On The Case

Plaintiffs pushing for COVID-19 insurance MDL: Don’t believe industry’s hype

(Reuters) - Two groups of plaintiffs' lawyers that want the Judicial Panel on Multidistrict Litigation to consolidate hundreds of federal lawsuits asserting demands for business interruption insurance argued in briefs filed Monday that insurers are exaggerating variations in policy language and state insurance law in order to avoid an MDL. And in an unusual development, one of the plaintiffs’ groups has submitted an expert witness declaration to back its arguments.

The expert, insurance law guru Tom Baker of Penn Law and Wharton, is building a database of COVID-19 related insurance coverage cases, focusing on the policy language cited by plaintiffs who claim they were wrongly denied coverage for COVID-19 shutdowns. Baker said he has found that many of the provisions “are nearly identical across insurers.” And even when policy language varies, he said in his declaration, those variations can be sorted into a relatively small number of categories.

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Baker said that’s by the design of the insurance industry, in which “standardization is essential.” The professor’s assertion seems to contradict arguments just last week in briefs by more than a dozen insurers opposing a COVID-19 insurance MDL. As I’ve told you, one of the insurance industry’s central arguments against consolidation of scores of federal suits is that there’s too much variation in individual policies and in state insurance law to achieve any efficiency from an MDL. The insurers contend that consolidation will not streamline the litigation but will instead delay a resolution of claims by policyholders who will have to wait years for the MDL machinery to grind into action.

The plaintiffs' group that submitted Baker’s declaration – DiCello Levitt Gutzler, the Lanier Law FirmBurns Bowen Bair and Daniels & Tredennick – highlighted that “irreconcilable tension” in a reply brief filed Monday. Insurers standardized their policy forms, including relevant provisions addressing property damage and business interruptions arising from government-imposed shutdowns, in part to enable the industry to respond to legal developments, the brief argued. Moreover, the plaintiffs' firms Levin Sedran & Berman, Beasley Allen Crow Methvin Portis & Miles and Golomb & Honik argued in their reply brief in favor of the MDL, the insurance industry adopted a “blanket policy to deny coverage,” with denials “typically based upon the same reasoning.”

Both of the reply briefs pointed out that the U.K.’s Financial Conduct Authority has established a test case procedure for business interruption insurance claims, after analyzing policies from eight insurers and concluding that they could be broken down into no more than 17 categories. The FCA said its test case findings will not resolve all possible permutations of policyholders’ claims, but that it will “resolve some key contractual uncertainties and ‘causation’ issues to provide clarity for policyholders and insurers.” The plaintiffs’ reply briefs and Baker’s declaration suggested that an MDL in the country can provide similar clarity.

“There simply is no public purpose to be served by having a multitude of courts decide how standard form language responds to a common risk,” the DiCello Levitt group said in its filing. “It not only thwarts efficient adjudication; it also thwarts the very idea of standardization.”

The MDL panel is scheduled to consider consolidation of business interruption insurance suits at the end of July. If the judges decide to consolidate the cases, the MDL will be perhaps the biggest litigation to arise from COVID-19.