Judges break down consolidated business interruption claims – boost for insurers

A panel of judges has preemptively moved to prevent 1,000 COVID-19-related business interruption (BI) insurance lawsuits from consolidating, which would have swamped the one judge overseeing all the cases.

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Last week, a group of judges said that it would be too unwieldly for one judge to administer over 1,000 BI cases from all across the US, ruling that it would be more efficient to have the courts currently hearing the cases decide whether the financial impact of COVID-19 triggered coverage for insurers such as Hartford Financial Services Group, The Travelers Companies, and Lloyd’s.

According to an order written by US District Judge and panel chair Karen Caldwell, letting the judges currently hearing the BI cases decide whether coverage exists “will result in quicker and more efficient resolution of this litigation.” This would be preferable, Caldwell said, over having one judge attempting to organize and resolve the core policy interpretation issues for all 1,000 cases.

The panel also added that some BI cases have already reached a point wherein the presiding local judge is ready to decide over the coverage issue – consolidating these cases would have ruined any progress made, the panel said, especially with businesses on the line.

“Time is of the essence in this litigation,” Caldwell explained in the order. “Many plaintiffs are on the brink of bankruptcy as a result of business lost due to the COVID-19 pandemic and the government closure orders.”

Bloomberg reported that while the panel shot down any plans to consolidate BI claims, it did find benefit in the merging of 34 cases against insurance carrier Society Insurance. The panel said that the 34 Society cases are grouped together in Midwestern states rather than from all over America.

“This suggests to us that this litigation presents a manageable controversy that can best be streamlined by proceeding before a single judge,” Caldwell wrote.

The decision has been met with support from the insurance industry.

“This is the correct result,” Insurance Information Institute lawyer and member Michael Menapace told Bloomberg in an email statement. “There are no efficiencies to be gained by combining different insurers who write different policies for different policyholders who are in different industries and made claims under different factual scenarios.”