by viral pandemics.
An issue of national importance
“This issue — whether business interruption insurance policies will cover losses incurred by businesses forced to shutter their business as a result of the governmental orders — is one of national importance and great significance to the ultimate survival of many businesses,” said one of the petitions, according to Law 360. “Addressing this issue in a uniform manner as opposed to potentially disparate treatment by different courts throughout the country helps to serve one of the main purposes” of multidistrict litigation (MDL), it reads.
While the plaintiffs agree that centralization can help streamline the resolution of the coronavirus business interruption cases, they offered diverse views on where the cases should be heard and how they should be structured.
One MDL? Philadelphia or Chicago?
One group of policyholder plaintiffs is petitioning the judicial panel to consolidate the cases under U.S. District Judge Timothy J. Savage in Philadelphia. This petition, filed April 20 by a pair of Philadelphia restaurants, argues that the mid-Atlantic region and Judge Savage, who is already presiding over 17 business interruption coverage cases, are a natural fit for multidistrict litigation.
A second petition, representing a multitude of proposed class actions in multiple states, emphasized the importance of coordinating expert witnesses in the cases, as policyholders will need to present “epidemiological modeling of the spread of the virus in order to ascertain its likely presence and impact.”
That petition is asking that the cases be centralized before U.S. Judge Matthew F. Kennelly in Chicago. A lawyer representing one of the plaintiffs in the second group of petitioners told Law 360 that the insurance industry has taken an anti-MDL stance “to keep things as fragmented as possible because each insurer thinks that keeping things fragmented is more strategically advantageous.”
“The insurance industry traffics in creating confusion. We don’t think it is an appropriate argument here, nor do we think it is valid,” the lawyer told Law 360.
A small number of plaintiffs filed briefs calling for establishing multiple MDLs that combine cases by state, region, or defendant. One California plaintiff called for establishing a “small number of MDLs corresponding with states in which numerous actions, filed by different counsel, are pending before different federal judges in different districts,” or, in other words, combining cases by “litigation hot spots.”
Another plaintiff argued that MDLs should be grouped by insurer defendant, as policy terms could vary greatly from one insurance company to another.
“All actions brought against a given insurer are based on the same or substantially similar questions of law and fact,” one Ohio-based restaurant claimant argues. The plaintiff added that grouping actions by insurer would eliminate duplicative discovery and the potential for inconsistent rulings, thereby making litigation more efficient and convenient.
The two pro-MDL petitions elicited strong opposition in the form of 43 briefs urging the JPML to reject calls to combine the business interruption cases into one or more MDLs. Most of the voices opposing MDL are of individual insurance companies as well as the industry’s two leading trade groups: the American Property and Casualty Insurance Association and the National Association of Mutual Insurance Companies.
“The opposition briefs generally argued that an MDL would be an inappropriate vehicle for resolving insurance cases, given the differences in insurers’ policy language, policyholders’ losses during the pandemic and states’ laws on the requirements for business interruption insurance,” Law 360 explained.
United Policyholders expressed the concerns of policyholder plaintiffs opposing MDL, saying there is no “cookie-cutter” solution for the pandemic-related business interruption claims.
“From the beginning, we have been saying you cannot lump all these together, because the policy language is all over the map, different businesses have unique challenges and losses, and insurance is regulated on the state — not federal — level,” United Policyholders executive director Amy Bach told Law360. “We knew it would be a balancing act between judicial efficiency and fairness, having each case resolved on its merits.”
Business interruption insurance claim lawyers
Many small business owners are fighting back and filing lawsuits against their insurance companies for denying coverage they believe they are entitled to. Beasley Allen is actively pursuing cases with clients whose insurance companies denied their business interruption claims. Dee Miles, Head of our Consumer Fraud Section, Rachel Boyd and Paul Evans are spearheading this litigation for our firm. They would like to talk to you about any potential claims.