MDL Panel Declines to Centralize COVID-19 Lawsuits Against Most Insurance Carriers, But Not All

After denying a recent request to consolidate all COVID-19 business interruption insurance lawsuits before one federal judge, the U.S. Judicial Panel on Multidistrict Litigation (JPML) has also rejected most requests to consolidate the cases into numerous separate MDLs based on the specific insurance company involved.

Since the COVID-19 pandemic emerged earlier this year, a growing number of insurance coverage lawsuits have been filed by small business owners nationwide, raising similar allegations that carriers have routinely denied business interruption claims, which they indicate should be covered under policies they purchased prior to the coronavirus outbreak.

Each of the claims raise similar questions of fact and law, indicating that various different carriers have refused to honor any claims for business losses following COVID-19 shutdowns, regardless of the circumstances or policy language.

In early August, the U.S. Judicial Panel on Multidistrict Litigation (JPML) rejected a requested to consolidate all insurance business interruption lawsuits before one judge, which sought to centralize the litigation, regardless of the insurance carriers involved in the complaints.

In an order issued on August 12, the panel determined that forming one MDL would provide little benefit for the parties or the court system, given the large number of different insurers and policy language involved in the cases. However, within that order, the JPML noted it would consider a separate request to establish several separate MDLs based on a “state-by-state, regional, or insurer-by insurer basis”.

Additional oral arguments were held in late September, to consider individual requests to centralize claims against specific insurance companies named in a number of claims filed throughout the federal court system. However, to date, the MDL panel has only approved one of the requests.

In orders issued last week, the U.S. JPML issued orders denied transfer for COVID-19 lawsuits against Travelers Insurance (PDF), The Hartford (PDF), Cincinnati Insurance Company (PDF), and the Underwriters of Lloyd’s of London (PDF).

However, on October 2, the JPML issued a transfer order (PDF) calling for consolidation of 34 actions filed against Society Insurance Company, calling for them to be centralized before U.S. District Judge Edmond E. Chang in the U.S. District Court for the Northern District of Illinois.

“Unlike the other business interruption insurance dockets arising from MDL No. 2942 in which we have denied centralization, we find that centralization presents the most efficient means of advancing these actions toward resolution. Here, there are before us 34 total actions pending in six nearby states, the majority in one district,” the JPML wrote. “This suggests to us that this litigation presents a manageable controversy that can best be streamlined by proceeding before a single judge.”

In complex product liability litigation, where a large number of claims are filed throughout the federal court system by individuals who suffered similar injuries as a result of the same or similar products or venues, it is common for the federal court system to centralize the litigation for pretrial proceedings. However, if settlements are not reached during discovery or following a series of early “bellwether” trials, each claim may later be remanded back to the U.S. District Court where it was originally filed to go before a jury.

It is estimated that thousands of similar business interruption insurance lawsuits will likely be filed in the coming months, as more small businesses are pushed to the brink only to find their insurance companies are denying payments on policies they purchased.