King's Bench Petition Seeks to Consolidate All Pennsylvania COVID-19 Business Interruption Insurance Cases

White and Williams LLP

White and Williams LLP

On Wednesday, April 29, 2020, a Pittsburgh-based restaurant filed an Emergency Application in the Pennsylvania Supreme Court asking it to invoke its “King’s Bench” and statutory powers to assume extraordinary jurisdiction of the restaurant’s pending business interruption insurance case against Erie Insurance Exchange and to establish and coordinate a system for resolving all similar COVID-19 business interruption insurance cases in Pennsylvania.

The Pennsylvania Supreme Court’s “King’s Bench” power and its related but distinct “extraordinary jurisdiction” power each enable Pennsylvania’s highest court to assume control – via the exercise of its own plenary jurisdiction – over matters of immediate public importance. The court’s “extraordinary jurisdiction” power is statutory: 42 Pa. C.S. §726 authorizes the Court, in its discretion and on its own motion or on petition of any party, to assume such plenary jurisdiction over any matter that is of immediate public importance and is then pending before any Pennsylvania state court. Pursuant to § 726, the Court may exercise this power at any stage of the underlying case and thereafter enter a final order “or otherwise cause right and justice to be done.” 42 Pa. C.S. §726 (2020).

The “King’s Bench” power, by contrast, is authorized by Section 1 of the Schedule of the Judiciary Article of the Pennsylvania state constitution. It allows the state supreme court to assume plenary jurisdiction over an issue even when no matter is pending in a Pennsylvania court. Pa. R.A.P. 3309 governs applications to the Pennsylvania Supreme Court for relief pursuant to these powers and requires the adverse party to file an answer to any such petition no later than 14 days after service of the application. Amici curiae may also file a response to the Petition with leave of court via a motion for such permission filed with the proposed response by the same deadline. The Court may hold argument to determine whether to grant or deny the application. If the Court grants the application, jurisdiction is transferred to the Pennsylvania Supreme Court.

The Pennsylvania Supreme Court has previously exercised these rarely-used powers to take jurisdiction of cases involving election disputes, public employee strikes, prison overcrowding, investigating grand juries, powers of the legislature and alleged judicial misconduct. Most recently, the Court invoked these powers to uphold Pennsylvania Governor Tom Wolf’s March 19, 2020 Executive Order requiring the closure of non-essential businesses due to the spread of COVID-19.

The Petitioner in Wednesday’s application – Joseph Tambellini, Inc. d/b/a Joseph Tambellini Restaurant – initially commenced a lawsuit against Erie Insurance Exchange in state trial court seeking damages as a result of Erie’s denial of its COVID-19 business interruption insurance claim. The restaurant’s petition asks the Pennsylvania Supreme Court to assume control of that trial court case and all other Pennsylvania COVID-19 business interruption insurance cases. The restaurant argues that its coverage case, and all other Pennsylvania state court cases like it, presents issues of immediate public importance because the plaintiff businesses need prompt resolution of their business interruption coverage disputes, and the delay inherent in the regular trial and appellate process to achieve final resolution of these issues would unduly prejudice them.

Interestingly, in lieu of asking the Pennsylvania Supreme Court to collect and manage each of the COVID-19 business interruption insurance claim cases itself, the restaurant’s Petition also asks the Court, inter alia, to establish and coordinate a system for the resolution of all COVID-19 business interruption cases filed in Pennsylvania in one county before one or more judges. The restaurant’s Petition asks that the requested exercise of the Pennsylvania Supreme Court’s plenary jurisdiction over these cases be similar to the federal Multi-District Litigation Panel’s exercise of jurisdiction to consolidate federal court cases into a single proceeding. We wrote previously about two separate Petitions seeking to consolidate all federal COVID-19 business interruption cases into one federal district court. The Pennsylvania Supreme Court has previously delegated the tasks of issuing findings of fact and conclusions of law to a lower court for ultimate review by the Supreme Court. E.g., Erfer v. Commonwealth, 794 A.2d 325, 568 Pa. 128 (2002); Malinowski v. Nanticoke Micro Techs., Inc., No. 51 MM 2009, 2010 Pa. LEXIS 1372 (Jun. 24, 2010). The Petition appears to request that the Pennsylvania Supreme Court take a similar approach for resolving the COVID-19 business interruption insurance cases.

A significant increase in insurance litigation over COVID-19 business interruption claims in the foreseeable future is just as likely in Pennsylvania and other state court systems as it is forecast for the federal court system. This prospect, however, does not necessarily equate to immediate agreement by insurers to consolidate all of these cases into a single court. In particular, the restaurant’s petition raises many of the same issues inherent in the similar MDL Petitions filed on April 23, 2020. Differences in policy language and coverage forms, disparate, statewide locations of plaintiffs and defendants, and significant differences in the types of claimed business losses may prove too cumbersome for effective consolidation and resolution of these cases.

For example, insurers may point out that material differences in business interruption coverage provisions between the many different policy forms at issue in these cases might result in a finding of coverage in one case but not in another over similar facts. There may also be substantial differences among the COVID-19 cases as to whether and to what extent policyholders, their insurance brokers, and the underwriters discussed the availability of coverage for viral contamination and/or pandemics that may also influence the ultimate coverage determinations in these cases. Claims-handling practices in administering COVID-19 business interruption insurance claims may also vary widely from insurer to insurer to the extent that different claims examiners may have focused and relied upon different information to make coverage determinations in each case. Similarly, the facts of each particular business loss at issue are likely to vary widely among the COVID-19 cases because each business is different, the circumstances of each business interruption are different, and the actual loss of each business is different. These may differ substantially depending upon the nature of the insured’s business, the extent to which the insured’s business was actually interrupted, and whether the claim involves direct viral contamination of the insured’s property. Consequently, some may oppose the consolidation of widely differing COVID-19 business interruption insurance cases across the state into a single proceeding on the basis that these cases are not conducive to uniform, prompt resolution for these reasons.

The restaurant’s Petition accelerates the debate over how best to resolve the expected wave of insurance coverage litigation over COVID-19 business interruption insurance claims. Importantly, the Petition at issue is an attempt to address the administration of all Pennsylvania state court COVID-19 business interruption cases, which would not be affected by the federal MDL Petitions filed on April 23, 2020. Since most, if not all, U.S. states are likely to see a rise in such state court insurance litigation, we expect to see similar efforts in other states, whether via applications to the judiciary or otherwise, to streamline the resolution of these cases.

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