Hearing to decide on consolidation of business interruption suits

Insurance companies and business owners will be closely watching a multi-district litigation panel hearing Thursday to decide whether to consolidate more than 100 federal lawsuits accusing insurance companies of wrongfully denying business interruption insurance coverage due to coronavirus-related economic shutdowns. Hearing oral arguments via teleconference, the seven-judge panel on multi-district litigation in Washington, D.C. must decide whether to side with defense attorneys representing insurance companies who oppose consolidation or some plaintiffs' attorneys representing businesses who are favor it.

Lieff Cabraser Heimann & Bernstein LLP, which sued insurers on behalf of restaurants who say their business interruption claims pursuant to state and local government orders during the pandemic were unfairly denied, is in favor of consolidating. The position is not uniformly held among plaintiffs' firms.

"That these questions are predominantly common across the cases is underscored by the fact that the defendant insurers appear to have executed a coordinated strategy to deny all business interruption claims related to the COVID-19 pandemic, and have justified their denials almost uniformly based on their invocation of just a handful of common policy provisions," Robert J. Nelson, a Lieff Cabraser partner, argued in a brief filed with the litigation panel June 5.

Plaintiffs' firm Keller Rohrback LLP also filed a brief supporting consolidation.

Zelle LLP, which represent American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies, said consolidation would prolong litigation.

"Directing these cases to a single federal judge would undermine longstanding principles of federalism and state autonomy," the firm argued in a recent brief.

Boies Schiller Flexner LLP and King & Spalding LLP, which is representing businesses filing suits against insurers, also oppose consolidation.

When local and state governments forced restaurants and retailers to close or severely reduce operations in March due to the pandemic, owners who took an economic hit turned to insurance providers claiming a civil authority shutdown due to a virus was covered under their business interruption policies,

Insurers denied the claims for the most part, arguing business interruption policies only cover physical loss or damage, not consequences of government orders.

What exactly constitutes a physical loss will be a central point of contention whether the suits are consolidated or not.

Among the firms representing insurers include Gibson, Dunn & Crutcher LLP, O'Melveny & Myers LLP, Alston & Bird LLP, Sidley Austin LLP and Steptoe & Johnson LLP.

Additional plaintiffs' firms include the Lanier Law Firm, Barrack Rodos & Bacine, and Robbins Geller Rudman & Dowd LLP.

The hearing will begin Thursday at 6:30 a.m.. In re COVID-19 Business Interruption Protection Insurance Litigation, MDL No. 2942 (U.S. Jud. Pan. Multi. Lit., filed April 20, 2020).