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Federal Judges Consider Consolidation of Business Interruption Coverage Litigation

May 21, 2020

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<p style="text-align: justify;">In addition to disrupting the lives and livelihoods of millions of people across the country and worldwide, the Covid-19 has sparked a torrent of lawsuits by businesses alleging they are owed business interruption coverage based the income they lost during Covid-19 related shutdowns.  In response to this massive wave of litigation, the Judicial Panel on Multidistrict Litigation, is now considering whether these cases should be consolidated in a multidistrict litigation (MDL) proceeding.</p>
<p style="text-align: justify;">MDL refers to a special procedure in federal cases where the issues have significant overlap.  The idea is that by combining the cases, they can address the claims efficiently and with less strain on the court system. Typical uses for MDL include products liability cases, where a single product causes a multitude of injuries, or in mass torts cases such as asbestos related cases.</p>
<p style="text-align: justify;">So far in response to Covid-19, multiple businesses have filed nationwide class actions seeking to represent a class of all insureds whose business interruption claims were denied by a particular insurer. Some of these insureds have gone even further, seeking to consolidate all pending business interruption litigation in federal court against every insurer that is or will be named in the future as a defendant into a single MDL.  One of the proposed venues for such an MDL is the U.S. District Court for the Eastern District of Pennsylvania. As we wrote about <a href="https://www.wcmlaw.com/2020/05/pennsylvania-restaurants-directly-ask-pa-supreme-court-to-weigh-in-on-business-income-coverage-dispute-claims-due-to-covid-19-pa/">last week</a>, a similar effort at consolidation also is underway in Pennsylvania state court.</p>
<p style="text-align: justify;">The most recent development is that insurers are now asking for more time to slow the consolidation process. In a motion filed May 6, insurers requested a three-week extension to file briefs responding to consolidation requests by lawyers for policyholders. <em>In re COVID-19 Bus. Interruption Prot. Ins. Litig.</em>, No. 20-md-2942, motion for extension filed (J.P.M.L. May 6, 2020).  While insureds argue that consolidation is needed for efficiency given the amount of lawsuits, insurers and critics are likely to argue that these cases cannot effectively be combined since they are inherently fact specific and rely on different policy wording.</p>
<p style="text-align: justify;">Whether the JMPL grants MDL consolidation would have a significant impact on the resolution of these claims. many insureds are feeling the economic sting from the mandated closures and are asking the Court to get in front of a potential logjam of cases. A ruling is not expected for a few weeks. We will continue to keep you posted as new developments arise.</p>
Thanks to Andrew Debter for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.

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