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Reed Smith, Pillsbury Gear Up for Coronavirus Insurance Fights

April 10, 2020, 9:31 AM

Law firms such as Reed Smith LLP and Pillsbury Winthrop Shaw Pittman LLP are poised to benefit the most from an expected wave of insurance coverage lawsuits triggered by the coronavirus pandemic.

The two firms are already considering shifting commercial litigators as they position themselves to bring lawsuits against insurers for denying claims on business interruption policies while many of their Big Law peers are conflicted out because of their industry clients.

“Given a limited supply of non-conflicted policyholder-side firms, and the amount of new work we’ve already seen in the last three weeks here at Pillsbury, we will need to tap more of our firm lawyers,” said Robert Wallan, co-chair of Pillsbury Winthrop Shaw Pittman LLP’s insurance recovery group.

Law firms’ decisions about how to allocate resources to their insurance practices comes as they deal with a slowdown in other areas, like corporate deal-making and litigation. Some firms have already announced layoffs, furloughs, pay cuts and other cost-cutting measures.

Insurance practices are unlikely to take as big of a hit, said Alex Dimitrief, a partner with law firm consultant Zeughauser Group.

“There are very few practices that are as immune to downturns as high-quality insurance coverage work,” Dimitriref said.

Drip, Drip

Law firms still have time, since coronavirus coverage litigation is only now beginning.

Less than a dozen such lawsuits have been filed in six states as of April 4, according to a review by law firm Hinshaw & Culbertson LLP, which represents insurers.

Restaurateurs, including high-profile chefs like Thomas Keller of the French Laundry in California, have been the plaintiffs in six of those suits. Those suits were filed against a unit of insurance giant The Hartford and Lloyds of London. Theater owners and Native American tribes who lost money after several commercial businesses were shuttered have also filed suits, according to the Hinshaw analysis.

The complaints so far have been in disputes over whether business interruption policies should cover government-mandated closures and reduced hours in response to the pandemic.

Most of the insurance fights moving forward are going to be in those areas, said Scott Seaman, the co-chair of Hinshaw’s global insurance services practice group. Seaman added that the number of suits nationwide had grown to around a dozen as of April 9.

Expect Delays

There are a variety of reasons why there hasn’t been a lot of coronavirus-related litigation, according to David Halbreich, the chair of Reed Smith LLP’s insurance recovery group.

Many policies require businesses to be closed for a certain number of days before a business can file claims, and those limits may not have been reached, he said.

Insurers typically have around 30 days to review a claim before deciding whether to provide coverage or not, he added.

Another factor is that court systems in some states, including New York, aren’t accepting new filings during the crisis.

Calling Reinforcements

At this point, big policyholder firms are advising clients about their coverage and researching the issues that are likely to come up.

“We’re very busy. If we need to bring in people, we will,” Halbreich said, adding that his team could dip into Reed Smith’s pool of general litigation attorneys if necessary.

Other big policyholder firms are gearing up in different ways.

Wallan said that Pillsbury’s commercial litigators would be brought in to help research coverage issues and aid in discovery and pleadings.

Covington & Burling LLP, another of the top policyholder firms, doesn’t have any current plans to rope in general litigators, according to Anna Engh, the co-chair of Covington’s insurance practice group. She noted that the firm’s insurance practice grew out of a similar situation in the 1970s – the onset of asbestos litigation.

“At that point, we brought some of the general litigators in our firm in, and that’s how our practice started,” she said.

Covington will bring in other attorneys to assist the group if necessary, with appellate specialists high on that list, Engh said.

‘All Happening at Once’

Firms representing the insurance industry are unlikely to see the same kind of scramble, said Larry Schiffer, a senior partner at Squire Patton Boggs LLP, which represents insurers and reinsurers.

“They’re used to this. They know how to do this. It can be organized. Some firms will hire national counsel to supervise and get local people to handle lower courts,” he said.

The coronavirus-related insurance litigation is going to be different than asbestos, where litigation has dragged on for decades, said John W. Houghtaling II of Gauthier, Murphy & Houghtaling LLP, who represents Keller and other top restaurateurs.

“It is all happening at once,” he said.

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com