By Shawn Rice | June 15, 2021
On the heels of a ruling in three bellwether cases in multidistrict litigation over Society Insurance Co.’s widespread denial of pandemic-related coverage, an Illinois federal judge on Tuesday refused the insurer’s bid for an appeal concerning claims for business interruption coverage.
U.S. District Judge Edmond E. Chang rejected Society’s call to send to the Seventh Circuit the question of whether a policyholder’s loss or partial loss of use of property is “direct physical loss of” its property. The judge noted the “intricacy of the policy’s provisions and complexity and fact-rich complaints.”
Society repeats many of the same arguments in its dismissal and summary judgment motions, the judge said. The denial of the motions on the business interruption claims focused on the fact-bound question of whether Society’s policy “is nothing if not ‘long’ and ‘detailed’ and ‘obscure,'” Judge Chang added.
And without certification of the liability question, Judge Chang also found no need to have the Seventh Circuit consider the viability of the policyholders’ bad faith claims, as those claims won’t affect discovery. Therefore, the likelihood of the case ending as a result of any appellate decision on the bad faith claims “is close to zero,” according to the judge.
“Appealing now would be premature, distract the parties from advancing the case in the district court, and would not speed this court’s progress of the litigation toward that final judgment,” the judge said.
At dispute is Judge Chang’s selection of dismissal or summary judgment motions filed by Society in three cases — two filed in Illinois federal court and one filed in Wisconsin federal court — to serve as bellwethers to address policy interpretation issues common to the 40-plus cases that are consolidated in the MDL.
The Illinois cases are comprised of Chicago-area bars, theaters and restaurants dubbed the “Big Onion plaintiffs,” and an eatery in Glenview, Ill., called Valley Lodge. The Wisconsin case involves bars and restaurants known as the “Rising Dough plaintiffs,” located in Wisconsin, Minnesota and Tennessee.
In February, Judge Chang allowed the policyholders in all three bellwether cases to continue with claims for business interruption coverage under the policies. The Big Onion plaintiffs and Valley Lodge were also permitted to proceed with allegations that Society denied their insurance claims in bad faith.
Judge Chang wasn’t convinced that physical loss or damage requires a tangible alteration to physical property. He ruled, however, that the claims under the civil authority, contamination and extra expense coverages, as well as the sue and labor provision of Society’s standard policy, can’t proceed.
Society asked for an appeal to the Seventh Circuit in March, arguing that the majority of courts applying Illinois law say a policyholder’s inability to use its property due to the presence of the coronavirus and government shutdown orders wasn’t a direct physical loss.
But in Tuesday’s ruling, Judge Chang declined to give Society that appeal. Having the Seventh Circuit weigh in on the business interruption coverage issue wouldn’t advance the litigation, the judge said, noting that he has already ordered mediation and discovery to proceed “as quickly as practicable.”
Counsel for the parties didn’t immediately respond to requests for comment Tuesday.
The policyholders are represented by co-lead counsel Shelby S. Guilbert Jr. of McGuire Woods LLP, Adam J. Levitt of DiCello Levitt Gutzler LLC, Timothy W. Burns of Burns Bowen Bair LLP, Shannon M. McNulty of Clifford Law Offices PC and W. Mark Lanier of The Lanier Law Firm PC.
Society is represented by co-lead counsel Thomas B. Underwood of Purcell & Wardrope Chtd. and Laura A. Foggan of Crowell & Moring LLP..
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, Eastern Division.
–Additional reporting by Celeste Bott. Editing by Regan Estes.