In the bellwether case of Joseph Tambellini, Inc. v. Erie Insurance Exchange, the Pennsylvania Supreme Court was petitioned under its King’s Bench powers to assume plenary jurisdiction of an insurance coverage dispute that had been filed in the Court of Common Pleas, Allegheny County, Pennsylvania. The high court was asked to decide critical legal issues that would have impacted thousands of other insurance claims that might arise in the future from the COVID-19 pandemic. Duane Morris was retained by insurer trade associations, including APCIA, NAMIC, PAMIC, and the Insurance Federation of Pennsylvania (the “Insurance Industry Amici”), to oppose this extraordinary petition.
The Insurance Industry Amici argued that business interruption lawsuits will present many individualized issues relating to wide variations in insurance policies — such as coverage grants, exclusions, and loss determinations — along with other unique factual circumstances pertaining to each business policyholder. Thus, any decision on Tambellini’s claim under one policy could not reasonably be extrapolated across numerous other cases that have yet to be filed.
The Insurance Industry Amici further argued that the Court should not decide important legal issues without a factual record, review by the lower courts, and the participation of all interested parties, because any petition requesting that the Court assume extraordinary jurisdiction or for exercise of King’s Bench powers must show service upon all persons who may be affected. Further, if the Court were to retroactively impose a new, extra-contractual risk on insurance carriers, this could result in insurance company insolvencies, creating an anticompetitive market and adversely affecting the availability of affordable insurance in Pennsylvania.
On May 14, the Pennsylvania Supreme Court denied the petition. It declined to use its King’s Bench powers in a per curiam order.
This order is a huge “win” for the insurance industry. Accelerating and consolidating all of the COVID insurance disputes for business interruption would have been a terrible development on its own and also an awful precedent both in Pennsylvania and around the nation.
The “win” also helps to extinguish a threat to the insurance industry from a separate recent opinion by the Pennsylvania Supreme Court decision in Friends of DiVito v. Wolf. In that case, a state political candidate had challenged Pennsylvania Governor Tom Wolf’s Emergency Order which closed all non-essential businesses and offices, including DiVito’s campaign headquarters, whereas his incumbent opponent’s office remained open. In a 4-3 decision, the Pennsylvania Supreme Court upheld the Governor’s powers to issue the emergency order, concluding that the coronavirus constitutes a “natural disaster.” This characterization of a “natural disaster” posed a threat that the Court might read insurance-contract language in the same way. This was the approach of the plaintiffs’ coverage counsel in Tambellini even though the DiVito Court did not decide the central issue of whether coronavirus causes physical damage, and even though insurance coverage was not at issue. The “win” in the Court’s unanimous Tambellini decision undercuts any such use of the DiVito characterization of a “natural disaster” going forward with respect to insurance coverage disputes.