By Jeff Sistrunk

Law360 (September 24, 2020, 10:05 PM EDT ) The Judicial Panel on Multidistrict Litigation grappled Thursday with whether to create five multidistrict litigation cases to centralize COVID-19 business interruption suits against four insurers and a group of Lloyd's of London underwriters, an approach one policyholder attorney called a "sensible middle ground" after the panel refused to form one nationwide MDL.

During a series of five hearings that spanned two and a half hours, the JPML heard arguments from more than 30 attorneys over whether to establish five separate "single-insurer" MDLs to centralize COVID-19 coverage actions pending in federal district courts against The Hartford, Cincinnati Insurance Co., Society Insurance Co., Travelers and a slew of Lloyd's underwriters.

The panel's ultimate ruling will determine if nearly 300 suits against those insurers — which comprise a sizable chunk of the more than 700 federal COVID-19 coverage disputes around the country — will move forward individually or on some sort of consolidated basis.

A number of attorneys for policyholders strongly endorsed the concept of single-insurer MDLs. Benjamin Widlanski of Kozyak Tropin & Throckmorton LLP, who is representing a pair of Florida restaurant operators in suits against Lloyd's underwriters, told the seven-member JPML that the single-insurer approach is a "sensible middle ground between one industrywide case and no consolidation whatsoever."

The JPML on Aug. 12 refused to create one MDL for all the federal COVID-19 coverage cases, which involve in excess of 100 insurers.

U.S. District Judge R. David Proctor asked Widlanski what he and his co-counsel would do first if they were granted their wish to centralize all the cases against the Lloyd's underwriters.

"There should be a uniform complaint filed, and a uniform motion to dismiss responding to that complaint," Widlanski replied.

At the same time, Widlanski added, discovery should proceed on "uniform matters of common fact," such as the "epidemiological and biological science" of COVID-19 and the underwriters' understanding of their policy language and "any direction they have given to their adjusters."

Throughout Thursday's hearings, Senior U.S. District Judge Ellen Huvelle hammered attorneys supporting centralization over whether the cases against a given insurer share enough common fact — as opposed to legal — issues to justify the creation of an MDL.

In a back-and-forth with W. Mark Lanier of The Lanier Law Firm PC, who represents an Alabama-based clothing retailer in a case against Cincinnati, Judge Huvelle said the motions to dismiss already lodged by Cincinnati in several dozen cases appear to focus on purely legal issues relating to prerequisites for coverage in the insurer's policies.

"Generally, we do not centralize if somebody is doing legal analysis; in fact, I doubt we ever have," Judge Huvelle said. "So we are a little bit concerned that if [judges] decide to dismiss those cases, then we won't get centralization, and we are sticking our foot into a hornet's nest at the moment."

But Lanier said he believes a number of the cases will survive motions to dismiss and move forward to discovery, pointing out that one Missouri federal judge has already denied Cincinnati's bid to dismiss a suit filed by a group of hair salons and restaurants. Moreover, Lanier argued, parties would benefit if an MDL transferee judge issued a definitive ruling on the proper interpretation of key policy terms.

"These policies all need some type of a centralized ruling on motions in some type of way, where you don't have this fragmented disarray that ultimately winds its way through all of the appellate courts," he said. "If you are ever going to stick your toe into that water, this may be the case to do it."

U.S. District Judge Matthew F. Kennelly later queried Cincinnati's attorney, Daniel G. Litchfield of Litchfield Cavo LLP, as to why it wouldn't make sense for a single judge to resolve the arguments raised in the insurer's motions to dismiss, rather than "20, 30 or 40 judges all ruling on essentially the same motion, and probably not all coming up with the same result." Cincinnati, like the Lloyd's underwriters, Hartford, Society and Travelers, opposes centralization in any form.

Litchfield noted that the outcomes of its motions to dismiss are likely to depend on which state's law applies. Judge Kennelly, however, said it is common in product liability MDLs for a single judge to interpret the laws of multiple states.

When Litchfield contended that product liability MDLs typically involve common factual issues, Judge Kennelly pointed out that a number of Cincinnati policyholders have taken the position that such issues abound in these coverage disputes.

"If the policy language is determined to be ambiguous, then that becomes a factual issue," the judge said. "There may be a question about whether a virus sitting on a counter constitutes physical damage or not."

Litchfield said Judge Kennelly's hypothetical question would still raise many individualized questions about how each policyholder has responded to the COVID-19 pandemic.

"The experience of a dental clinic in Chicago will not be the same factually, I think, as the experience of a restaurant in Alabama," he said.

Counsel for the other insurance carriers also expressed concerns over a lack of common factual issues in the cases against them, and the potential consequences of uprooting cases from their current courts and transferring them to an MDL. For instance, Theodore Boutrous of Gibson Dunn & Crutcher LLP, who represents Travelers, said his client's arguments in its various motions to dismiss have been based in large part on the facts of the specific government shutdown orders affecting each policyholder and the degree to which each policyholder was required to close or reduce its operations.

"The legal issues are clear, and judges are, on the language of the policies and the exclusions, dismissing these cases," Boutrous said, noting that Travelers has already won dismissal of two cases in California federal courts. "And we think the home courts should be entitled to decide those legal issues before there is any need for an MDL proceeding. This is vastly premature."

The insurers were not the only ones arguing against the formation of single-insurer MDLs on Thursday, as attorneys for several policyholders also spoke out against centralization. One of those lawyers, Shelby S. Guilbert Jr. of King & Spalding LLP, said his clients — a group of Chicago-area restaurants, taverns and movie theaters pursuing cases against Society — would face undue delay if their cases were transferred to an MDL.

Guilbert pointed out that he and other attorneys have already sought to reassign all the cases pending against Society in Chicago's district court to the same judge. If that motion is granted, the cases pending against Society in several other states could "proceed without the need for an Illinois federal court to weigh in on fact issues particular to how the pandemic has unfolded across state lines," he said.

"On the other hand, the creation of an MDL would only slow this process down through the delays inherent in the transfer of all the cases to a single court, the creation of a leadership structure and figuring out what to say in a consolidated amended complaint," Guilbert argued. "Frankly, my clients don't have the luxury of time to wait months for those things to transpire."

The JPML consists of U.S. District Judges Karen K. Caldwell, R. David Proctor, Ellen Segal Huvelle, Catherine D. Perry, Nathaniel M. Gorton, Matthew F. Kennelly and David C. Norton.

The cases are In Re: Certain Underwriters At Lloyd's, London COVID-19 Business Interruption Protection Litigation, MDL No. 2961, In Re: Cincinnati Insurance Co. COVID-19 Business Interruption Protection Litigation, MDL No. 2962, In Re: Hartford COVID-19 Business Interruption Protection Litigation, MDL No. 2963, In Re: Society Insurance Co. COVID-19 Business Interruption Protection Litigation, MDL No. 2962, and In Re: Travelers COVID-19 Business Interruption Protection Litigation, MDL No. 2965. 

--Editing by Michael Watanabe.

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