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Law360 (December 3, 2020, 9:33 PM EST) -- Several members of a judicial panel appeared inclined Thursday to centralize more than 20 cases alleging Erie Insurance Group has wrongfully refused to cover businesses' losses amid the COVID-19 pandemic, with one judge saying there doesn't seem to be much variation among states' laws on key coverage issues.
During a hearing held via Zoom, U.S. District Judge Matthew F. Kennelly of the seven-member Judicial Panel on Multidistrict Litigation questioned Erie's position that 26 federal court cases pending against it in seven states should not be grouped into an MDL because, among other things, states' laws on insurance policy interpretation differ.
Judge Kennelly, who is presiding over COVID-19 business interruption actions against several other insurance companies, said he has seen insurers and policyholders frequently cite the same decisions from around the country to back their respective positions.
"Everybody cites all the same cases, no matter what state they are from and no matter what insurer they are from," Judge Kennelly said. "The message that sends is that there really isn't that much variation in the law, among these various states. At least the parties don't think so. Otherwise, they would not be citing cases from Washington in Illinois."
Erie attorney Tiffany L. Powers of Alston & Bird LLP responded that while "all of the COVID cases that are coming down are being cited by all the different carriers," states' laws still vary on core issues underpinning some of the pandemic coverage suits.
"There is state-specific law, and the earlier precedent relating to insurance contract construction of 'direct physical loss of or damage to' property, that is relevant and would be beneficial for the judges in those home courts who have familiarity with that existing precedent prior to all of the COVID litigation," Powers said.
Attorneys for several groups of restaurants, hair salons, spas and other businesses litigating against Erie are aiming to create the second MDL to group COVID-19 business interruption cases against a specific insurer. The JPML formed the first such MDL in early October to centralize more than 30 cases brought against Society Insurance Co. in federal courts across three states. The panel declined to form similar "single-insurer" MDLs to group cases against Travelers, Cincinnati Insurance Co., The Hartford and underwriters at Lloyd's of London.
Powers pointed out on Thursday that the cases against Erie are more geographically dispersed than those against Society. But U.S. District Judge Roger T. Benitez queried whether that fact would "actually speak in favor of centralizing" the suits against Erie.
"No, Your Honor, I don't think it does, because with the lack of geographic concentration, you are still going to have all those courts that are considering the same types of cases for other carriers that would be considering them for Erie as well," Powers responded. "Again, Erie believes it should be able to leverage those efficiencies, where the judges in their home courts are already familiar with those issues and the state precedent."
Attorneys for several Erie policyholders told the JPML that their situation is highly similar to that of the Society policyholders. Like Society, Erie is a smaller regional carrier that uses standardized policy forms, said Kelly K. Iverson of Carlson Lynch LLP, who is representing a Pittsburgh-area bar and grill insured by Erie.
"Like in Society, it is the same common facts and same common issues with respect to the COVID closures, as well as the use of standard policy forms which have standard coverage language," Iverson said. "Your Honor, like in Society, centralization here would promote the efficiencies."
Iverson and an attorney for several other policyholders urged the JPML to centralize the cases against Erie in the Western District of Pennsylvania, in Pittsburgh. A third attorney representing another set of Erie policyholders suggested that the cases could best be managed in the Eastern District of Pennsylvania, in Philadelphia.
Support for an MDL was not unanimous among policyholders, however. Robert R. Duncan of Duncan Law Group LLC, who represents two restaurants insured by Erie, said centralization would not increase efficiency. Duncan is also representing several eateries in cases against Society and previously opposed centralization of the actions against that insurer.
Duncan challenged another attorney's remark at Thursday's hearing that the Society MDL has been proceeding smoothly, saying that, while that MDL "may be moving forward, we had to start over."
"It is just time that these plaintiffs and putative class members cannot afford in this case," Duncan said.
Judge Kennelly contested Duncan's characterization of the Society MDL's status. He noted that the judge overseeing that MDL, U.S. District Judge Edmond Chang of the Northern District of Illinois, has selected several dismissal motions filed by Society to serve as bellwethers for key issues and requested supplemental briefing on them.
"That is the opposite of starting from scratch," Judge Kennelly said.
The case is In Re: Erie COVID-19 Business Interruption Protection Insurance Litigation, MDL No. 2969, before the Judicial Panel on Multidistrict Litigation.
--Editing by Jay Jackson Jr.
For a reprint of this article, please contact reprints@law360.com.
