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Law360 (August 7, 2020, 5:28 PM EDT) --
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| Shanon Carson |
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| John Albanese |
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| Michael Twersky |
In fact, the article illustrates the reasons why an MDL proceeding is appropriate and essential to resolving business interruption insurance claims related to COVID-19. In this business interruption litigation regarding the pandemic, there are core common factual and legal issues, and absent creation of an MDL, there is a significant risk that there will be conflicting resolutions of these questions.
The article posits that detailed claims analysis is needed for all aspects of each insured's claim. But ironically, this is belied by what appears to be the insurance companies' own behavior in their handling of COVID-19 business interruption claims: The companies are systematically denying them en masse with little or no investigation, and in form fashion, to the detriment of their customers who are not getting what they paid for.
The author suggests that the purpose of the request for an MDL is to create "gravitas and a façade that insurers must pay for the policyholders' business income" and that "concentrated pressures and postures may be created that could lead to findings of coverage." But, moving beyond the creative adjectives, this argument rests on a faulty premise that business interruption insurance requires a physical alteration to property.
However, the law is far from settled on that point and policyholders have presented strong legal arguments why business income and civil authority insurance must pay for losses related to COVID-19 and related civil authority orders.[1] Regardless, "where the litigation involves common factual questions, centralization may be appropriate even though defendants predict that they will prevail on dispositive motions prior to commencement of discovery."[2]
In other words, just because the author assumes wrongly that the merits are weak, is not a reason for the rejection of an MDL proceeding.
The author also misconstrues and underplays the policyholders' arguments for consolidation, pinning them solely on alacrity, or in the author's words, "quick economic resolution to unfavorable business conditions created by COVID-19, without necessarily steering the claims through the detailed requirements of individualized insurance disputes."
But if individualized inquiries are required, why have insurance companies seemingly been denying the COVID-19 insurance claims across the board and based on the same reasoning with no individual investigation?[3]
While the need for speedy relief is certainly an important factor favoring consolidation in this instance, and especially where businesses across the country have been severely affected by the pandemic, it is not the only factor. Centralization is also needed to avoid inconsistent rulings on fundamental issues, prevent duplicative discovery, and conserve judicial resources.[4]
There are certain core questions an MDL can address across large swaths of cases that will avoid the undeniable nightmare associated with thousands of individual actions spread around federal courts throughout the country. These core common questions, many of which implicate mixed questions of fact and law, include, without limitation:
- Whether COVID-19 and its presence constitute direct physical loss of or damage to property;
- What constitutes physical loss of or damage to property;
- Whether the nationwide imminent threat of COVID-19 causes direct physical loss of or damage to property;
- Whether the widespread stay at home orders trigger coverage; and
- Whether any exclusions, particularly those related to viruses, apply in the context of COVID-19.[5]
Absent centralization, these same issues could well be decided in a conflicting manner across the country even where the relevant law and facts are the same. Moreover, discovery would be duplicated again and again across cases creating undo and needless burden, cost and inefficiency.
As put succinctly by one attorney during the MDL hearing arguing in favor of consolidation, this litigation in many ways boils down to five words: direct physical loss or damage. A review of the dispositive motions filed to date shows that the cases involve:
As for variations in state law, such variations are common in MDL proceedings and no impediment to consolidation. First as highlighted in one movant's briefing and reiterated during the JMPL oral argument, these variations in state law are overblown as most states simply apply the same basic principles of contractual interpretation.[7]Three main threshold issues: (1) whether there is a virus exclusion that precludes coverage, (2) whether the civil authority provision applies to this situation, and (3) whether the insured plaintiff has suffered physical damage to the property or loss.[6]
And even to the extent state law does in fact vary somewhat, this is nothing new in MDLs and the JPML has previously called such arguments not convincing.[8] By the logic of the author and those opposing the creation of an MDL: If the insurers win a dispositive motion in one locale they should not cite it in another, because it has no value as each case is unique. But of course, they will.
Moreover, even if these variations were truly a concern, there can be little question that these small differences would be greatly reduced in insurer-specific MDLs. Insurance companies and especially the larger ones — that the majority of the cases are filed against — utilize common policy forms nationwide.[9]
The author insinuates that if the JPML creates insurer-specific MDLs, a new wave of suits is "promised to then justify and populate such MDLs." However, no such promise was made or insinuated, rather it is simply a fact that with or without an MDL, many more cases are coming down the pike given the number of businesses that have been affected by COVID-19 and shut-down orders.
