Court panel won’t centralize COVID-19 suits

The U.S. Judicial Panel on Multidistrict Litigation on Wednesday refused to consolidate COVID-19-related business interruption litigation filed by businesses against all insurers, but is considering centralizing litigation filed against individual insurers.

The panel said in its ruling that centralizing all litigation would not work because of differences between policies, among other factors, but combining litigation against individual insurers may be feasible, according to the ruling in In re: COVID-19 business Interruption Protection Litigation. Numerous businesses have filed suit against insurers claiming they are entitled to business interruption losses stemming from the COVID-19 pandemic.

The Washington, D.C.-based panel, which was created in 1968, determines whether civil actions pending in different federal districts involve common questions that should be transferred to one federal court and judge to avoid duplication, prevent inconsistent rulings, and conserve resources, according to its website. It consists of seven sitting federal judges appointed by the Chief Justice, and no two panel members may be from the same circuit.

The ruling said there were two motions to centralize pretrial proceedings: one filed by plaintiffs in two Eastern District of Pennsylvania actions that seek to centralize 11 actions in the district and a second that seeks to centralize 15 actions, including the 11 in the first motion and another five, in the Northern District of Illinois.

Plaintiffs in more than 175 actions or related actions have responded to the motion, according to the ruling, with many supporting centralization in either Illinois or Pennsylvania and others suggesting courts in California, Florida, Missouri, New Jersey and Washington as potential transferee districts for this litigation, according to the ruling. Plaintiffs in more than 30 actions have also proposed centralizing litigation on a state-by-state, regional, or insurer-by-insurer basis, according to the ruling.

A total of 32 insurers or insurance groups named as defendant responded to the motions. “Unlike plaintiffs, the defendants uniformly oppose centralization,” the ruling said. The “industry-wide centralization requested by movants will not serve the convenience of the parties and witnesses or further the just and efficient conduct of this litigation,” the ruling states.

Centralization proponents identify three core common questions: whether government closure orders trigger coverage; what constitutes “physical loss or damage” to property; and whether any exclusions, particularly those related to viruses apply,” the ruling said. “These questions, though, share only a superficial commonality.  There is no common defendant in these actions – indeed, there are no true multi-defendant cases, as the actions involve either a single insurer or insurer group (i.e., related insurers operating under the same umbrella or sharing ownership interests).  Thus, there is little potential for common disco very actors the litigation.

“Furthermore, these cases involve different insurance policies with different coverages, conditions, exclusions, and policy language, purchased by different businesses in different industries located in different styles. These differences will overwhelm any common factual questions,” the ruling says. “Moreover, the proposed MDL raises significant managerial and efficiency concerns.

The ruling adds, however, that “In contrast, the arguments for insurer-specific MDLS are more persuasive. Such an MDL would be limited to a single insurer or group of related insurers and thus would not entail the managerial problems of an industry-wide involving more than a hundred insurers,” it said.  “The actions are more likely to involve insurance policies utilizing the same language, endorsements, and exclusions.”

The ruling adds, however, that “we will not attempt to create an insurer-specific MDL on the present record.” It directs four insurers or groups of related insurers, Lloyd’s of London underwriters, the Cincinnati Insurance Co., units of the Hartford Financial Services Group Inc. and Fond du Lac, Wisconsin-based Society Insurance Co., to show cause why the actions should not be centralized.

Lead attorneys in the case had no comment or could not be reached.

Source: Business Insurance