When the coronavirus lockdowns occurred, some businesses thought they had insurance that would cover their losses: a business interruption policy. Unfortunately, the insurers have insisted that pandemics are excluded from most of these policies. Or worse, they refuse to cover COVID-related business interruptions unless their policies affirmatively grant coverage for pandemics.
This has led to a great deal of litigation, as you might expect. How much? Much more than you would see after another natural disaster like a hurricane or wildfire. In fact, more than 700 claims against business interruption insurers have been filed nationwide.
A group at the University of Pennsylvania has been keeping track of insurance coverage litigation related to COVID-19 through its COVID Coverage Litigation Tracker (CCLT). It uses a machine learning platform to identify lawsuits and harvest their data from PACER, the federal courts’ docketing system.
Recently, the professor tracking the litigation spoke at an insurance webinar. He had already found 694 business interruption denial lawsuits related to COVID-19. But the very day of the webinar, he found 69 more cases through the CCLT. Some of those are probably duplicates of suits that were filed earlier, but the professor was confident we’ve seen more than 700 such lawsuits.
That’s more business interruption lawsuits than were filed after Hurricanes Ike, Irma and Harvey and Superstorm Sandy combined.
Indeed, COVID-related business interruption cases exceed each of those storms by almost five times. That may be because storms only affect one region of the country, at most, while COVID-19 has interrupted business operations nationwide.
The nature of the disputes are different, too. After a storm, there is little question that the insurance will kick in. It’s mostly a question of how much it will pay, as opposed to what the federal flood program or FEMA will pay. With COVID-19, the insurance companies have simply and flatly denied payment for any claims.
The next step may be multi-district litigation
According to the U-Penn professor, at least three groups of lawyers have filed competing efforts to consolidate these business interruption claims nationwide. However, the consolidation will take time, if it is allowed at all.
One reason any multi-district litigation could take time to set up is that many claims have yet to be filed. And, the professor says, the peak in filings typically comes a year out from the disaster — which, in this case, is a rolling date. Moreover, many cases related to storms are still filed two to three years out from the original event. If COVID-19 business interruption claims follow a similar pattern, it would suggest that many more lawsuits are on their way.