This is hardly a surprise. Monthly small business losses during the pandemic have been estimated to be between $255 billion and $431 billion. With companies facing such staggering losses and universally receiving denials of their insurance claims, this wave of litigation was inevitable. What has been unexpected, however, is the volume of cases for which plaintiffs have sought consolidated action, a less than frequent occurrence in insurance coverage litigation.
In addition to a number of class action filings, at least two groups of plaintiffs have sought to make business interruption coverage the subject of federal, multi-district litigation. On April 20, 2020, LH Dining L.L.C. and Newchops Restaurant Comcast LLC formally sought to consolidate many business interruption coverage cases for pre-trial proceedings in the Eastern District of Pennsylvania. A dueling effort persists in Illinois. Generally, the plaintiffs in these actions argue that at the core of every federal lawsuit is a singular question necessitating a uniform answer: “whether business interruption insurance policies will cover losses incurred by businesses forced to shutter their business as a result of the Governmental Orders?”
If only it were that simple. The purposes of multi-district consolidation are to avoid duplication of discovery, to prevent inconsistent pretrial rulings, and to conserve the resources of the parties, their counsel and the judiciary.” In the past, multidistrict litigation has been reserved for complex, but factually similar, cases such as asbestos torts, airplane crashes, complex product liability cases, and anti-trust claims. At the heart of these cases, there is usually a singular and controlling issue that makes multi-district litigation a more efficient and uniform way to litigate.
This is generally not true of insurance coverage disputes. The central inquiry in any coverage dispute is a specific insurance policy’s actual language. Interpretative rules vary from one jurisdiction to the next. And the unique factual circumstances of each insured’s loss, viewed under the lens of that insured’s policy language, generally dictate the outcome.
The COVID-19 business interruption cases involve dramatic differences in policy language, applicable law, and factual circumstances. Many of the plaintiffs in the multitude of pending lawsuits have different insurers. Even those sharing insurers may not have the same policy or the same policy language. The plaintiffs are located all over the country, with each geographic region not only having a different applicable body of case law but also a different set of factual circumstances resulting from the pandemic. These considerable, and generally dispositive, differences frustrate the purposes of multidistrict litigation.
If these suits are not consolidated, could there be contradictory results reached in different states? Yes. As is the case with respect to nearly every legal issue regarding which there are divergent views across state lines or geographically unique consequences of even a similar event. Let the forum shopping begin.
In the interim, it is important that policyholders obtain tailored legal advice that is based on specific policy language and particular facts, guided by controlling legal precedent where the policyholder does business. Klehr Harrison’s Insurance Recovery Focus Group stands ready to provide precisely this type of client-specific advice and to determine the appropriate legal strategy for each client. The notion that there is a shortcut to justice is inviting. It is not, however, correct.
The Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops.