Tim has been appointed Interim Co-Lead Counsel in the consolidated class litigation relating to COVID-19 business interruption losses captioned:  Troy Stacy Enterprises Inc. v. The Cincinnati Ins. Co. (S.D. Ohio).  0057 – ORDER CONSOLIDATING CASES AND APPOINTING INTERIM CO-LEAD COUNSEL- Swearingen Smiles LLC et al. v.Th – Troy Stacy Enterprises Inc. v. The Cincinnati Insurance Company – ohsd – 1-2020-cv-00312


“The four firms here also have experience litigating class actions and knowledge of the applicable law. Adam Levitt and DLG were recently appointed interim co-lead counsel in a similar action. See The K’s Inc. v. Westchester Surplus Lines Ins. Co., No. 1:20-cv-01724-WMR, Dkt. Nos. 56-57 (N.D. Ga. Oct. 5, 2020). Susman Godfrey has served as interim class counsel in large insurance litigation before. E.g., 37 Besen Parkway, LLC v. John Hancock Life Ins. Co. (U.S.A.), No. 15-cv-9924, Doc No. 26 (S.D.N.Y. May 2, 2016). The legal teams at the Lanier Law Firm and Burns Bowen Bair LLP also have extensive experience in complex litigation, including insurance litigation.”

Tim has been appointed Co-Lead Counsel in In Re:  Society Ins. Co. COVID-19 Business Interruption Protection LitigaCo-Lead Ordertion (N.D. Ill.).  Co-Lead Order

“They bring the right mix of expertise in the pertinent area of law, leadership experience in other MDLs or class actions, and representativeness of different perspectives (both substantively in Illinois and non-Illinois cases and strategically in factual development and in considering the pluses and minuses of mass actions versus class actions).”

By Jeff Bowen

The Biometric Information Privacy Act (BIPA), a 2008 Illinois law governing the collection, maintenance and disclosure of biometric data, has generated thorny jurisdictional issues for years.  The statue places limitations on the collection and use of such data, mandates public disclosure of a plan governing the scope of use, and requires written consent from individuals whose data is obtained.  BIPA also provides a private right of action for persons aggrieved by violation of those requirements.  Under the 2016 Supreme Court case Spokeo v. Robins, 136 S. Ct. 1540 (2016), the harm alleged under a data privacy statute like this must be both concrete and particularized in order to give rise to standing in federal court.  District courts applying Spokeo to BIPA claims have reached quite different results, with some allowing the claims to proceed and others remanding to state court or dismissing the claims outright.  Earlier this year, the Seventh Circuit provided significant guidance as to the type of BIPA claims that may trigger federal jurisdiction, with individualized informational injury potentially meeting the standing threshold but violation of general disclosure requirements falling short.  Bryant v. Compass Group USA, Inc., 958 F.3d 617 (7th Cir. 2020).  The Bryant decision provides important information for both defense counsel and plaintiffs, though several other issues remain in play, such as the scope of preemption under statutes governing collective bargaining agreements and the availability of insurance coverage.

BIPA and Early Federal Court Decisions

BIPA subjects companies to potential liability for collecting, maintaining, or disclosing the biometric information of individuals without certain required disclosures and written consent.  740 Ill. Comp. Stat. § 14/1 et seq. (2008).  “Biometric identifier” includes a “retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry,” while “biometric information” includes any information based on a biometric identifier that is used to identify an individual.  Id. § 10. The Act requires publication of a retention schedule and guidelines for “permanently destroying biometric identifiers and biometric information.” Id. § 15(a).  BIPA also prohibits the collection or receipt of biometric information without informing the subject of such collection and its purpose and then obtaining written consent.  Id. § 15(b) Other provisions address the sale, disclosure, and retention of biometric information.  Some BIPA claims involve biometric data collected from customers, such as through ticket sales or vending machines.  Other cases involve claims brought by employees, whose employers use biometric data to track working hours or restrict access to certain hazardous or sensitive materials.

The Illinois supreme court has held that individuals who have suffered no injury beyond the violation of statutory rights under BIPA may still present a claim. Rosenbach v. Six Flags Ent. Corp., 129 N.E.3d 1197 (Ill. 2019).  In Rosenbach, the claimant’s 14-year-old son had provided fingerprint data in order to obtain a season pass to the amusement park.  She alleged that she had not received any information about the collection of his fingerprints, nor had she provided written consent, and she sued on behalf of a purported class of similarly situated park attendees.  The defendants argued that she had alleged no actual or threatened injury, but the court held that violation of BIPA obligations “constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach.”  Id. at 1206. Because such a person is “aggrieved” within the meaning of the provision creating a private right of action, she is “entitled to seek recovery” without pleading any additional consequences. Id.

The availability of this private right of action gives rise to important standing questions in federal court, even when parties have satisfied other diversity requirements.  Under Spokeo v. Robins, 136 S. Ct. 1540 (2016), claimants must allege an injury in fact that is both concrete and particularized in order to satisfy standing requirements.  In that case, the Ninth Circuit had held that a search engine’s alleged publication of inaccurate information about the plaintiff in violation of the Fair Credit Reporting Act was sufficiently individualized to confer standing, but the Supreme Court reversed, remanding the case for determination of whether the injury was also sufficiently concrete.  Id. at 1548-49.  The Court stressed that the alleged injury need not be tangible in order to be concrete, but nor could it be a bare procedural violation.  In the wake of Spokeo, violations of purely statutory rights may give rise to justiciable claims in state court, but federal jurisdiction requires specific allegations of concrete and particularized harm to the individual claimant.

Courts must therefore decide whether alleged violations of BIPA satisfy the Spokeo standard, and decisions rendered over the past several years reflect a variety of conclusions.  Several district courts recognized allegations of concrete and particularized harm.  One court found standing based on the sale of human resources software that collected and stored biometric data on employees without disclosure or consent.  Figueroa v. Kronos Inc., 2020 WL 1848206 (N.D. Ill. Apr. 13, 2020).  Another found standing based on the requirement that truck drivers provide fingerprint data in order to gain access to freight at railway terminals, which was obtained and disseminated without consent.  Rogers v. CSX Intermodal Terminals, 409 F. Supp. 3d 612 (N.D. Ill. 2019).  See also Namuwonge v. Kronos, Inc., 418 F.Supp.3d 279 (N.D. Ill. 2019) (finding standing under BIPA § 15(a) for failure to publish a data retention schedule but dismissing other claims for insufficiency of allegations).

By contrast, another court held that alleged anxiety over whether an employer would ever delete biometric information did not confer standing due to the absence of alleged concrete harm.  McGinnis v. U.S. Cold Storage, Inc., 382 F.Supp.3d 813 (N.D. Ill. 2019).  In Aguilar v. Rexnord, No. 17 CV 9019, 2018 WL 3239715 (N.D. Ill. July 3, 2018), the court found that employees forced to clock in through fingerprints obtained without written consent had failed to allege the necessary concrete injury.  Similarly, the creation and retention of unique face templates did not in themselves cause the concrete injury required to establish standing.  Rivera v. Google, Inc., 366 F. Supp. 3d 998 (N.D. Ill. 2018).  See also Heard v. Becton, Dickinson & Co., 440 F. Supp. 3d 960 (N.D. Ill. 2020) (finding insufficient allegations of control by defendant over collected data); Colon v. Dynacast, 2019 WL 5536834 (N.D. Ill. Oct. 17, 2019) (finding lack of standing given absence of allegations that data had been collected without knowledge of the subjects).

At the circuit court level, the Seventh Circuit agreed that union airline workers had satisfied standing requirements based on an obligation to clock in and out with biometric data.  Miller v. Southwest Airlines Co., 926 F.3d 898 (7th Cir. 2019).  The court noted that the need to bargain over employee consent or over the means of tracking time might affect the conditions of employment and that the employees had also alleged a heightened risk of disclosure. The Ninth Circuit also held that the use of facial-recognition technology by Facebook without informed consent satisfied standing requirements because plaintiffs alleged invasion of privacy.  Patel v. Facebook, Inc., 932 F.3d 1264 (9th Cir. 2019).  The Second Circuit, by contrast, held that the video game player plaintiff had effectively consented to the collection of his biometric data by permitting a lengthy scan of his face and proceeding with the creation of a game avatar. Santana v. Take-Two Interactive Software, Inc., 717 F. App’x 12 (2d Cir. 2017).

Bryant v. Compass Group

The Seventh Circuit attempted to synthesize these decisions and provide guidance on jurisdictional concerns in Bryant v. Compass Group USA, Inc., 958 F.3d 617 (7th Cir. 2020).  Bryant used a vending machine in her company break room that required each employee to provide a fingerprint, which was then linked to a payment account set up by that employee.  Id. at 619.  Bryant alleged that her employer instructed employees to provide a fingerprint, and she did so.  She generally understood why her biometric data was being collected but alleged that the lack of disclosure by the machine operator prohibited her from giving informed written consent.  She sued on behalf of a class of similarly situated people, alleging violation of BIPA §15(a) for failure to provide a public schedule of data retention and guidelines and violation of §15(b) for failure to inform her about the collection, use, and storage of her data and failure to obtain her written consent. Bryant filed in state court, but the defendant removed to federal court under the Class Action Fairness Act.  Bryant sought remand to state court, leaving the defendant to argue that the claimant had standing to pursue her claims in federal court.  The panel ultimately concluded that Bryant lacked standing to bring her §15(a) claim but held that she could proceed with her §15(b) claim.

The Bryant panel distinguished between the vindication of public rights and redress for violation of the private rights of an individual plaintiff, relying in part on the Spokeo concurrence penned by Justice Thomas.  While the §15(a) obligation was owed to the public generally, the court had “no trouble concluding that Bryant was asserting a violation of her own rights—her fingerprints, her private information” under §15(b) and that this was “enough to show injury-in-fact without further tangible consequences.”  Id. at 624.  After all, she had alleged invasion of her “private domain,” similar in many ways to an act of trespass.

The court further noted that the alleged inability to give informed written consent satisfied Seventh Circuit case law on standing for informational injury, which requires that the failure to disclose information impairs the “ability to use the information in a way the statute envisioned.”  Id.  Thus, in Groshek v. Time Warner Cable, 865 F.3d 884, (7th Cir. 2018), the plaintiff did not allege concrete injury because he merely received the required information in a larger document, rather than in a stand-alone disclosure, whereas in Robertson v. Allied Solutions, LLC, 902 F.3d 690 (7th Cir. 2018), the plaintiff alleged concrete injury because the failure to provide her with a copy of her background report meant she could not challenge the recission of her employment offer.  In Bryant, too, the failure to provide substantive information about the use and storage of her personal data meant that Bryant could not give the informed consent required by the statute.

In the wake of Bryant, district courts have found no standing for similar general disclosure claims but potential standing for failure to provide information necessary for informed consent. In Cothron v. White Castle System, No. 19 CV 00382, 2020 WL 3250706 (N.D. Ill. June 16, 2020), the plaintiff alleged that White Castle required her to provide a fingerprint in order to access the computer system.  Citing Bryant, the court permitted the claims under §§15(b) & (d) to proceed because they alleged failure to provide the information necessary to permit informed consent. In Kloss v. Acuant, Inc., No. 19 C 6353, 2020 WL 2571901 (N.D. Ill. May 21, 2020), the court remanded § 15(a) claims for lack of standing in light of Bryant and dismissed other claims for failure to allege sufficient facts in support.

Other BIPA Jurisdictional Issues

Bryant resolved many significant jurisdictional questions, but BIPA, of course, will likely continue to generate substantial litigation.  Although Bryant set forth the type of claims that may give rise to standing in federal court, allegations of an individual informational injury do not guarantee federal jurisdiction.  For example, employees subject to collective bargaining agreements governed by state or federal statutes may need to bring their claims before an adjustment board or similar entity.  Even though the employees in Miller v. Southwest Airlines, 926 F.3d 898 (7th Cir. 2019), alleged sufficient concrete and particularized harm to confer standing, the Railway Labor Act required their claims to be heard by an adjustment board.  Moreover, the scope of claims that must be submitted to such an entity continues to generate litigation.  One court found that that § 301 of the Labor Management Relations Act preempted BIPA claims arising after the collective bargaining agreement governing the plaintiff’s employment went into effect but permitted the plaintiff to proceed with claims relating to alleged violations prior to that date.  Peatry v. Bimbo Bakeries USA, Inc., 2020 WL 919202 (N.D. Ill. Feb. 26, 2020).  See also Darty v. Columbia Rehabilitation and Nursing Ctr., 2020 WL 3447779 N.D. Ill. June 24, 2020) (agreeing that the LMRA preempted BIPA claims but noting that the named plaintiff was not herself a member of the union, thus requiring remand to state court).  Another court found that the Illinois Worker Compensation Act only preempted accidental claims, thereby permitting an assembly worker’s BIPA claims against the manufacturer to proceed. Treadwell v. Power Solutions Intl., 427 F.Supp.3d 984 (N.D. Ill. 2019).

Similarly, the Bryant decision does not preclude enforcement of valid arbitration clauses, and plaintiffs whose claims fall within the scope of an employment arbitration agreement may need to arbitrate those claims. In Crooms v. Southwest Airlines Co., — F.Supp.3d —-2020 WL 2404878 (N.D. Ill. May 12, 2020), for example, the court held that all of the plaintiff ramp agents and supervisors were subject to arbitration of their claims under their employment agreement.  Three of the plaintiffs, however, needed to bring their claims before the Railway Labor Board, as the Railway Labor Act preempted immediate arbitration of those claims.

Another lingering issue involves the location of the injury and any potential extraterritorial application of the statute. Thus, the maker of a cloud-based point-of-sale system that allowed restaurants and other businesses to track employee time through a biometric finger scanner challenged the extraterritorial application of the statute.  Neals v. PAR Technology Corp., 419 F.Supp.3d 1088 (N.D. Ill. Dec. 18, 2019).  The district court rejected the extraterritoriality claim but noted the absence of allegations that the plaintiff restaurant was located in Illinois. The court therefore dismissed the complaint but with leave to amend.

Insurance Coverage For BIPA Claims

Finally, given the number of BIPA claims in recent years, potential insurance coverage for those claims has also become an issue. Depending on the nature of the claims, companies facing exposure under BIPA may turn to several different types of insurance coverage. Cyber policies may respond to a claim based on the unauthorized collection or release of biometric data, depending on the policy definitions of data and the presence of employment related exclusions.  General liability policies might cover BIPA claims under the “personal and advertising injury” coverage, though any exclusions related to loss of data or to statutory violations could come into play.  Employment practices liability policies could respond to claims brought by employees, though, again, potential exclusions would need to be considered.

Some of these insurance claims have already appeared in federal litigation, though very few decisions have been rendered.  In 2018, Zurich filed a declaratory judgment action after its policyholder was sued in Illinois for allegedly using fingerprint data to regulate access to stored medications. Zurich Am. Ins. Co. v. Omnicell, No. 3:18-cv-05345, 2018 WL 4198057 (Compl.) (N.D. Cal. Aug. 30, 2018).  The insurer pointed to exclusions in its general liability policy for statutory violations, but no decision was reached because the case was stayed pending resolution of the underlying matter.  Zurich Am. Ins. Co. v. Omnicell, No. 3:18-cv-05345, 2019 WL 570760 (N.D. Cal. Feb. 12, 2019).  In another recent case, the issuer of a multi-peril policy filed a declaratory judgment action in Illinois federal court, arguing that its employment practices policy excluded liability for violations of law, and that the other coverage forms issued, including general liability and professional liability, all contained exclusions for injuries to employees. Church Mut. Ins. Co. v. Triad Senior Living Inc., Case No. 1:19-cv-07599 (Compl.) (N.D. Ill. Nov. 18, 2019).  The case was voluntarily dismissed without prejudice before any decision was entered.  Finally, another insurer recently filed a declaratory judgment action arguing that its general liability policy excluded employment practices involving the collection and use of data.  Am. Family Mut. Ins. Co. S.I. v. Schmitt South Eola LLC, No. 1:20-cv-01872 (compl.) (N.D. Ill. Mar. 19, 2020) The underlying case alleged that a MacDonald’s restaurant violated BIPA by requiring employees to scan their fingerprints and then sharing that biometric data within the nationwide McDonald’s computer system.

Outside of federal court, one Illinois court held that an insurer had a duty to defend a BIPA claim under a general liability policy. West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan Inc., No. 1-19-1834, 2020 IL App (1st) 191834, 2020 WL 1330494 (Ill. App. Mar. 13, 2020) (unpub).  The underlying case alleged that the defendant required customers to provide fingerprint data along with membership and then automatically entered that data in a national L.A. Tan database. The court concluded that publication to one third-party vendor was sufficient to constitute “publication” under the policy, thus triggering potential coverage under the advertising and personally liability coverage.  Id at ¶¶ 34-37.  The court also held that an exclusion for statutory violations did not apply to BIPA claims because it was limited to statutes governing certain methods of communication.  Id. at ¶¶42-43.  Although this decision was rendered in an Illinois appellate court, federal practitioners can expect the body of case law relating to insurance coverage for BIPA claims to continue to expand.




In a response filed Monday, Caribe Restaurant & Nightclub Inc. took aim at Topa Insurance Co.’s bid to dismiss the suit, saying the insurer is misinterpreting the “physical loss of or damage” clause in the policy to require a structural alteration when no such requirement is in its language.

“Although the words are ordinary, the impact of any decision on the merits by this court will be extraordinary,” the restaurant told the court.

According to the brief, the plain meaning of the words “direct physical loss of or damage” supports coverage, as courts have taken “loss” to include loss of use even when the property did not suffer structural alteration.

The word “physical,” the restaurant argued, only aims to exclude tangential damages like depreciation in value, but should include things like loss of use.

Caribe’s suit is one of six class actions launched by attorneys from DiCello Levitt Gutzler LLC, the Lanier Law Firm PC, Burns Bowen Bair LLP and Daniels & Tredennick in April, with Caribe alleging like the others that it paid premiums to its insurer for business interruption insurance for situations in which it could be forced to close through no fault of its own, but its claim has been denied.

In Monday’s brief, the restaurant further argued that even if structural alteration was needed, the COVID-19 pandemic satisfies that requirement because Caribe pled that it is infested with a harmful agent and that the virus diminished its space and ability to use the property.

The restaurant cited another case, in the Northern District of California, that found that E. coli in a restaurant’s well constituted direct physical damage, saying that COVID-19 likewise should be found to cause physical damage.

In addition, courts have found that losing habitability or functionality constitutes physical loss, the restaurant said, referring to one case in which a nightclub owner got coverage because the club could no longer operate after losing its license following a shooting.

The restaurant also pointed to several recent decisions supporting businesses seeking COVID-19 coverage, including cases in Missouri and Florida in the past two months in which judges found that policy language regarding physical loss did not bar coverage.

The restaurant said various civil orders causing shutdowns bolster its argument, as they make clear that COVID-19 causes direct physical loss, with some containing language saying the virus “is physically causing property damage.”

And because the virus is causing that property damage to other businesses around Caribe, the restaurant argued, the civil authority coverage is likewise valid, adding that the policy does not require that Caribe’s business be entirely stopped.

Caribe also urged the court to find it can be reimbursed by Topa for any expenses it paid trying to mitigate its losses from the virus, as those are covered under the policy as well.

Finally, the restaurant took aim at the two exclusions Topa cited, saying that the “Nuclear, Biological, Bio-Chemical and Radiation Exclusion” is intended for intentional acts, not the natural spread of a virus, and the “Ordinance or Law” exclusion doesn’t apply because that’s exclusively concerned with compliance with building and land use codes.

An attorney for Topa said the insurer plans to file its reply, but otherwise declined to comment.

Representatives for Caribe could not immediately be reached for comment Tuesday.

Caribe is represented by C. Moze Cowper and Noel E. Garcia of Cowper Law LLP, Adam J. Levitt, Daniel R. Ferri, Mark Hamill, Mark A. DiCello, Kenneth P. Abbarno and Mark Abramowitz of DiCello Levitt Gutzler LLC, Timothy Burns, Jeff Bowen, Freya Bowen and Jesse Bair of Burns Bowen Bair LLP, Mark Lanier and Alex Brown of the Lanier Law Firm PC and Douglas Daniels of Daniels & Tredennick.

Topa is represented by Gordon A. Greenberg, Jason D. Strabo, Margaret H. Warner and Joshua B. Simon of McDermott Will & Emery LLP.

The case is Caribe Restaurant & Nightclub Inc. v. Topa Insurance Company, case number 2:20-cv-03570, in the U.S. District Court for the Central District of California.

–Additional reporting by Jeff Sistrunk. Editing by Amy Rowe.


Dorothy Atkins | August 14, 2020

A steakhouse chain with more than 50 restaurants around the country has hit Zurich American Insurance Co. with a lawsuit in Illinois state court, alleging the Swiss insurance giant broke their contract by refusing to cover business losses caused by the pandemic, even though the chain paid for premium coverage.

In a 23-page complaint filed Aug. 12, Firebirds International LLC argued that the coronavirus poses an “imminent threat” to each of its 54 “Wood Fired Grill” restaurants, and since the spring, state-mandated closures have ravaged its business.

The Charlotte, North Carolina-based company said it paid the insurer premiums for $146 million per occurrence coverage for property damage and business interruption losses. And yet, Zurich has refused to reimburse the company “a single dollar” for its recent losses, in clear breach of their contract, according to the suit.

“There is no ‘contamination’ or ‘virus’ exclusion within this portion of the policies that could possibly exempt Zurich from providing Firebirds full payment thereunder,” the complaint says.

The provisions at issue cover business income losses, or “time element” coverage, including gross earning losses. They also cover losses caused by property damage and restricted access to property, including “loss of access caused by an order issued by a civil authority,” as well as any costs incurred in order to temporarily protect and preserve the insured property, the complaint says.

The six-count complaint asserts multiple breach of contract claims and asks the court to declare that its losses fall under multiple policy provisions.

Firebirds’ counsel, Jeffrey P. Goodman of Saltz Mongeluzzi & Bendesky PC, told Law360 on Friday that the company has been denied insurance coverage, “like so many other businesses,” even though his client paid a premium for an “all risk” policy that did not include any virus exclusions.

“It’s disappointing, but at the end of the day the Zurich policy here covering Firebirds is a very strong policy for the business owner,” Goodman said. “They clearly paid for certain protections with the understanding that Zurich would satisfy [the contract]. That’s the very reason we have insurance.”

Firebirds’ lawsuit is one of several that have been filed against insurers by restaurant chains, movie theaters, shopping malls, hair salons and other hospitality businesses that have been forced to close their doors since March due to state-mandated closures that aim to slow the spread of COVID-19.

The businesses generally claim that the insurers wrongfully denied them coverage for their losses, and the disputes have shed new light on the importance of various insurance policy terms and exclusions, including provisions that exclude coverage for losses due to contamination by viruses and bacteria.

Many of the lawsuits playing out in courts have also hinged on whether a virus can cause a “physical loss” to property, and so far, courts have appeared to lean in favor of the insurance companies on the matter. Earlier this month, a D.C. judge ruled that government shutdown orders don’t constitute a “direct physical loss” that triggers the policy.

The ruling followed a decision in July by a Michigan state judge who dismissed Gavrilides Management Co. LLC’s suit seeking $650,000 from Michigan Insurance Co. for losses it suffered after Gov. Gretchen Whitmer issued executive orders that limited its two restaurants to takeout and delivery orders.

At a hearing in the Judicial Panel on Multidistrict Litigation to determine whether to roll such suits into an MDL, attorneys called “direct physical loss or damage” the “five simple words” that were a common thread throughout the suits.

Representatives for Zurich didn’t immediately respond Friday to a request for comment.

Firebirds is represented by Adam J. Levitt, Amy E. Keller, Daniel R. Ferri, Mark Hamill, Laura E. Reasons, Kenneth P. Abbarno, Mark A. DiCello and Mark Abramowitz of DiCello Levitt Gutzler LLC; Robert J. Mongeluzzi, Jeffrey P. Goodman, Marni S. Berger and Samuel B. Dordick of Saltz Mongeluzzi & Bendesky PC; Mark Lanier, Alex Brown and Skip McBride of The Lanier Law Firm PC; Timothy W. Burns, Jeff J. Bowen, Jesse J. Bair and Freya K. Bowen of Burns Bowen Bair LLP; and Douglas Daniels of Daniels & Tredennick LLP.

Counsel information for Zurich American Insurance wasn’t immediately available Friday.

The lawsuit is Firebirds International LLC v. Zurich American Insurance Co., case number 2020CH05360, in the Circuit Court of Cook County, Illinois, County Department, Chancery Division.

–Additional reporting by Mike Curley.  Editing by Alyssa Miller.

Alison Frankel | July 30, 2020

(Reuters) – No fewer than three different people used the word “nightmare” at a Judicial Panel on Multidistrict Litigation hearing Thursday morning about whether to consolidate hundreds of federal-court suits by insurance policyholders whose claims for business interruption coverage was denied. And one of them was a judge.

That apt depiction of the challenge that these cases pose for the JPML came from U.S. District Judge Matthew Kennelly of Chicago – a JPML panel member whom many plaintiffs’ firms have proposed to oversee a nationwide consolidation of the business interruption litigation. Judge Kennelly was asking questions of the insurance industry’s lead counsel, Richard Goetz of O’Melveny & Myers, who had told the panel that insurers oppose any MDL consolidation, whether it’s a single nationwide proceeding or multiple insurer-by-insurer or state-by-state MDLs. But 200 of the more than 400 suits already filed in federal court are class actions, Kennelly said.

“Isn’t that going to be nightmare to reconcile and resolve if there isn’t some form of consolidation?” Kennelly asked Goetz.

The insurers’ lawyer fired back that consolidation would be the nightmare – and that the panel should not allow plaintiffs’ lawyers to use the specter of prospective class actions to justify an MDL that would be crippled by variation among state insurance laws, state public emergency declarations, insurance policy language and contracts and plaintiffs’ individual circumstances. Even the theories plaintiffs have asserted in the class actions on file differ widely, Goetz said.

“That would be the tail wagging the dog,” he advised the panel. (For the record, the third person who described management of the business interruption coverage litigation as a “nightmare” was David Boies of Boies Schiller Flexner, who represents plaintiffs opposed to a nationwide MDL.)

The JPML did not clearly indicate which way they’re leaning at Thursday’s hearing, which was conducted by Zoom with more than 440 people listening in on an audio-only phone line. Plaintiffs’ lawyers presented the panel with a variety of options, as I’ll explain. The judges had tough questions about all of the proposals – including the insurance industry’s suggestion that the panel simply allow individual judges to decide the cases before them.

U.S. District Judge Ellen Huvelle of Washington, D.C., who presided over the hearing, was clearly concerned about lumping insurers that have been named as defendants in only a handful of cases into a vast MDL. U.S. District Judges Catherine Perry of St. Louis and David Proctor of Birmingham pressed plaintiffs to specify the common factual issues in the cases, a prerequisite for MDL consolidation. Judge Kennelly was particularly interested in whether there are common epidemiological questions about the nature of COVID-19 and how it’s spread that cut across the entire litigation.

Judge Proctor said he agreed with arguments by plaintiffs’ lawyers that small businesses need a quick resolution because they’re counting on insurance coverage to survive the pandemic. But a single MDL judge would have to deal with policy language from hundreds of insurers and the laws of all 50 states, he said. “How in the world is a judge going to get through all this with any type of efficiency?” Judge Proctor asked.

But at other moments in the hearing, Judge Proctor seemed interested in the prospect of multiple MDLs, or multiple tracks within an MDL, for different insurers. He homed in on plaintiffs’ arguments that although policy language varies from insurer to insurer, each carrier uses consistent language across its policies. Judge Proctor also suggested that MDL judges could effectively coordinate with state judges overseeing insurance coverage suits filed in state court.

Leading the charge for a single, nationwide proceeding was Mark Lanier of the Lanier Law Firm, who told the JPML (in a phrase repeated by other plaintiffs’ lawyers who presented arguments) that all of these cases are governed by five words: “direct physical loss or damage.” (Lanier’s firm, which is working on these cases with DiCello Levitt Gutzler, Burns Bowen Bair and Daniels & Tredennick, is pushing for Judge Kennelly to preside over a single proceeding.) Lanier contended that variations in state insurance law are overwhelmed by every state’s basic contract law principles.

Other plaintiffs’ lawyers, however, suggested alternatives to a nationwide MDL. Patrick Stueve of Stueve Siegel Hanson proposed MDLs against three carriers – Cincinnati, Lloyds and the Hartford – that have each been named in multiple suits instead of a single proceeding that, he said, would be “not manageable.” Shelby Guilbert of King & Spalding, who represents about 50 bars and restaurants in Chicago that are all suing Society Insurance, opposed any formal consolidation by the JPML, even when Judge Huvelle asked if it would be better for Society policyholders to be litigating before one judge instead of five or six.

Arguing on behalf of dozens of insurers, Goetz directly confronted the judges’ concern with efficiency. Individual cases, he said, are already moving fast. Insurers have filed motions to dismiss in 18 suits. Rather than stop these cases in their tracks to wait for an MDL to gear up, Goetz said, the panel should allow the suits to move ahead on their own to deliver the quickest resolution. (Sarah Gordon of Steptoe & Johnson, who argued against consolidation on behalf of The Hartford, reiterated the point that the fastest way to find out if individual policyholders were wrongly denied coverage is to allow their individual suits to go forward outside of an MDL.)

Perhaps looking for a reason to justify consolidation, Judge Huvelle asked Goetz if there were similarities among those 18 dismissal motions. Goetz said they addressed varying claims and were very different.

Plaintiffs’ lawyer Adam Levitt of DiCello Levitt predicted to me that if an insurer wins one of those dismissal motions, the industry will argue that the ruling should be binding nationwide, despite emphasizing dissimilarities at Thursday’s hearing. “This nationwide economic collapse calls for a unified response, and, yet, at today’s JPML hearing, the insurance industry argued for a fragmented, chaotic, judicial response,” Levitt said.

I emailed Goetz after the hearing to ask but he didn’t get back to me. Hartford counsel Gordon referred me to a company spokesman who didn’t immediately respond.

Lanier said in an email that the business interruption insurance litigation is a “tough situation” for the JPML. “The choice is between a very difficult MDL or chaos,” Lanier said, noting that this will be a rare MDL ruling that could affect the stock market. “I hope they opt for MDL. It will speak with one voice to the economy.  The economy will listen.”


Jeff Sistrunk | July 30, 2020

The Judicial Panel on Multidistrict Litigation on Thursday peppered attorneys for policyholders and insurance carriers with questions over whether the hundreds of COVID-19 business interruption coverage disputes pending in federal courts nationwide should be centralized in one or more courts or left to be resolved case by case.

During a 90-minute hearing held via Zoom, the JPML heard arguments from 15 attorneys on dueling petitions filed in April by two groups of policyholder plaintiffs, one seeking to centralize federal business interruption cases in the Northern District of Illinois in Chicago and the other asking for them to be centralized in the Eastern District of Pennsylvania in Philadelphia.

Arnold Levin of Levin Sedran & Berman LLP, who represents the petitioners seeking centralization in Philadelphia, told the seven-member JPML there is no merit to insurers’ contention that consolidation is inappropriate due to the high number of different defendants and policies involved in the coverage cases. He pointed to several past MDLs, such as one concerning orthopedic bone screw products liability litigation, that centralized cases involving multiple different defendants and products.

“So, Mr. Levin, what is the common issue of fact?” asked U.S. District Judge Matthew Kennelly.

“The common issues of fact are, one, whether or not there is property damage. Did the virus get into the property?” Levin replied. “Also, the exclusions are all the same.”

Levin added that the insurance policies at issue “have all been formulated, for the most part,” by the Insurance Services Office.

“We have sought discovery from the ISO to show they are the same,” he said.

Mark Lanier of The Lanier Law Firm PC, who represents the petitioners requesting centralization in Chicago, also contended that the hundreds of cases will share certain common factual issues, “regardless of state, regardless of insurance company, regardless of policy.” Those include whether the different iterations of the novel coronavirus should be treated as one or multiple occurrences under a policy, whether the virus is considered to be present “everywhere people congregate” and what type of scientific analysis “is going to be acceptable and not acceptable,” according to Lanier.

“The preponderance of common facts will, by and large, be huge,” he said.

Moreover, Lanier added, many insurers that have already filed motions to dismiss policyholders’ suits have asserted the same arguments, including that COVID-19 did not cause “direct physical loss or damage” to the insured business, as required for business interruption coverage to apply. Those “five simple words” are a common thread running through these coverage disputes, he argued.

“So you are telling me the state laws of all 50 states interpret those five words in the context of every insurance policy the same way?” U.S. District Judge Catherine D. Perry asked Lanier.

Lanier replied that he would not say “quite that, totally,” but that “by and large, every state has the same basic principle of contract interpretation, that you give plain and ordinary meaning to contractual terms.”

“I don’t think the courts are going to find this to be that different in terms of each state, and I think that is why insurance companies are seeking a national legislative solution,” he said.

While the petitions requesting centralization in Philadelphia or Chicago have garnered the support of some policyholder plaintiffs, other policyholders have opposed them and pitched wildly varying proposals of their own.

The full range of policyholders’ views was on display during Thursday’s hearing. Some attorneys representing policyholders backed one of the two petitions, while others opposed any form of centralization. Several attorneys pushed for centralization in California, Florida or Washington. And still others advocated for the creation of multiple MDLs, either by consolidating cases filed against the same insurance company or lumping together cases lodged in the same state.

For instance, Patrick J. Stueve of Stueve Stueve Siegel Hanson LLP, who represents several policyholders in suits pending in Missouri federal court, suggested an “incremental approach” in which the JPML would create smaller MDLs to consolidate cases against “insurers who have been sued in many lawsuits, in multiple jurisdictions, by many plaintiffs firms.” Currently, only a few of the nearly 100 insurers named in coverage cases around the country meet that criteria, including The Hartford, Cincinnati Insurance Co. and underwriters at Lloyd’s of London, he said.

“Several smaller MDLs will ensure the most manageable and efficient resolution of these cases,” he said.

While policyholders’ views are varied, insurance carriers have uniformly opposed the formation of any kind of MDL.

Arguing on behalf of Westchester Surplus Lines Insurance Co. and more than 30 other insurers, Richard Goetz of O’Melveny & Myers LLP said the factual differences among the coverage disputes outweigh any commonalities. Goetz emphasized that all the organizations that filed amicus briefs with the JPML, including both insurance industry trade groups and the prominent policyholder advocacy group United Policyholders, oppose centralization.

“The fact issues are overwhelmingly centered on individual plaintiffs,” he said. “What is their business? Did they close? When and why would they have had any business if they had remained open? Did they claim that the virus was or was not there? Was there a stay-at-home order, and what did it say?”

Goetz further contended that creating smaller “insurer-specific” MDLs is “not the answer,” given that the policy language and factual circumstances can vary even across cases involving the same insurer.

U.S. District Judge Nathaniel M. Gorton asked Goetz what his “alternative suggestion” would be for dividing up the business interruption cases.

“Your honor, I think you could leave the cases where they are,” Goetz said, pointing out that insurers’ motions to dismiss have already been fully briefed in at least 18 cases.

Sarah D. Gordon of Steptoe & Johnson LLP, who represents Hartford and a number of its subsidiary insurers, later said she agreed with Goetz that the creation of multiple single-insurer MDLs would not resolve the issues that would abound with an industrywide MDL.

“The only efficiency that might be gained from a single-insurer MDL is a reduction in the variation of policy language, but even at the single-insurer level, there are still variations,” Gordon said.

The case is In re: COVID-19 Business Interruption Protection Insurance Litigation, case number 2942, before the Judicial Panel on Multidistrict Litigation.

–Editing by Gemma Horowitz

Joyce Hanson | July 29, 2020

A group of Lloyd’s underwriters has asked to send two pizza companies’ COVID-19 coverage suit to Florida, telling a New York federal court that the companies suing are based in the Sunshine State as are the agents who sold them their commercial property insurance policies.

The Lloyd’s of London insurers argued Wednesday before the New York court that the Florida-based lead plaintiffs in the proposed class action, Gio Pizzeria & Bar Hospitality LLC of Coral Springs and Gio Pizzeria Boca of Boca Raton, are merely engaging in forum shopping.

The pizzeria companies claim their case should be heard in New York only because their policies provide that service of a complaint should go to London-based Lloyd’s service agent, “who happens to be in New York,” the underwriters say in their motion to transfer venue.

But the truth, according to the underwriters, is that the two policies delivered to the Gio Pizzeria companies were issued by a Floridian producing agent and a Floridian surplus lines agent. And the pizzeria companies don’t like their odds of winning in Florida federal court because five other COVID-19 cases pending there may hurt their chances of prevailing on the argument that government closure orders triggered their policies’ “civil authority” coverage, the underwriters say.

“Plaintiffs’ filing in this court is nothing more than transparent forum shopping,” the underwriters argue. “The critical witnesses and evidence regarding are located in South Florida. The Southern District of New York’s connection with this dispute is nonexistent. Further, transfer to the Southern District of Florida will allow this matter to proceed in coordination with the five currently pending putative class actions against members of the Lloyd’s, London insurance market, arising out of COVID-19.”

The Gio case stems from Lloyd’s underwriters’ denial of coverage after the plaintiffs were forced to reduce business at their Nick’s pizzerias due to the COVID-19 pandemic and resultant orders issued by civil authorities in Florida mandating the suspension of business for on-site services.

Attorneys from DiCello Levitt Gutzler LLC filed the suit April 17 on behalf of the two Gio Pizzeria companies, joining the Lanier Law Firm PC, Burns Bowen Bair LLP and Daniels & Tredennick in launching class action suits against six insurance companies in federal courts over their denials of coverage for businesses shut down because of the coronavirus outbreak.

The complaints target Certain Underwriters at Lloyd’s, London in New York, Society Insurance in Wisconsin, Auto-Owners Insurance Co. in Ohio, Topa Insurance Co. in California, Oregon Mutual Insurance Co. in Oregon, and Aspen American Insurance Co. in Texas, the attorneys announced in an April 17 press release.

In each case, the businesses, which include the pizzerias, bakeries, taverns, restaurants, nightclubs and bridal retailers, allege they paid premiums to the insurance companies for business interruption insurance for situations in which they could be forced to close through no fault of their own, but their claims have been denied.

Adam Levitt of DiCello Levitt Gutzler LLC, a lawyer for the Gio Pizzeria companies, on Wednesday shot down the underwriters’ bid to transfer venue, telling Law360 in an email that the suit is lodged in the proper court.

“Our complaint and the underlying facts speak for themselves. We filed our case in the correct venue,” Levitt wrote. “It would be helpful if defendants, instead of playing procedural games in an effort to confuse, attenuate, and frustrate the litigation process, would actually step up and honor their substantial contractual obligations to our clients and the other class members.”

Counsel for the Lloyd’s underwriters could not immediately be reached for comment Wednesday.

