The U.S. Judicial Panel on Multidistrict Litigation (MDL) faces a tough decision this week. It must decide whether to consolidate hundreds of lawsuits in which businesses allege that their insurance companies wrongfully denied their COVID-19 related business interruption coverage. Collectively, these lawsuits seek billions of dollars in damages—so the stakes are extraordinarily high for the parties involved.
There are, of course, two sides to the coin.
From the plaintiffs’ perspective, consolidation would lend to greater efficiency. One court would determine questions of threshold, thereby avoiding a web of inconsistent rulings that would otherwise result from multiple courts deciding such issues.
Defendants see another side of the coin—one in which multiple insurers will suffer delays on their rulings due to the wide variation in insurance laws, policy language, and level of government shutdown orders issued in different states.
If the MDL panel decides to consolidate the cases—which now lie in various federal courts in Texas, California, New, York, Illinois, and Florida—they will also need to determine which court should handle the MDL.
Of “National Importance”
One plaintiff law firm that filed a request for consolidation described this business interruption coverage issue as “one of national importance and great significance to the ultimate survival of many businesses.”
The complaint supports this statement with a quote from President Trump who said in an April 2020 press conference, “[y]ou have people that have never asked for business interruption insurance [payouts] and they’ve been paying a lot of money for a lot of years for the privilege of having it. And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
Opposition to consolidation includes most law firms for the defendants in these business interruption claims—along with a handful of plaintiffs. American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies remark that federal judges assigned to the MDL would suffer a burdensome task and that the prudent decision would be to keep pending cases in the courts that are familiar with given state laws pertaining to each claim.
The MDL panel meets Thursday, July 30, 2020.