A federal court has received notice that 101 lawsuits have been filed as of late May seeking coverage from insurers for business interruption losses caused by COVID-19.
Plaintiffs attorneys say they expect the number to rise into the thousands.
“Ultimately, I think what’s going to happen is small businesses are going to have to come to the table with the insurance companies and the government to figure out a solution for this,” said Richard Golomb, a partner with the Golomb & Honik law firm in Philadelphia.
The 101 cases filed so far — which does not include suits filed in state courts — were tagged by the U.S. Judicial Panel on Multidistrict Litigation because they are related to a petition filed by groups of plaintiffs in Philadelphia and Chicago to assign to a single judge all COVID-19 business-interruption lawsuits filed in federal courts. The panel was created in 1968 to determine whether civil actions pending in different federal districts involve one or more common questions of fact and should be coordinated or consolidated for pretrial proceedings.
The central question binding all of the lawsuits is whether the novel coronavirus amounts to a physical loss of property that triggers insurance coverage for business income lost because of government ordered closures. The federal filings show that question is being asked by restaurants, taverns, dental practices, day care centers and hair salons all across America.
Golomb said insurers have been giving blanket denial to such claims, while business owners — especially restaurant owners — are counting on an insurance payout to survive. He cited an estimate by the National Restaurant Association that if no assistance is given, 40% of restaurants will not survive.
The American Property and Casualty Insurance Association said forcing insurers to pay such claims would undermine the solvency of the industry. APCIA estimated business closures are costing businesses with fewer than 500 employees from $393 billion to $668 billion per month.
What started as a judicial question has moved to the legislative branch. Bills to require insurers to pay COVID-19 business interruption claims have been introduced in eight states, although a bill in the Louisiana state house has been dropped.
Golomb said he believes eventually insurers will ask Congress for help in paying business interruption claims. In the end, that might result in a complicated global settlement in which each of the parties pays a part of the lost income costs.
For now, plaintiffs attorneys don’t even agree among themselves whether all of the COVID-19 claims should be heard by the Multidistrict Panel.
A group of plaintiffs led by the Big Onion Tavern in Chicago involved in lawsuits against Society Insurance filed a memorandum opposing consolidation of the cases. They argue that each claim involves unique insurance policies in various states with differing laws.
There’s also a question of where to assign the cases. In addition to competing petitions from Philadelphia and Chicago, a third group of plaintiffs in South Florida asked the Multidistrict Panel to assign to the U.S. District Court in Miami.
Attorney Charles A. Silverman, a sole practitioner in Skokie, Ill., filed his own petition asking that his suit filed on behalf of Sandy Point Dental P.C. against Cincinnati Insurance Co. be heard in Chicago. Silverman said he doesn’t travel and doesn’t want to hire co-counsel in a distant city. He said he doesn’t oppose consolidation of the cases in principal, although it may be difficult for the court to resolve questions of law that apply to a wide range of policy types across myriad jurisdictions. However, he said some coordination is possible. For example, the court may create consolidated cases for claims in each state, or by region.
Insurance Defense Attorney Steven Badger, with Zelle LLP in Dallas, said the COVID-19 claims don’t belong in a consolidated action and shouldn’t be resolved politically either. Badger said breach-of-contract lawsuits involving hundreds of different insurance companies, thousands of different policy forms with 50 different applicable state laws will not serve the purpose of the Multidistrict Panel, which is to expedite and simplify litigation.
“Just the opposite would occur here — with a single MDL judge being overwhelmed by the predictable morass of individual case issues,” he said in an email. “As a result, the insurance industry uniformly opposes a federal MDL.”
Badger said he believes personal injury attorneys are hoping for a modest “hold-up” settlement, but that won’t likely be the result. Settlements will be offered based on the merits of each claim without any expectation of a federal bailout, he said.
“Any plaintiffs’ attorney who believes that the insurance industry is just going to bundle-up thousands of lawsuits and write big checks without specific claim analysis is being shortsighted and doesn’t understand commercial first-party property insurance litigation,” he said.
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