The US Judicial Panel on Multidistrict Litigation (Panel) previously declined to centralize all coronavirus (COVID-19)-related business interruption insurance lawsuits, but left open the possibility of certain insurer-specific multidistrict litigations (MDLs) subject to further briefing and proceedings.[1]

The Panel issued orders on October 2 declining to create insurer-specific MDLs for COVID-19-related business interruption lawsuits against The Hartford, Travelers, Cincinnati Insurance Company, and Certain Underwriters at Lloyd’s, London. The Panel did, however, centralize in Illinois over 30 lawsuits against Society Insurance Company. We focus on two of the Panel’s orders related to Hartford and Society. The reasons presented by the Panel for denying the Hartford MDL are similar to those presented in the other denials.

These decisions demonstrate how important it is for policyholders, with the assistance of experienced coverage counsel, to carefully and efficiently analyze the particular language in their insurance policies as well as the particular factual circumstances of their claims in order to maximize the potential recovery of their COVID-19-related business interruption losses.

IN RE: HARTFORD COVID-19 BUSINESS INTERRUPTION PROTECTION INSURANCE LITIGATION (MDL NO. 2963)

COVID-19 business interruption actions against Hartford are pending in 36 different districts in 24 states and the District of Columbia. After considering the arguments presented by counsel at the hearing session on September 24, the Panel concluded that “centralization of the Hartford actions will not serve the convenience of the parties and witnesses or further the just and efficient conduct of this litigation” even though the Hartford insurance policies appear to use standard forms and common policy language, such as the phrase, “direct physical loss or physical damage to property.”

The Panel concluded that centralization would not be the most efficient path forward for these business-plaintiffs, finding that “[e]fficiency here is best obtained outside the MDL context.” The Panel recognized that “[m]any plaintiffs are on the brink of bankruptcy as a result of business lost due to the COVID-19 pandemic and the government closure orders.” (Emphasis added). Centralizing the actions would have resulted in protracted coordination proceedings costing these businesses precious time when time continues to be of the essence.

The Panel further recognized that many plaintiffs are pursuing distinct theories of liability (which will require different legal analysis and different discovery), and that much of the discovery will be “plaintiff- and property-specific.” The Panel noted that “some similar actions are pending in the same district before multiple judges, and it may be appropriate for the courts or the parties to seek to relate those before one judge.” The Panel also encouraged informal cooperation and coordination among parties and courts to minimize any duplicative pretrial proceedings.

IN RE: SOCIETY INSURANCE COMPANY COVID-19 BUSINESS INTERRUPTION PROTECTION INSURANCE LITIGATION (MDL NO. 2964)

While the Panel declined to create insurer-specific MDLs involving The Hartford, Travelers, Cincinnati Insurance Co., and Certain Underwriters at Lloyd’s, London, it centralized actions against Society Insurance Company (Society). The Panel explained that Society is a regional carrier operating in six Midwestern states, and that there are 34 total actions pending in six nearby states (with the majority in one district). The Panel found that, “[t]his suggests to us that this litigation presents a manageable controversy that can best be streamlined by proceeding before a single judge.”

The Panel found that “[w]ere this litigation larger in geographic scope and if it involved more state laws (such as in some of the other show cause dockets before us), this might be a more persuasive argument because the transferee judge would be tasked with managing a much more complicated litigation.” The Society matters were distinguishable because of the “defined geographical scope of these actions, which implicates only six state insurance laws.”

The Panel selected the US District Court for the Northern District of Illinois, the location of 22 of the total 34 pending cases, for centralization, and with the consent of that court, the cases will be assigned to the Honorable Edmond E. Chang.

LOOKING AHEAD

Those businesses free from centralization continue to have the opportunity to control their own actions. Retaining such control and pursuing individual litigation is crucial to maximizing the prospects of recovering business interruption losses related to COVID-19 and related government orders. It is imperative that such businesses act quickly to analyze policies, document losses, issue timely notice, and assert claims as appropriate.

Additionally, policyholders, particularly those with insured properties in multiple states, should carefully consider the unique policy language and factual circumstances that may strengthen or weaken their coverage claims and should confer with experienced coverage counsel who can advise on various issues regarding maximizing the prospects of recovery, including the best timing and most appropriate forum for filing coverage litigation, if necessary.

[1] See In re COVID-19 Bus. Interruption Prot. Ins. Litig., MDL No. 2942, 2020 WL 4670700, __ F. Supp. 3d __ (J.P.M.L. Aug. 12, 2020). See also, our LawFlash on that decision.

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