JPML Considering COVID-19 Business Interruption Lawsuit Consolidations Involving Separate Insurance Companies

After denying a recent request to consolidate all COVID-19 business interruption insurance lawsuits in one federal multidistrict litigation (MDL), the Court will consider whether a series of separate centralized proceedings should be created for claims against certain insurance companies.

A growing number of insurance coverage lawsuits have been filed by small business owners nationwide, after they were denied coverage for business interruption following the emergence of the COVID-19 pandemic in the United States.

Each of the claims raise similar allegations, indicating insurance carriers are failing to honor policies sold in recent years, routinely denying any claims for losses following the COVID-19 pandemic, regardless of the circumstances or policy language.

Earlier this month, 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”.

According to a Notice of Hearing Session (PDF) issued on August 18, the JPML will hear oral arguments next month about whether five separate MDLs should be established for claims involving policies issued by Lloyds of London, Cincinnati Insurance Company, The Hartford, Society Insurance Company and Travelers Casualty Insurance Company.

As opposed to a typical hearing, where both sides argue either for or against consolidation, the JPML has issued “show cause orders”, specifically asking parties to provide a reason why the cases should not be consolidated, indicating they are predisposed to coordinated proceedings involving these insurance carriers.

The hearings are scheduled for September 24 at the JPML headquarters in the Thurgood Marshall Federal Judiciary Building in Washington, D.C. However, the hearings will be held by videoconference or teleconference due to the very same ongoing pandemic which led to the lawsuits.

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.