Coronavirus Business Interruption Litigation Ramping up to Include Several Class Action Suits Against Single Insurers

By Dominica C. Anderson, Philip R. Matthews and Daniel B. Heidtke

As the coronavirus cases start peaking in at least some parts of the United States, the American courts are beginning to experience mounting cases relating to claims against businesses for coronavirus infections and against insurers for alleged business interruption coverage. A few weeks ago, some well-known restaurants in the United States commenced litigation against their insurers over claims for insurance coverage stemming from business interruption. These individual cases will raise a number of issues whether there is direct physical loss to covered property and whether the virus exclusions in the policies bar coverage. As a host of other types of businesses have followed by filing a number of individual suits in several states against their insurers. Last week, however, a new form of litigation has been filed with multiple class action insurance coverage lawsuits being brought by alleged representatives against single insures who are claimed to have written business interruption policies to a number of businesses in given areas or nationwide.

For example, in one federal court in the Central District of California, Plaintiff Caribe Restaurant and Nightclub, a California corporation located in San Diego County, sued Defendant Topa Insurance Company, a California company,  alleging loss of business due to the pandemic and claiming business interruption coverage under a Special Property Form issued by Topa. Caribe asserts causes of action for declaratory relief and breach of contract, which is typical of individual business interruption suits brought to date. However, this suit, like others filed last week, are styled as a class action under the Federal Rules of Civil Procedure, whereby the Plaintiff nightclub seeks to be the representative of a nationwide classes defined as all persons and entities, for (1) several types of coverage under a property policy issued by Topa, (2) have suffered a suspension of their business due to Covid-19, (3) have made a claim under a property policy by Topa; and were (4) denied coverage for the specified Covid-19 coverage claim against Topa. The subclasses include the Business Income Breach Class, the Civil Authority Breach Class, the Extra Expense Breach Class, the Sue and Labor Breach Class, the Business Income Declaratory Judgment Class, the Civil Authority Declaratory Judgement Class, the Extra Expense Declaratory Class and the Sue and Labor Declaratory Judgment Class. The Complaint excludes from the subclasses (1) Topa and any of its affiliated parties, (2) governmental entities and  (3) the court staff assigned to the case and any immediate family members.

Other similar class action class cases were brought last week in five other federal courts:

  • Rising Dough, Inc (d/b/a/ Madison Sourdough) v. Society Insurance, filed in federal court for the Eastern District of Wisconsin
  • Christie Jo Berkseth-Rojas DDS v. Aspen American Insurance Company, filed in the federal court for the Northern District of Texas
  • Bridall Expressions LLC v. Owners Insurance Company, filed in the Northern District of Ohio
  • Dakota Ventures, LLC (d/b/a Kokopelli Grill and Coyote BBQ Pub) v. Oregon Mutual Insurance Company, field in the District Court of Oregon
  • Gio Pizzeria & Bar Hospitality, LLV, et al v. Certain Underwriters at Lloyd’s, London, filed in federal court for the Southern District of New York

In the meantime today, one plaintiff has filed a Petition to create a nationwide MDL docket for COVID-19 coverage litigation before the U.S. Judicial Panel on Multi-District Litigation, requesting that their Judge Timothy J. Savage in the Eastern District of Pennsylvania be the judge to handle the COVID-19 coverage litigation.

These cases raise a number of procedural as well as substantive issues, which threaten to bog the courts down in protracted coverage litigation.  In the meantime, there is a draft Pandemic Risk and Reinsurance Act circulating around Congress modeled after the Terrorist Risk and Insurance Act which seeks to provide business interruption type coverage essentially reinsured by the federal government up to a cap, like $500 billion. Leaving aside the issue whether such insurance claims are covered or not, Congressional legislation could impact the course of these class actions.