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Chaffin Luhana LLP
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Hundreds of business owners, denied insurance coverage on their COVID-19 losses, have filed lawsuits in courts around the country hoping to force insurance companies to pay damages. In April 2020, a group of such companies filed a motion with the Judicial Panel on Multidistrict Litigation (JPML) to consolidate all of the lawsuits into one court for more efficient pretrial proceedings.

On August 12, 2020, the JPML denied the transfer of these cases for several reasons, including the fact that there is no common defendant.

Most Plaintiffs Supported Consolidation of Business Insurance Claims

The JPML heard arguments concerning the consolidation of business interruption lawsuits in July 2020. There were two motions under consideration:

  • The first brought by plaintiffs in two Eastern District of Pennsylvania actions who wanted to centralize 11 business interruption lawsuits in that district
  • The second brought by plaintiffs in seven actions pending in various districts who requested centralization of 15 actions in the Northern District of Illinois

The plaintiffs all allege that their business insurance policies provide coverage for losses caused by the COVID-19 pandemic and the related government shut-down orders, but the insurance companies refuse to pay on those policies.

In addition to these actions, the JPML had received notice of 263 related actions pending in 48 districts and naming more than a hundred insurers, including Lloyd’s, London; Cincinnati Insurance Company; The Hartford; State Farm; and Westchester Surplus Lines/Chubb.

Plaintiffs in more than 175 of them responded to the two motions to consolidate, and many supported centralization in one of the two districts. Others also supported centralization but suggested alternative locations, including the Northern District of California, Southern District of Florida, Western District of Missouri, District of New Jersey, and Western District of Washington.

Plaintiffs in more than 30 of the actions suggested that instead of an industry-wide consolidation, the JPML should centralize business interruption lawsuits on a state-by-state, regional, or insurer-by-insurer basis.

Unlike the plaintiffs, all of the defendants opposed centralization.

JPML Argues that Centralization Will Not Increase Efficiency

The JPML considered all of the arguments and concluded that industry-wide centralization “will not serve the convenience of the parties and witnesses or further the just and efficient conduct of this litigation.”

The plaintiffs argued that common questions of fact included the following:

  1. Do government closures trigger coverage under business interruption policies?
  2. What constitutes “physical loss or damage” to property?
  3. Do any exclusions (such as those related to viruses) apply?

The JPML stated that these questions share “only a superficial commonality,” and because there is no common defendant, there is little potential for common discovery across the litigation. They added that because the cases involve different insurance policies with different coverages, conditions, exclusions, and policy language—purchased by businesses in different industries in different states—that the differences would overwhelm common factual questions.

The JPML went on to note that the proposed MDL would raise “significant managerial and efficiency concerns,” that it would be over-complicated, and that it would not promote quick resolution of the cases, which many businesses need at this point. The panel didn’t agree with the idea to consolidate state-by-state or on a regional basis either, for the same reasons.

Panel Leaves the Door Open to Insurer-Specific MDLs

They JPML left the door open, however, for possible insurer-specific MDLs. These would be limited to a single insurer or group of related insurers and would not have the same problems as the other suggested MDLs. Moreover, the cases in such litigation would probably share common discovery and pretrial motion practice.

The panel didn’t attempt to create such an MDL at this time, stating they would require a better understanding of the commonalities and differences among these actions first. The panel plans to revisit the matter at its next hearing session on September 24, 2020.

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