As business interruption claims continue to pile up in the wake of the COVID-19 pandemic, questions are beginning to arise over how to best resolve the mass influx of expected claims. As courts across the country weigh various proposals including multidistrict litigation and class action status, federal and state executives and legislatures are beginning to offer their own solutions.
This past week, two claimants began the push for a coordinated approach to resolving such claims through a nationwide federal multidistrict litigation program. In a petition filed in the United Stated Judicial Panel on Multidistrict Litigation, the pair of restaurants argue that the issue of whether business interruption insurance policies will cover losses incurred by businesses forced to shutter their business because of governmental mandates. The petitioners highlight that this is an issue “in every corner of the country,” affecting not only the restaurant and hospitality sector, but also retail, manufacturing, real estate, professional services, and the gig economy, among others and “is one of national importance and great significance to the ultimate survival of many businesses.”
The petitioners argue that all such claims for business interruption coverage focus on common factual and legal issues centered around a key factual question – do the Governmental Orders trigger coverage under the business interruption insurance policies and do any exclusions, particularly those related to viruses or pandemics, apply.
The petitioners, whose restaurants are located in Philadelphia, argue that the U.S. Federal District Court for the Eastern District of Pennsylvania is a prudent venue given its location close to the Northeastern corridor that has borne the brunt of pandemic.
The filing comes a week after Travelers Casualty Insurance Company filed suit in a California federal court seeking a declaratory judgment that it is not obligated to cover business insurance losses for claims arising from the COVID-19 pandemic, becoming the first major insurer to seek a declaratory ruling on the issue. The filing in U.S. District Court for the Central District of California in Los Angeles comes in response to state court claims filed by Los Angeles law firm Geragos & Geragos seeking coverage under business insurance policies it purchased from Travelers. The Geragos suit is among a wave of similar lawsuits filed across the country, with some seeking class action status. Many more claims are expected in the future as the nation addresses the economic hardships caused by the COVID-19 pandemic.
To highlight the national importance of this issue, the petitions cite President Trump’s remarks during his April 10, 2020 press conference in which he stated “[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.” The President’s comments come following direct appeals to the President by restaurant industry leaders, including celebrity chefs such as Wolfgang Puck, to push insurers to pay business interruption claims.
The insurance industry, led by Evan Greenberg, CEO of the Chubb and a member of Trump’s Great American Economic Revival Industry Group for the Financial Services sector, urged extreme caution. In a recent interview, Greenberg asserted that collective losses stemming from COVID-19 would amount to the “largest single loss in insurance industry history”. Greenberg asserted that unlike natural disasters like hurricanes or earthquakes, which have limited impact in geography or time, a pandemic has no such boundaries and would hit the insurance industry at once, which “would bankrupt the industry.”
To counteract the pressure put on by policyholders groups, the American Property Casualty Insurance Association and the Reinsurance Association of America, backed by trade associations in affected businesses, proposed a government-backed “recovery” fund that would send money to businesses impacted by COVID-19 as an alternative to a lengthy and complex claims process. Separately, the National Association of Insurance Commissioners, representing insurance regulators of all 50 states and the District of Columbia, urged caution against efforts to force insurers to “retroactively pay unfunded COVID-19 business interruption claims that insurance policies do not currently cover.”
Despite the President’s comments, administration officials have been careful not to tip their hand and has remained in communication with both insurance industry leaders and policyholder representatives, though no decisions have been made.
CMBG3 Law continues to monitor these developments. If you’d like to learn more about how CMBG3 can help you to navigate these complex coverage and claims issues, please contact Eric Robbie at 617-279-8209 or by email.