Since the COVID-19 pandemic emerged earlier this year, an influx of lawsuits have been filed by small businesses who indicate their insurers are refusing to cover claims for losses suffered amid stay-home orders and other disruptions caused by the coronavirus. While insurance companies have maintained such losses are excluded under the policies, courts appear to be favoring plaintiffs in some early decisions.
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.
Early in the proceedings, some judges seemed to support the positions taken by the insurance industry. However, according to a recent report by the Connecticut Law Tribune, the courts appear to be shifting.
A number of judges have found that an inability to access property, due to state or locally mandated lockdowns, may equate to a physical loss of property under the terms of certain small business insurance policies.
The specific language of the insurance policy will be a crucial component in whether different cases are able to move forward. In addition, laws differ from state-to-state, resulting in different outcomes, and there are no consolidated federal proceedings, which may result in conflicting rulings from different courts.
In early August, the U.S. Judicial Panel on Multidistrict Litigation (JPML) rejected a requested to centralize all insurance business interruption lawsuits before one judge, indicating that forming one MDL for the business insurance lawsuits 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.
Therefore, the cases will proceed before different judges, and may result in contradictory rulings in different courts. However, as new cases of COVID-19 continue to rise in the U.S., causing devastating disruptions for many small businesses, it is expected that the courts will be dealing with the cases for years to come.