With so many businesses affected by nationwide shut-downs due to COVID-19 this year, businesses across the country have begun filing “business interruption” claims against their insurance carriers. Generally, business interruption coverage can replace lost income, operating expenses, re-location, payroll, taxes, and loan payments following in the event that business is halted due to direct physical loss or damage caused, for example, by a fire or a natural disaster.
However, standard business interruption insurance does not typically cover closures due to a pandemic, and frequently, such policies contain virus and pollution exclusions. The current pandemic has created the “perfect storm” for what could be years of insurance litigation, pun not intended.
INITIAL HISTORY OF CONsOLIDATION OF CLAIMS THROUGH MULTI-DISTRICT LITIGATION
Thus far, more than 175 first party actions or related actions have been filed nationwide. Many of these plaintiffs initially sought to centralize all litigation of this type—against all insurers—into one multi-district litigation (MDL). However, in August, a panel of federal judges denied transfer of all claims into one MDL action. The MDL panel found that industry-wide, there were very few common questions of fact, which were outweighed by the substantial convenience and efficiency challenges posed by managing a litigation involving the entire insurance industry.
In contrast, the MDL panel found that the arguments for insurer-specific MDLs were more persuasive and ordered rules to show cause against several insurers factual commonalities and differences among these actions, as well as the efficiencies that may or may not be gained through centralization, before creating an insurer-specific MDL.
Since then, it has been a mixed bag of insurer-specific MDL motions, but the insurers have largely prevailed. The MDL panel found that centralization of separate lawsuits pending against Travelers, Certain Underwriters at Lloyd’s of London, and Cincinnati Insurance Company would not serve convenience of parties and witnesses and further the just and efficient conduct of litigation.
However, the MDL panel found that centralization of suits presented against Society Insurance Company shared factual questions involving common language under standardized insurance form, sufficiently pleaded that time was of the essence because many of the insured businesses were on brink of bankruptcy, and presented most efficient means of advancing lawsuits towards resolution.
Regardless of whether COVID-19-related business interruption is centralized via MDL or litigated separately on a claim-by-claim basis, these lawsuits will certainly be a long-lasting effect of the pandemic long after there is a vaccine.
References For COVID-19 Business Interruption Lawsuits
In re COVID-19 Bus. Interruption Prot. Ins. Litig., MDL No. 2942, 2020 WL 4670700, ––– F. Supp. 3d –––– (J.P.M.L. Aug. 12, 2020).
In re Certain Underwriters at Lloyd’s, London, COVID-19 Bus. Interruption Prot. Ins. Litig., No. MDL 2961, 2020 WL 5887416, at *1 (U.S. Jud. Pan. Mult. Lit. Oct. 2, 2020)
In re Cincinnati Ins. Co. COVID-19 Bus. Interruption Prot. Ins. Litig., No. MDL 2962, 2020 WL 5884791, at *1 (U.S. Jud. Pan. Mult. Lit. Oct. 2, 2020)
In re Travelers COVID-19 Bus. Interruption Prot. Ins. Litig., No. MDL 2965, 2020 WL 5884785 (U.S. Jud. Pan. Mult. Lit. Oct. 2, 2020).
In re Soc’y Ins. Co. COVID-19 Bus. Interruption Prot. Ins. Litig., No. MDL 2964, 2020 WL 5887444 (U.S. Jud. Pan. Mult. Lit. Oct. 2, 2020)