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Federal Panel to Weigh Consolidation of Pandemic Coverage Suits

July 30, 2020, 10:37 AM

Small businesses and their insurers are set to plead their case to a special panel of federal judges on the prospect of combining a multitude of lawsuits over pandemic-linked business loss coverage in a single court venue.

The virtual arguments, set for Thursday before the U.S. Judicial Panel on Multidistrict Litigation (JPML), are the culmination of more than three months of the parties’ squabbling about whether the cases should be consolidated, if at all, in either a Pennsylvania or Illinois district court.

The panel’s ultimate decision is expected to play a role in determining the fate of numerous insurance coverage cases.

After the coronavirus hit the U.S. earlier this year and states imposed restrictions to stem its spread, hundreds of businesses subject to mandatory closures and other limitations—ranging from restaurants and retail stores to Las Vegas casinos—sued their insurers in state and federal courts across the country over denied claims.

The insurance industry has largely refused to cover losses related to business interruptions during the pandemic, holding that governmental actions don’t damage or limit access to insured property. Insurers have also argued that exclusions in many policies preclude any coverage for virus-related damage and loss.

Two Philadelphia restaurants—separately suing their insurers—were the first to move for consolidation, asking April 20 that nine other lawsuits in various jurisdictions be funneled into the U.S. District Court for the Eastern District of Pennsylvania.

The following day, other policyholders filed their own motion to transfer a handful of class actions to the U.S. District Court for the Northern District of Illinois.

Both plaintiff groups, in written briefs, touted the accessibility and experience with multidistrict litigation of the court of their choice.

Since then, more than 100 lawsuits in federal courts have been identified as related cases, several of which are paused pending the JPML’s ruling.

Need for Speed

Policyholders supportive of consolidation generally argue that a single venue will speed up the litigation and make the process easier—even if, unlike many other multidistrict cases, the fight over insurance coverage involves numerous defendants.

The question of whether government-ordered business closures trigger business interruption coverage is too important to the survival of the insured businesses to “leave to various courts across the country that could reach divergent and conflicting results,” the Philly eateries said in their initial brief.

Some business policyholders support consolidation, but in a venue other than Pennsylvania or Illinois federal court. Others still are in favor of multidistrict litigation involving only policyholders from the same state or with the same insurer.

Several policyholders joined insurance companies since April in filing motions opposing centralization, saying that the policies and businesses at issue in these cases are too different to be weighed together.

The motion for transfer “improperly seek to consolidate both individual and class action lawsuits filed against different insurers, advancing different claims, concerning different insurance policies, and governed by different states’ laws,” a group of restaurant plaintiffs wrote.

Arguments before the JPML, which is sitting virtually according to the clerk’s office, are slated to start at 9:30 a.m. Eastern, with remote access available to the general public.

The case is IN RE: COVID-19 Business Interruption Protection Insurance Litigation, J.P.M.L., No. 2942, oral argument scheduled for 7/30/20.

To contact the reporter on this story: Jacob Rund in Washington at jrund@bloomberglaw.com

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com

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