If you own a business, whether a franchisor, a franchisee or an independent owner, you have likely dusted-off your business owner’s policy (BOP) to review the terms related, or seemingly related, to the viability of a claim due to the economic impact of the COVID -19 pandemic. Look for “business interruption’ terms. Do you have a claim for lost business revenue?  Did you call your insurance agent for advice and receive the same response as others have – silence?

I assumed from my own experience and others that this coverage issue was going to blow-up in the Courts, and indeed it has.

Here is a decision from the Federal Court’s Judicial Panel on Multidistrict Litigation (“the Panel”), dated August 12, 2020, which gives us an idea of the litigation tsunami already hitting the Courts.

Concerning the matter of In re Covid-19 Bus. Interruption Prot. Ins. Litig., 2020 U.S. Dist. LEXIS 144446, the Panel heard oral argument by videoconference on July 30th; wherein, Plaintiff attorneys argued for multidistrict centralization of the current 278 lawsuits, involving over one hundred insurers, in 48 Federal Court Districts. The purpose of centralization would be to streamline the insurance claims and shorten the length and expense of litigation.

The insureds argued that insurance industry centralization of the lawsuits was absolutely essential (quote “time of the essence”) due to the near-bankruptcy of many of these Plaintiffs. Plaintiffs in 175 actions or related actions submitted responses to the Panel on this issue. Some argued that the centralization be organized on a state-by-state basis, while others urged a regional basis, or an insurer-by-insurer basis.

The Court Panel turned down the Plaintiffs’ applications in all but one regard. The Panel ordered the Clerk of the Panel to issue orders naming four insurers, or groups of related insurers, and directing these parties to show cause why actions involving these carriers or groups should not be centralized within the Federal Court system. These carriers/groups are as follows: Certain Underwriters at Lloyd’s, London; Cincinnati Insurance Company; the Hartford insurers; and Society Insurance. 

The Panel turned down the Plaintiffs on various grounds, including the dissimilarity of the claims or of the policies, as well as the difficulties in managing the cases in “Multi-district Litigation” (MLD).  The Panel concluded:

[P]ut simply, the MDL that movants request entails very few common questions of fact, which are outweighed by the substantial convenience and efficiency challenges posed by managing a litigation involving the entire insurance industry. The proponents’ arguments that these problems can be overcome are not persuasive. We therefore deny the motions for centralization.

However, the Panel did not close the door on future applications for MDL:

The Panel requires a better understanding of the factual commonalities and differences among these actions, as well as the efficiencies that may or may not be gained through centralization, before creating an insurer-specific MDL.

If you believe you are entitled to a recovery for COVID-19-related losses from your carrier, you are not alone. The lawsuits identified in the above-decision involve food industry, medical, dental and numerous retail business owners which have been rocked by the pandemic.

Seek legal advice from an attorney and understand that your policies contain claims expiration language which may prevent you from filing claims after a lapse of time. Therefore, time is of the Essence.

See decision here: https://advance.lexis.com/api/document?collection=cases&id=urn:contentItem:60K4-4TN1-F30T-B2RR-00000-00&context=

BE ADVISED that these comments are not intended as legal opinions and are not to be relied upon as legal advice. If you need franchise-related legal advice, please contact us to discuss the specifics of your franchise business.

© KilcommonsLaw, P.C. 2020