Finally, the author concludes with three overgeneralized and mistaken arguments against the creation of an MDL.
First the author argues that if an MDL is created, "the parties in a consolidated action will be forced early and often to engage in an endless debate between the similarities and differences in claims, issues, facts and law."
However, that is not really an argument against an MDL as this would be true regardless of whether or not an MDL is created. Even without an MDL, a positive result in any jurisdiction for an insured or an insurer will result in countless briefings attempting to both find such an opinion similar or different. The MDL would only reduce such a problem — by allowing for the efficient grouping of similar theories, policies and insurers to avoid duplicative arguments from rearing their head again and again in each case.
Second, the author argues that in an MDL, mom and pop claims will be pushed to the back of the line, but there is no evidence for this, and to the contrary, the creation of an MDL will allow mom and pop companies some measure of economy of scale and the ability to obtain quality representation that they may otherwise be unable to find. It is implausible that an MDL would be organized by the presiding judge in a way where only large claims are heard first, while smaller claims are shoved to the back of the line.
Third, the author argues that an MDL judge will have "a heightened temptation … to retreat to one-size-fits-all coverage conclusions." But as shown above, many issues are truly one-size-fits-all across many of the cases, and certainly, the main insurers used one-size-fits-all insurance forms and then applied a one-size-fits-all policy of denying the claims.
In conclusion, what the author ignores is that despite some differences that obviously exist between claims, there are many common factual and legal questions that can be resolved to expediate the COVID-19 business interruption claims and there is no sense in having each of these issues determined by hundreds of different judges across the country.
Multidistrict litigation was created to avoid "the possibility for conflict and duplication in discovery and other pretrial procedures."[10] Here, there is little doubt that absent an MDL, there will be conflict and duplication among the actions, which should be avoided.
Shanon Carson is a managing shareholder, and John Albanese and Michael Twersky are associates, at Berger Montague.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] See, e.g., LH Dining L.L.C. v. Admiral Indemnity Company, No. 20-cv-01869 (E.D. Pa. July 27, 2020) (ECF No. 30); Rising Dough Inc., et al. v. Society Insurance, No. 20-cv-00623 (E.D. Wis. July 20, 2020) (ECF No. 26).
[2] In re Allura Fiber Cement Siding Prod. Liab. Litig.
, 366 F. Supp. 3d 1365, 1366 (U.S. Jud. Pan. Mult. Lit. 2019).[3] See, e.g., In re: COVID-19 Business Interruption Protection Ins. Litig., Dkt. No. MDL-2942 (COVID-19 MDL), ECF Nos. 462 at 6-8, 543 at 5-6.
[4] See In re Evenflo Co., Inc., Mktg.
, Sales Practices & Prod. Liab. Litig., No. MDL 2938, 2020 WL 2849480, at *1 (U.S. Jud. Pan. Mult. Lit. June 2, 2020).[5] See, e.g., In re: COVID-19 Business Interruption Protection Ins. Litig., Dkt. No. MDL-2942 (COVID-19 MDL), ECF Nos. 543 at 4-6, 544 at 8-9.
[6] See, e.g., In re: COVID-19 Business Interruption Protection Ins. Litig., Dkt. No. MDL-2942 (COVID-19 MDL), ECF No. 758-1.
[7] See, e.g., In re: COVID-19 Business Interruption Protection Ins. Litig., Dkt. No. MDL-2942 (COVID-19 MDL), ECF Nos. 544 at 2-4.
[8] In re CenturyLink Residential Customer Billing Disputes Litig.
, 280 F. Supp. 3d 1383, 1384 (U.S. Jud. Pan. Mult. Lit. 2017).[9] In re: COVID-19 Business Interruption Protection Ins. Litig., Dkt. No. MDL-2942 (COVID-19 MDL), ECF Nos. 462 at 3-6; 544-1 at 6.
[10] In re Library Editions of Children's Books, 297 F. Supp. 385, 386 (J.P.M.L. 1968).
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