Panel Rejects Consolidation Of All Federal Business Interruption Cases

By Damon Vocke

On July 31, the seven-member Judicial Panel on Multi-District Litigation (JPML) heard oral argument of extraordinary length on the potential consolidation of all federal cases involving business interruption coverage relating to COVID-19 and/or COVID-19 shutdown orders, totaling approximately 449 such federal cases, roughly 200 of which are putative class actions.

On August 12, the JPML rejected the petitions to centralize these cases, noting that the “movants’ request entails very few common questions of fact, which are outweighed by the substantial convenience and efficiency challenges posed by managing a litigation involving the entire insurance industry.” The JPML specifically noted that the cases involve more than 100 insurers and a wide variety of different policy forms.

That said, the JPML indicated that centralization might still be appropriate as respects The Hartford and its affiliates (named in 68 federal actions), Cincinnati Insurance Company (named in 18 federal actions), Society Insurance Company (named in 21 federal actions), and various underwriters at Lloyd’s of London (named in 14 federal actions). The JPML has requested additional briefing on whether centralization would be appropriate for these four insurers, which have until August 16 to file briefs on this question of insurer-specific consolidation. Response briefs will be due on September 2.

The JPML noted the possibility that single-insurer MDLs might be viable as they may be “more likely to involve insurance policies utilizing the same language, endorsements, and exclusions,” and might therefore share common discovery and pretrial motion proceedings.

So, for now, the vast majority of the insurance industry can breathe a heavy sigh of relief in not being swept up in what likely would have been a very complex, slow-moving and intractably challenging national MDL proceeding involving all COVID-19-related business interruption federal cases.

As for the four insurers singled out for further briefing, the question remains as to whether the JPML may reach the same or a different outcome concerning consolidation of federal cases on a single-insurer basis, and we will continue to monitor this aspect of the MDL process.

Note that these developments do not affect or impact the hundreds of business interruption cases pending in state courts across the country, nor do they address much less decide the merits in state and federal courts on key questions such as whether COVID-19 may cause “physical damage or loss,” whether civil authority orders may trigger coverage or whether virus or communicable disease exclusions bar coverage as a matter of law. These questions will continue to be litigated in the ordinary course, but not in this comprehensive federal consolidation.