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Hartford, Travelers Won’t Face Combined Virus-Loss Claims (2)

Oct. 3, 2020, 12:56 AM

Hartford Financial Services Group, The Travelers Cos. Inc. and other insurers won’t have to face a consolidation of hundreds of billions of dollars’ worth of business-interruption claims tied to the Covid-19 outbreak, a group of judges concluded.

Having one judge oversee more than 1,000 cases -- grouped by individual insurers -- would be too cumbersome and it’s more efficient to have courts around the U.S. decide whether the coronavirus fallout triggered coverage by major insurers such as Hartford, Travelers and Lloyds of London, the legal panel ruled Friday. The group did agree to have a federal judge in Chicago oversee cases against Society Insurance, a smaller carrier.

It was the last gasp of plaintiffs’ lawyers attempting to pull together business-interruption cases against major insurers. They’re seeking to recover losses from the economic blows wrought by the virus, which prompted a wave of bankruptcy filings. They argued having one judge overseeing the litigation would cut duplication and hold dow legal costs.

“Rather than have one judge attempt to organize and resolve the core policy interpretation issues,” having judges already hearing the cases decide if coverage exists “will result in quicker and more efficient resolution of this litigation,” U.S. District Judge Karen Caldwell, the panel’s chair, said in a nine-page order.

Insurers warn the tidal wave of business-interruption suits could swamp them. Analysts warned this year that the industry could face at least $100 billion in losses from the pandemic, which could wind up being the most in insurance history.

“This is the correct result,” Michael Menapace, a lawyer and member of the Insurance Information Institute, said in an emailed statement. “There are no efficiencies to be gained by combining different insurers who write different policies for different policyholders who are in different industries and made claims under different factual scenarios.”

Rockets’ Claim

Firms ranging from the owner of National Basketball Association’s Houston RocketsHouston Rockets to upscale New Orleans restaurants argue in court filings the virus has devastated their businesses and triggered policies they purchased to cover such interruptions.

The insurers claim that since the virus hasn’t caused any physical damage -- unlike a hurricane or earthquake -- there’s no coverage. Different judges around the country have come to differing decisions on that issue.

Having a single judge decide the coverage issue would eliminate conflicting rulings that could clog appellate courts, Mark Lanier, a Houston-based lawyer for business owners, argued before the panel.“Now we are going to see a litigation zoo with different results all over the country,” Lanier said in an email Friday.

The panel, which oversees multidistrict litigation in U.S. federal courts, noted some cases already have progressed to the point where a judge is ready to decide the coverage issue and consolidating them would slow down their progress.

“Time is of the essence in this litigation,” Caldwell wrote. “Many plaintiffs are on the brink of bankruptcy as a result of business lost due to the Covid-19 pandemic and the government closure orders.”

The panel did find benefit in consolidating 34 cases against Society before U.S. District Judge Edmond Chang because they are grouped together in Midwestern states rather than across the U.S. “This suggests to us that this litigation presents a manageable controversy that can best be streamlined by proceeding before a single judge,” Caldwell wrote in the Society decision.

The cases are IN RE Hartford Covid-19 Business Interruption Protection Insurance Litigation, MDL No. 2963 and In RE Society Insurance Co. Covid-19 Business Interruption Protection Insurance Litigation, MDL No. 2964.

(Updates with other insurers covered by rulings starting in first paragraph)

To contact the reporters on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;
Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Joe Schneider, Peter Jeffrey

© 2020 Bloomberg L.P. All rights reserved. Used with permission.