The Gio Pizzeria plaintiffs are represented by Adam Levitt, Mark DiCello and Ken Abbarno of DiCello Levitt Gutzler LLC.

The underwriters at Lloyd’s are represented by Peter J. Fazio of Aaronson Rappaport Feinstein & Deutsch LLP.

The case is Gio Pizzeria & Bar Hospitality LLC et al. v. Certain Underwriters at Lloyd’s, London, case number 1:20-cv-03107, in the U.S. District Court for the Southern District of New York.


The Houston Rockets basketball organization and its venue the Toyota Center sued FM Global’s midmarket unit on Wednesday seeking business interruption coverage for coronavirus-related losses.

In the suit, Clutch City Sports & Entertainment LP (d/b/a Toyota Center) and Rocket Ball Ltd. v. Affiliated FM Insurance Co., which was filed in state court in Providence, Rhode Island, where FM Global is based, the team and the venue said the insurer wrongly denied their claim last month.

According to the suit, the Rockets and the Toyota Center, which hosts concerts and other shows in addition to National Basketball Association games, bought an “all risks” commercial insurance policy from Affiliated FM that provides $412 million in property damage limits “with a substantial portion of that amount in coverage for business interruption losses.” The policy includes $100,000 sublimits for property damage due to communicable disease and business interruption due to communicable disease.

The organizations paid $719,490 in premium for the coverage, which went into effect on Oct. 6, 2019, court papers say.

The Toyota Center attracted nearly 1.3 million people to events in 2019 but has attracted only 340,000 in 2020 due to the forced closure of the venue during the COVID-19 pandemic, court papers say.

City and state officials issued various orders in March imposing restrictions on businesses in Houston and issued further orders in June after an increase in COVID-19 cases in the state.

The venue and the Rockets contend in the suit that the presence of COVID-19 at the Toyota Center constitutes physical damage that triggers coverage for lost revenue under various clauses in its policy, including business interruption, extra expense, attraction and communicable disease coverage, according to the suit.

The communicable disease sublimits “do not purport to reduce other coverages available under the Policy. They are additive,” according to the suit.

“AFM is unable to discuss because it is a legal matter,” a spokesman for FM Global said in an email in response to a request for comment.

The suit is one of scores of suits filed by businesses across the country. Most of the suits are pending, but judges in Michigan and New York ruled in favor of insurers in two cases.




Mike Curley | July 16, 2020

The NBA’s Houston Rockets and their home arena are suing their insurance company, alleging it denied them coverage for losses stemming from the COVID-19 pandemic in an act of bad faith as part of a companywide policy to deny coverage for similar claims.

In a complaint filed in Rhode Island state court Wednesday, Clutch City Sports & Entertainment LP, which owns the Toyota Center, and Rocket Ball Ltd., which owns the Rockets, say Affiliated FM Insurance Co. owes them coverage under the team’s $412 million property insurance policy.

According to the Rockets, the arena was forced to shut down after the COVID-19 pandemic hit Houston and the NBA suspended the remainder of its season, saying the presence of the virus in Houston and the arena constitutes physical loss and damage under the policy.

“The loss of functionality is no less physical than the impact of a property having lost its roof to a tornado or hurricane,” the team wrote. “Where once the property could carry on its business function, the property with a blown away and crumbling roof cannot operate in that way. Where once the property could seat patrons away from the elements, it can no longer do so. That is physical damage, as is the loss of function at Toyota Center caused by COVID-19.”

As a result of the pandemic, the arena says it had to cancel 29 events, including nine Rockets games, plus an unknown number of playoff games. While the NBA has announced plans to resume its season, the team and arena say, none of the games are set to be played at the Toyota Center.

According to the complaint, the team’s policy with Affiliated FM, which is a subsidiary of FM Global Group, expressly considers a communicable disease like COVID-19 as physical loss and damage, as the policy specifically covers “cleanup, removal and disposal” of communicable disease.

The team further alleges that the governor’s shutdown orders, which closed the doors on nonessential businesses, also trigger the policy under the civil authority clause, which grants coverage for business interruption caused by government orders prohibiting access.

According to the complaint, the policy’s exclusion for contamination does not apply, as it does not include communicable disease like COVID-19 among its list of contaminants. In addition, the team argues that the policy’s sublimits for communicable disease coverage don’t limit coverage of the business interruption and physical damage claims, and should not apply.

The complaint also cites an internal “talking points” memo from FM Global, which the team claims informs insurance adjusters that the virus doesn’t count as physical damage, nor does a communicable disease. According to the team, this memo is the basis for FM Global and its affiliates’ bad faith effort to deny coverage for COVID-19-related claims, as adjusters are not instructed to take into account the policy language or local law when denying the claims.

A spokesperson for FM Global declined to comment Thursday.

Attorneys for the Toyota Center and the Rockets referred questions to the Toyota Center. A spokesperson for the team declined to comment.

The suit comes after Minor League Baseball teams began suing their insurers over coverage after the cancellation of their season, including the farm team for the New York Yankees.

The arena and the team are represented by Stephen M. Prignano of McIntyre Tate LLP; W. Mark Lanier, Alex J. Brown, Ralph D. McBride and Matthew D. Przywara of The Lanier Law Firm PC; Denman H. Heard of Heard Law Firm PLLC; Adam J. Levitt, Mark A. DiCello and Kenneth P. Abbarno of DiCello Levitt Gutzler LLC; Timothy W. Burns, Jeff J. Bowen, Jesse J. Bair and Freya K. Bowen of Burns Bowen Bair LLP; and Douglas Daniels of Daniels & Tredennick.

Counsel information for Affiliated FM was not available.

The case is Clutch City Sports & Entertainment LP et al. v. Affiliated FM Insurance Co., case number PC-2020-05137, in the Providence/Bristol County Superior Court, Rhode Island.