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Law360 (October 27, 2020, 5:46 PM EDT) --
In the piece, Reich outlined a pattern of behavior in which litigators manipulate the American judicial system, using it to circumvent our nation's traditional regulatory procedures and practices. Through the process of regulation through litigation — Reich's aptly coined term — unscrupulous attorneys utilize lawsuits as a tool to establish judicial precedent, effectively imposing de facto regulation over the industry they wish to target.
Whether it's within the tobacco industry or the firearms business, litigators have previously used this technique to affect policy and alter law in their favor. It's undeniably an insidious scheme — but nevertheless an effective one. Now, trial lawyers are at it again, upending the legal and regulatory systems for their own benefit. Only this time, they're using the suffering caused by COVID-19 to target a critical sector of the American economy: the insurance industry.
Keen observers of the legal sphere likely have noticed a growing trend as of late: the increasing frequency of COVID-19-related business interruption lawsuits. Across the nation, litigants have filed over 1,300 suits against insurance companies.
Interestingly, though, seemingly all those cases make essentially the same argument. They each claim insurers should be held liable for the financial damages incurred due to COVID-19 and the resulting economic lockdowns, despite Congress already providing nearly $350 billion in relief aid. If that sounds like a coordinated effort, that's because it is.
Why go through all that trouble, though? For trial lawyers, there's a lot of money to be made in suing insurance companies for COVID-19 relief. But there's a problem: On this issue, plaintiffs simply don't have the law on their side.
Business interruption insurance has generally been understood to protect against losses caused by physical destruction or property loss. According to the National Association of Insurance Commissioners, business interruption insurance doesn't typically cover losses related to a reduction of services or viral contamination.
This makes sense because if insurers were forced to cover the costs of every business across the nation affected by the lockdown, the insurance industry would collapse into bankruptcy. And the industry's assets, needed for assistance during hurricanes, wildfires and other disasters, would cease to exist.
But for greedy trial lawyers, broader considerations for the economy always elude them. They want to profit off the backs of insurers and businesses struggling under COVID-19 — and they are using the process of regulation through litigation as a means to that end.
Indeed, this campaign to flood America's civil court system is straight out of the trial lawyer's playbook. These civil attorneys first concoct far-flung legal theories which, conveniently, happen to further their own ambitions. They then market these theories to potential plaintiffs — individuals and businesses harmed by COVID-19 and desperate for relief. And after the lawyers have inundated the judicial system with thousands of meritless lawsuits, they wait for an activist judge to effectively rewrite the law by ruling in their favor.
Such a ruling would establish the needed judicial precedent — a model for other courts to follow — providing the legal basis for insurers to bear financial responsibility for business losses associated with COVID-19. This creates a snowballing effect. One court's decision influences a second, the second's is then cited as precedent for the third, and so on.
The pattern continues until once plain reading of the general policy is lost under the rising tide of judicial precedent. In this way, trial lawyers can regulate the insurance market without ever passing a single piece of legislation. That is the power of regulation through litigation, and as is readily apparent, the consequences of that scheme are quite dangerous.
As Reich foresaw in his op-ed nearly 20 years ago, trial attorneys' efforts to regulate industries through the judicial system create blatant end-runs around the democratic process. Their business interruption campaign not only threatens the integrity of the insurance industry and the American economy more generally, but it also weakens our nation's fundamental democratic institutions.
Americans' elected representatives — not the trial bar — should have the authority to regulate business within the U.S. The courts must restore that balance of power by rejecting the dreaded return of regulation through litigation.
Sherman Joyce is the president of the American Tort Reform Association.
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