American businesses have filed over 1,300 insurance coverage lawsuits as a result of the COVID-19 pandemic and the executive orders issued by governors, local governments, and health departments suspending the operations of these businesses on either a full or partial basis.
Many of these claims have been brought under the civil authority coverage of the businesses’ commercial property insurance policies. Civil authority coverage is triggered when a policyholder’s business is closed as a result of an executive order prohibiting access to the policyholder’s business following nearby property damage of a type insured against under the policyholder’s insurance policy. Some of the earliest cases involved closure orders following civil unrest in the 1970s. Businesses that suffered no property damage filed civil authority claims for lost income because their businesses were closed on either a full or partial basis because of executive orders issued in response to ongoing civil unrest, a covered peril under the policies, and many nearby businesses suffered property damage because of violent acts.
In August 2020, the U.S. Judicial Panel on Multidistrict Litigation rejected two motions that sought to consolidate these COVID-19 insurance coverage lawsuits. The panel then sought input on whether insurer-specific consolidation was appropriate. Ultimately, the panel decided not to proceed on a consolidated basis for insurers The Hartford, Travelers, Cincinnati Insurance Company, and Lloyd’s of London, but did allow consolidation of federal lawsuits filed against Society Insurance Company (Society).
What set Society apart was its limited geographical scope. Society is a regional insurer, having sold insurance in the six Midwestern states of Illinois, Indiana, Iowa, Minnesota, Tennessee, and Wisconsin. As a result, the judge presiding over the Society multidistrict litigation would only have to construe the policy language under the laws of these six states. In comparison, at the time of briefing, The Hartford was subject to over 65 lawsuits that implicated the laws of 24 states and the District of Columbia.
Because many lawsuits against Society were filed in Illinois federal courts, the Panel decided to consolidate the cases before Judge Edmond Chang of the Northern District of Illinois. To manage the cases in an efficient manner, the Panel suggested that Judge Chang employ any number of pretrial techniques, including establishing state-specific tracks and selecting certain already-briefed motions in individual cases as bellwether motions. See In re: Society Ins. Co. COVID-19 Bus. Interruption Prot. Ins. Litig., MDL No. 2964 (Oct. 2, 2020).
On Sept. 21, 2020, Judge Robert Gettleman of the Northern District of Illinois dismissed a complaint seeking coverage as a result of the COVID-19 pandemic in Sandy Point Dental, PC v. Cincinnati Insurance Company. The dismissal turned on pleading failures. The plaintiff did not allege there was any demonstrable, physical alteration to the property at its dental office as a result of the virus. Judge Gettleman said in dicta that the coronavirus does not physically alter the appearance, shape, color, structure, or other material dimension of the property. Judge Gettleman reasoned that because the plaintiff chose not to allege (and could not likely allege) the coronavirus caused direct physical loss to other property, the plaintiff’s civil authority claim failed and warranted dismissal.
In contrast, Governor J.B. Pritzker’s closure orders in the State of Illinois specifically stated that the coronavirus has caused illness, death, and damage to property. Indeed, we have distinguished the Sandy Point Dental case, as a failure to plead.
Presently, Taft serves as counsel and co-counsel to a variety of individuals and businesses seeking insurance coverage for COVID-19 losses.
- In Dowding, et al. v. Nationwide Mutual Ins. Co., a proposed class action lawsuit, we represent as co-counsel a consumer who bought trip insurance from Nationwide for a cruise. Dowding bought an airline ticket from Chicago to her departure point, but the cruise was cancelled as a result of the pandemic. Rather than refund her airline ticket along with the cancelled cruise fees that were refunded, Nationwide denied her claim because the airline offered her a 90-day voucher for a replacement ticket. Not only was Dowding subject to stay-at-home orders that prevented her travel, but the cruise ships cancelled all cruises. On Sept. 29, 2020, Judge Virginia Kendall of the Northern District of Illinois denied Nationwide’s motion to dismiss and the matter has been referred to a settlement conference to occur on Jan. 14, 2021.
- In Ensemble Theatre Cincinnati v. The Cincinnati Insurance Company et al., Taft represents Plaintiff Ensemble Theatre pursuing civil authority and other claims against Cincinnati Insurance under policies that did not have a virus exclusion. The case was filed in state court in Hamilton County, Ohio. Cincinnati Insurance has filed a motion to dismiss and Ensemble Theatre’s response was due Oct. 23, 2020. No hearing has been set on the motion.
- In Firenze Ventures, LLC, et al. v. Twin City Fire Ins. Co., d/b/a The Hartford, Taft represents as co-counsel restaurants pursuing civil authority and other claims under limited virus coverage provided by Twin City. A hearing was held on October 9, 2020 on Twin City’s motion to dismiss, and the Court has scheduled a follow up conference for Dec. 1, 2020.
In Firenze, Twin City relied on a case that favors the plaintiffs. In Curtis O. Griess & Sons, Inc. v. Farm Bureau Ins. Co. of Nebraska, 528 N.W.2d 329 (Neb. 1995), the plaintiff’s swine were infected with pseudorabies after a tornado carried the virus to plaintiff’s swine-raising operation. The Farm Bureau policy insured against windstorm, a named peril, and infectious diseases were not excluded under the policy. The Nebraska Supreme Court held that where a virus has been transmitted by a covered peril, the covered peril was the proximate cause of the loss. The Court reasoned that without the windstorm, there would have been no infection of plaintiff’s swine. While the presence of the virus downwind was a prior condition, the windstorm was the proximate cause, and therefore the direct cause, of plaintiff’s loss. Since the windstorm directly caused the harm to plaintiff’s swine, the district court properly determined the insurer was liable. In Firenze, we are arguing that the COVID-19 virus was transmitted by the specifically named perils “aircraft or vehicle.” Because the coronavirus was transported to Illinois by aircraft or vehicles, aircraft or vehicles were the proximate cause of the loss.
- In Parson’s Chicken & Fish, LLC, et al. v. Society Ins. Co., Taft represents as co-counsel restaurants pursuing civil authority and other claims against Society Insurance under policies that did not have a virus exclusion. The case was filed in state court in Cook County, Illinois. Rather than remove the case to federal court, Society chose to file a motion for judgment on the pleadings. A hearing on Society’s motion is set for Jan. 20, 2021. Because Society did not remove the case to federal court, the case is not subject to the MDL Panel consolidation order.
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