Insurer Wants Civil Authority Claims Tossed In COVID-19 MDL

By Shawn Rice
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Law360 (May 7, 2021, 5:31 PM EDT) -- Society Insurance Co. has urged an Illinois federal judge to take a favorable bellwether ruling and toss all claims in the COVID-19 business interruption multidistrict litigation asking for civil authority and contamination coverage for businesses' pandemic-related losses.

U.S. District Judge Edmond E. Chang's denial of civil authority and contamination coverage in three bellwether cases should be applied to the businesses' 39 suits asking for that coverage as well as two suits asking solely for civil authority coverage, Society said in Thursday's filing.

"In line with the purpose of the bellwether mechanism to allow the court to streamline this MDL proceeding, this court should dismiss from the remaining MDL actions all claims that are premised on civil authority and/or contamination coverage provisions," Society said.

Judge Chang tested Society's motions to dismiss and for summary judgment in three bellwether cases on policy interpretation issues over the denial of coverage for the pandemic that are common to most of the 40-plus cases folded into the MDL, which was formed by the Judicial Panel on Multidistrict Litigation.

Two of the suits were brought in Illinois federal court by Chicago-area restaurants, theaters and bars dubbed the "Big Onion plaintiffs," and a Glenview, Illinois, eatery, called Valley Lodge. A group of bars and restaurants known as the "Rising Dough plaintiffs" filed the third federal suit in Wisconsin.

In the February ruling, Judge Chang allowed the restaurants, bars and theaters to proceed on business income coverage claims. But the judge dismissed the policyholders' claims under civil authority coverage, saying the stay-at-home orders did not prohibit them from accessing the properties.

Judge Chang also said the policyholders could not tap into the contamination provision, which extended coverage for lost business income and cleaning costs associated with closures due to contamination. The policyholders did not claim that they closed based on an actual COVID-19 contamination, the judge said.

Society has already asked for an immediate appeal of Judge Chang's refusal to dismiss the policyholders' claims for business income coverage. It argued the Seventh Circuit should be allowed to answer whether the policyholders' loss of use of property is a "direct physical loss" under its policies.

Counsel for Society declined to comment on Friday.

Counsel for the policyholders did not respond to requests for comment.

The policyholders are represented by co-lead counsel Adam J. Levitt of DiCello Levitt Gutzler LLC; W. Mark Lanier of The Lanier Law Firm PC; Timothy W. Burns of Burns Bowen Bair LLP; Shelby Guilbert Jr. of McGuireWoods, Shannon McNulty of Clifford Law Offices, and others.

Society is represented by co-lead counsel Laura A. Foggan and April N. Ross of Crowell & Moring LLP; Thomas B. Underwood of Purcell & Wardrope Chtd., and others.

The case is In Re: Society Insurance Co. COVID-19 Business Interruption Protection Insurance Litigation, MDL number 2964, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Celeste Bott and Jeff Sistrunk. Editing by Peter Rozovsky.

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