Insurers Won’t Face Consolidated Claims Over Virus Losses

Hartford Financial Services Group and other insurers won’t have to face a consolidation of hundreds of billions of dollars’ worth of business-interruption claims tied to the Covid-19 outbreak, a group of judges concluded.

Having one judge oversee more than 1,000 cases — grouped by individual insurers — would be too cumbersome and it’s more efficient to have courts around the U.S. decide whether the coronavirus fallout triggered coverage, the legal panel ruled Friday.

It was the last gasp by plaintiffs’ lawyers to pull the cases together. They’re seeking to recover losses from the economic blows wrought by the virus, which has prompted a wave of bankruptcy filings. They argued having one judge oversee the litigation would cut out duplication and legal costs.

“Rather than have one judge attempt to organize and resolve the core policy interpretation issues,” having judges already hearing the cases decide if coverage exists “will result in quicker and more efficient resolution of this litigation,” U.S. District Judge Karen Caldwell, the panel’s chair, said in a nine-page order.

Insurers warn the tidal wave of business-interruption suits could swamp them. Analysts warned this year that the industry could face at least $100 billion in losses from the pandemic, which could wind up being the most in insurance history.

“This is the correct result,” Michael Menapace, a lawyer and member of the Insurance Information Institute, said in an emailed 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.”

Rockets’ Claim

Firms ranging from the owner of National Basketball Association’s Houston Rockets to upscale New Orleans restaurants argue in court filings the virus has devastated their businesses and triggered policies they purchased to cover such interruptions.

The insurers counter that since the virus hasn’t caused any physical damage — unlike a hurricane or earthquake — there’s no coverage. Different judges around the country have come to differing decisions on that issue.

Having a single judge decide the coverage issue would eliminate conflicting rulings that could clog appellate courts, Mark Lanier, a Houston-based lawyer for business owners, argued before the panel.“Now we are going to see a litigation zoo with different results all over the country,” Lanier said in an email Friday.

The panel, which oversees multidistrict litigation in U.S. federal courts, noted some cases already have progressed to the point where a judge is ready to decide the coverage issue and consolidating them would slow down their progress.

“Time is of the essence in this litigation,” Caldwell wrote. “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.”

The case is IN RE Hartford Covid-19 Business Interruption Protection Insurance Litigation, MDL No. 2963.

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