COVID-19 Business Insurance Lawsuits Consolidated In New York and Pennsylvania

A panel of federal judges has decided to created two new multidistrict litigations (MDLs) for lawsuits filed against Generali and Erie Insurance Company over failure to cover claims related to the COVID-19 pandemic under business interruption policies, centralizing pretrial proceedings involving the insurers in New York and Pennsylvania respectively.

Since the coronavirus emerged earlier this year, an influx of insurance lawsuits have been filed by small business owners nationwide, alleging their insurers are refusing to honor coverage for losses suffered since widespread stay-home orders were issued. While insurance companies have been routinely denying claims presented under business interruption coverage, plaintiffs maintain the specific language of different policies does not properly exclude all damages linked to the pandemic.

There are an estimated 1,300 COVID-19 business insurance lawsuits already filed in courts nationwide, which likely only represent a small fraction of all companies denied coverage for business interruption under policies they had in place when the pandemic entered the United States.

In early August, the U.S. Judicial Panel on Multidistrict Litigation (JPML) rejected a requested to centralize all of the insurance business interruption claims before one judge, indicating 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 litigation.

Since then, a number of individual requests have been filed to consolidate claims involving specific insurers, and the U.S. JPML previously agreed to establish centralized proceedings for claims involving Society Insurance Company in the Northern District of Illinois. However, following oral arguments presented earlier this month, the panel agreed to centralize claims involving Erie Insurance Company and Generali,

In a transfer order (pdf) issued on December 15, the U.S. JPML indicated 13 lawsuits filed against Erie Insurance Company will be centralized in the Western District of Pennsylvania for pretrial proceedings. On the same day, the panel also issued a transfer order (PDF) ordering centralization of seven similar lawsuits filed against Generali in the Southern District of New York.

“Erie argues that centralization is not appropriate because the actions involve different claims and different types of business,” the panel stated in the Erie transfer order. “The presence of additional or differing legal theories is not significant, however, when the actions arise from a common factual core.”

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 COVID-19 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. Eventually, there may be close to a dozen different MDLs established before different U.S. District Judges to coordinate discovery and pretrial proceedings involving separate insurance companies.