Business interruption insurance is typically part of a business owner’s commercial property coverage, or may be a stand-alone policy. Regardless, business interruption insurance helps a business cover bills and payroll in the event of a disaster that forces the business to temporarily close. Because many business owners have been required to close as a result of the COVID-19 threat, many are turning to their insurance policies to determine if business interruption coverage may provide them some relief.
Though coverage for business interruption due to coronavirus closures will depend on the specific language of each business’s policy, many with arguable claims for coverage have filed lawsuits either seeking a declaratory judgment that their losses due to the shutdown are covered under their policies, or claiming breach of contract after coverage has been denied by their insurers.
Due to the volume of these cases, the consolidation of such cases in multidistrict litigation (MDL) was proposed in late April. To date, consolidation has been proposed in either the Eastern District of Pennsylvania, Northern District of Illinois, Southern District of Florida, Western District of Missouri, Western District of Washington, and Northern District of California. Currently, the anticipated hearing date for the Judicial Panel on Multidistrict Litigation (JPML) to decide the consolidation and transfer issues is the 30th of this month.
These petitions assert that the issue of whether business interruption policies will cover losses incurred by businesses as a result of the COVID-19 pandemic is one of national importance and great significance to the ultimate survival of many businesses. Additionally, they emphasize the importance of coordinating expert witnesses in the cases and discovery. As of June 5, 2020, 20 supporting briefs have been filed by individual companies or groups of policyholders. Some of these supporting briefs have asked the JPML to consider forming not one, but multiple MDLs, with cases lumped together either by state, region, or insurer Defendant.
The MDL petitions also drew strong opposition, with 43 briefs urging the JPML to reject the proposal to combine the business interruption cases. Insurers lodged 29 of these opposition filings, but a dozen individual policyholders and groups of policyholder Plaintiffs also oppose consolidation or coordinated proceedings.
While there are hurdles to the consolidation of all business interruption claims in one MDL, many other cases have managed multiple Defendants with multiple issues in efficient ways. For instance, through the use of liaison counsel and the groupings of Defendants and/or policies at issue with similar language and exclusions, the MDL goals of efficiency and consistency will be promoted. Without coordination, thousands of Plaintiffs will be seeking to retain the same limited pool of relevant experts, creating a costly logistical nightmare for litigants and detracting from lawmakers’ need to consult with these same experts to fashion the best policies for dealing with the pandemic.
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.