Centralizing COVID-related Insurance Coverage Lawsuits, October 13, 2020
The Judicial Panel on Multi-District Litigation (“JPML”) decided last week to centralize more than 30 lawsuits seeking business interruption coverage from Society Insurance Company in the Northern District of Illinois.
In July, the JPML had considered requests to centralize all federal litigation nationwide involving business interruption coverage claims arising out of the coronavirus pandemic. The JPML denied the requests in August, reasoning that there were too many differences among the various insurers. The Panel nonetheless stated that it would consider the creation of insurer-specific Multi-District Litigations (“MDLs”) and sought briefing with respect to five insurers: Lloyd’s, London; Cincinnati Insurance Company; Hartford Insurance Company, Society Insurance Company, and Travelers Insurance Company.
In a series of opinions, the JPML decided last week to centralize only the business interruption lawsuits against Society Insurance Company. The Panel reasoned that the limited geographical scope of the cases against Society, a regional insurance carrier in the Midwest, meant that centralization of the cases would lead to a quick resolution. Only six states’ insurance laws were implicated by the lawsuits against Society, and an MDL judge would be able to organize the cases quickly and efficiently. In contrast, the JPML stated that it would take too long for an MDL judge to organize and resolve the central policy questions in the lawsuits against the other insurance carriers.
The JPML also separately decided to centralize other insurance-related disputes arising out of insurance claims under policies purchased alongside seasonal or multi-day ski passes. The passes covered skiing at resorts that were closed in response to the COVID-19 pandemic. The Panel decided to create two insurer-specific MDLs: one with cases brought against Arch Insurance Company in the Western District of Missouri, and the other with cases against United Specialty Insurance Company in the Northern District of California.
Litigation Update: Business Interruption Coverage, May 20, 2020
This past Thursday, Judge Valerie Caproni of the Southern District of New York denied a request for a preliminary injunction that would require an insurer to immediately cover Social Life Magazine, Inc.’s business interruption losses arising from the COVID-19 pandemic. In an oral decision at a telephonic hearing, Judge Caproni reasoned that Social Life’s property had not suffered any damages, and “New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going.” Accordingly, the judge concluded that Social Life had failed to show that it was likely to prevail on the merits of its case and denied the preliminary injunction request. Social Life filed a notice of appeal to the Second Circuit on Sunday, May 17.
As we’ve previously reported, we’re starting to see lawsuits brought against companies in certain industries related to COVID-19. The latest in this trend are suits filed against colleges and universities that discontinued on-campus classes in the wake of the pandemic and shifted to online classes. In connection with the shift in teaching methods, the educational institutions sent students home. Now, a number of students at certain institutions have filed lawsuits against their schools and seek the return of tuition and various fees, including those charged for room and board. The lawsuits, which are typically being filed as class actions, seek recovery based on a number of theories, including breach of contract, unjust enrichment, and conversion. The lawsuits seeking tuition refunds raise a particularly interesting issue as to the substance and quality of online learning as compared to traditional learning and whether students receiving online learning are obtaining the benefit of their bargain. We will be monitoring these suits as they progress. Colleges and universities facing such lawsuits (or at risk of facing such suits) should have an attorney check their insurance policies, including directors and officers liability insurance, to see if coverage potentially exists.
We’ve seen the number of cases brought against insurers regarding business interruption coverage increase rapidly in the last several weeks. More recently, we’ve started to see class actions brought in federal courts – typically, these plaintiffs seek to bring claims on behalf of a nationwide class against a single insurer. Now, a pair of Philadelphia-based restaurants are seeking to establish a Multi-District Litigation proceeding to resolve all cases regarding insurance coverage for COVID-19 losses. Their motion, filed with the Judicial Panel on Multi-District Litigation, argues that the issue of whether business interruption insurance policies will cover losses incurred by businesses forced to close as a result of stay-at-home orders is one that should be addressed in a uniform manner across the country. They propose consolidating all federal actions on this issue, regardless of the insurer or specific policy language, in the Eastern District of Pennsylvania. We will monitor these developments to see whether courts are receptive to resolving these issues on a mass scale.
As we reported last week, we’re starting to see personal injury actions against cruise ship lines claiming that they failed to protect passengers from the coronavirus. Now we’re starting to see similar suits against other industries. A wrongful death action has been brought against a nursing home in Washington state that was recently the site of a coronavirus outbreak. According to the complaint, the facility failed to protect its residents, leading to numerous deaths, including the death of the plaintiff’s mother. The lawsuit claims the nursing home had known respiratory outbreak since January, but failed to quarantine residents and instead held a Mardi Gras party, allowed visitors to go in and out of the building, and delayed reporting the outbreak of disease. For a description of the suit, see https://abcnews.go.com/Health/family-files-1st-wrongful-death-lawsuit-life-care/story?id=70122496.
Businesses across the country are filing suit against their insurers to determine coverage for their COVID-19 losses. The first such lawsuit, Cajun Conti LLC, et al. v. Certain Underwriters at Lloyd’s, London, et al., was filed by owners of a New Orleans restaurant on March 16, and since then, restaurants, movie theaters, and small businesses from California to Pennsylvania have followed. The plaintiffs generally seek declarations that their losses are covered, although some also bring breach of contract claims against insurers who have denied coverage. As we have noted, policies that provide business interruption coverage typically require suspension of the insured’s operations to be caused by “direct physical loss of or damage to property.” Some plaintiffs are already relying on language in orders from government authorities to support their case that this has been established – in Boutros v. Sentinel Insurance Co., for example, the complaint points to a stay-at-home order from Harris County Judge Lina Hidalgo, which states that “the COVID-19 virus causes property loss or damage due to its ability to attach to surfaces for prolonged periods of time.” We will be monitoring these cases closely as they progress.
We’re starting to see more lawsuits brought by people who say that businesses failed to protect them from the coronavirus. Just yesterday, a class action was filed in Florida by cruise ship passengers against Costa Cruises (a subsidiary of Carnival), alleging that Costa was negligent in failing to warn passengers that a passenger on a prior voyage was disembarked due to symptoms of the coronavirus. The complaint alleges that passengers were injured as a result and that Costa is liable for negligence, negligent and intentional infliction of emotional distress, false advertising, and negligent misrepresentation. Plaintiffs seek damages in an unspecified amount. (For a copy of the complaint, see https://www.lipcon.com/work-in-progress/complaint-costa-luminosa-coronavirus/.) We can be sure that, as the crisis continues, we’ll see more lawsuits of this sort against a variety of businesses. Companies should have an attorney check their general liability insurance policies, which generally cover claims for personal injury caused by an accident or exposure to injury-producing conditions, for potential coverage.