MDL panel considers consolidating business interruption suits

In its last session of the year, the Judicial Panel on Multidistrict Litigation in Washington, D.C. on Thursday once again considered consolidating COVID-19-related business interruption suits from various states into one litigation.

After the insurance industry uniformly denied thousands of business interruption claims amid the pandemic, a wave of lawsuits were filed across the nation. On the brink of bankruptcy as a result of business loss due to the pandemic and government closure orders, some business owners say consolidating suits would expedite the litigation process. However, most attempts to do so have failed.

Plaintiff attorneys seeking coverage from Pennsylvania-based Erie Insurance Group, argued to consolidate at least 13 separate actions from six states Thursday.

With almost 100 people listening-in by phone or Zoom, the panel -- made up of seven federal judges from throughout the nation -- asked pointed questions of Erie's attorney, Atlanta-based Tiffany Powers of Alston & Bird LLP who, like all the defense attorneys, oppose consolidation.

"Everybody is citing the same precedent from all sorts of states, all over the country right?"asked U.S. District Judge Matthew F. Kennelly of the Northern District of Illinois.

Kennelly seemed dubious of Powers' argument that consolidating lawsuits from different states with different insurance laws would slow the litigation process. In re: Erie COVID-19 Business Interruption Protection Insurance Litigation, MDL No. 2969 (U.S. MDL., filed Oct. 21, 2020).

Kennelly said he has presided over several business interruption suits since the pandemic began, and parties have cited the same cases to bolster their arguments, regardless of the state or insurance carrier defendant.

"The message that sends is that there really isn't much variation in the law," Kennelly continued. "At least the parties don't think so, otherwise they wouldn't be citing cases from Washington in Illinois."

After an effort to consolidate close to 300 COVID-19-related insurance cases failed in August, the panel remained open to the idea of consolidating litigation by insurance company-defendant. The panel considered bundling four insurance defendants with hundreds of actions filed against them, into one multidistrict litigation. Certain Underwriters at Lloyd's of London; Cincinnati Insurance Co.; The Hartford Insurers; and Society Insurance were among the insurers considered for consolidation.

Despite finding the actions presented common legal and factual questions and involved interpretation of common policy language, the panel ultimately chose not to consolidate, stating, "Efficiency here is best obtained outside of a multidistrict litigation," in an October order.

While reluctant to grant consolidation, the panel opted for an insurer-specific multidistrict litigation involving 34 actions against Society in October. While plaintiff attorneys did not unanimously agree Thursday that consolidation would be the most efficient way to proceed, the ones that did, cited the Society case numerous times during the hearing.

Insurers argue losses due to the pandemic do not constitute "direct physical loss or damage" because the virus does not, like a fire or flood, physically alter or tangibly destroy the property.

Plaintiffs' arguments have differed in some key places usually based on whether the policy at issue includes a virus exclusions or not. Plaintiff's survival rate on motions to dismiss have thus far been notably higher when the policy at issue does not include a virus exclusion.

Some plaintiff attorneys argue exclusions are irrelevant. As long as plaintiffs can prove a policyholder would reasonably believe their business interruption policies covered a closure due to a pandemic, judges should rule in their favor, they say.

The panel, chaired by U.S. District Judge Karen K. Caldwell of the Eastern District of Kentucky, has been quick to rule on the issue of consolidation and will likely decide whether or not to consolidate the Erie case before the end of the month.