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Business Income Cases CCLT Reporting Methods

Ja-Del Inc. SJ Order Vacated and the CCLT Database Updated

Author: Tom Baker Date: 03.18.21

Ja-Del Inc. SJ Order Vacated and the CCLT Database Updated

About a week ago, we learned that the summary judgment order granted in favor of Ja-Del Inc. in Ja-Del Inc v. Zurich American Insurance, 2016-CV11209 (Jackson Cty Circuit Ct, Missouri) (Feb. 4, 2021) had been vacated.  That was a new one for us.  There is nothing “off the rack” about the CCLT database or the CCLT website, so we had to scramble to figure out how to reflect that development.  Simply deleting the earlier Order wasn’t an option, because that Order and the court’s decision to vacate are part of the history of the litigation.  But we didn’t want the Order to continue to appear on the list of on-the-merits Judicial Orders on the website, nor did we want it to count for the box score.  Thanks to Alex Shor, we came up with a solution.  The Order remains in the database, but it no longer appears on the CCLT website.

Please keep us informed of these and other developments, particularly in state court cases.  And please be patient when those developments don’t fit neatly into our database structure.  We’re building this plane while we’re flying it!

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Analytics Business Income Cases

Update on Dismissals Without Prejudice

Author: Sean Bender Date: 03.08.21

Update on Dismissals Without Prejudice

With the latest update to our coding methodology, we are now tracking 30 cases where the trial judge granted the insurer’s motion to dismiss but gave the policyholder leave to amend their complaint:

  Virus exclusion in policy No virus exclusion in policy Total
Amended complaint filed 5 9 14
Appeal filed 6 1 7
No further action 8 1 9
Total 19 11 30

 

As these data show, most plaintiffs whose policies do not have a virus exclusion have elected to file an amended complaint. Those whose policies do have a virus exclusion have been more likely to seek appellate review of the dismissal or abandon the litigation entirely. With such a small dataset, though, it’s hard to draw causal inferences from this trend. A few additional notes:

Amended Complaint Filed: Of these fourteen cases, insurers have renewed their motion to dismiss in eleven, one of which – Harvest Moon Distributors LLC v. Southern Owners Insurance Company – was granted (again without prejudice) earlier this month. The policyholders in that case have until March 12 to file a second amended complaint.

Appeal Filed: Because an order dismissing a case without prejudice is not a final judgement, it’s usually not appealable under 18 U.S.C. § 1291. We’re going to leave them coded as-is for now, but know that in the seven cases where policyholders have appealed these orders, judgement has actually been entered dismissing the cases with prejudice pursuant to Rule 41(a).

No Further Action: When plaintiffs fail to file an amended complaint following dismissal without prejudice, courts will eventually enter judgement on that order and terminate the case, pursuant to Rule 41(b). That has now happened in seven of these nine cases: three with prejudice, and four without prejudice.

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Analytics Business Income Cases Federalism

Why insurers prefer federal court

Author: Tom Baker Date: 02.26.21

Why insurers prefer federal court

Last fall, before the onslaught of rulings in motions to dismiss in the Covid 19 BI cases, Chris French asked why policyholders were filing so many of these cases in federal court.  He provided a variety of answers, but the prediction that plaintiff/policyholders would do better in federal court than state court was not among them.  Indeed, his prediction was just the opposite:  “a plaintiff’s chances of winning are generally much higher in state court than in federal court.”

It’s still early days in the litigation, but the early results suggest that Chris was right.  Our new judicial ruling box score separates state and federal court decisions, and the difference is really dramatic.  Check it out here.

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Business Income Cases

Defense Verdict in Cajun Conti

Author: Tom Baker Date: 02.17.21

Defense Verdict in Cajun Conti

JUDGMENT

The trial on the merits for Plaintiffs’ Petition for Declaratory Judgment took place from December 14, 2020 through December 16, 2020. Appearing at the trial for the respective parties were the following:

James Williams, Desiree Charbonnet, Roderick Alvendia, Jennifer Perez, Jennifer Keuchmann, Anthony Irpino, Phillip La Borde, Bernard Charbonnet, Matthew Sherman, , John Houghtaling, and Daniel Davillier, Attorneys for Plaintiff; Allen Miller, Virginia Dodd, and Kevin Welsh, Attorneys for Defendant

After the trial, the parties submitted post-trial memoranda, and the Court thereafter took the matter under advisement. The Court, after hearing testimony and considering applicable law as well as the entire record, renders the following judgment:

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Plaintiffs’ Petition for Declaratory Relief is hereby DENIED.

JUDGMENT RENDERED AND SIGNED on this 10th day of Februarv. 2021 in New Orleans, Louisiana.

Judge Paulette R. Irons

-~

Categories
Business Income Cases Litigation strategy

New Discovery Protocols for Covid BI Business Interruption Cases

Author: Tom Baker Date: 02.12.21

New Discovery Protocols for Covid BI Business Interruption Cases

I am pleased to see that the Institute for the Advancement of the American Legal System at the University of Denver has released discovery protocols for “Business Interruption Disputes Arising from the COVID-19 Pandemic and Similar Public Health Threats.”  Great to see so many people I know on the working group: Steven Badger, David Brown, Jay Levin, Adam Levitt, Judge Lee Rosenthal, Ron Schiller, and Joyce Wang.   What a balanced, powerhouse group!  Just in time for the discovery disputes that will follow on the current winnowing stage of the litigation.

Categories
Analytics Business Income Cases

Update on Dismissals and Answers in the Covid Business Interruption Coverage Cases

Author: Tom Baker Date: 02.04.21

Update on Dismissals and Answers in the Covid Business Interruption Coverage Cases

As I always emphasize, our data are incomplete:

  1. We know that we don’t have all the state Covid Coverage cases because nobody has a good system for finding those cases.  We think that we’re finding out about all or most of the dismissal orders because of our readers (thank you!!), but we can’t be sure.
  2. We know that our state court data aren’t up to date even on the state cases that we do know about, because too many state electronic dockets are terrible or cost too much to access or both.  Again, we think that we’re finding out about all or most of the dismissal orders because of our readers (thank you, again!!), but we can’t be sure.
  3. Because we are human, we are not as up to date with federal cases as automated systems like (our favorite) Lex Machina.  We’re pretty sure that we have all the dismissal orders, and almost as sure that we have all the voluntary dismissals (perhaps with a lag of a week or so), but we can’t be sure.
  4. Because we are human, we make coding mistakes (but so do the automated systems, as we have discovered).

Strongly in our favor, we know lots of things about the federal cases that the automated systems do not.  And we are doing more to figure out what’s happening in the state cases than anyone else who is publicly reporting their findings.  (I expect that insurers with lots of exposure know more than we do, and not only about their own cases, but those data are under wraps.)

With those caveats, here is what our data are telling us right now about the answers and dismissal events in the business interruption cases:

  1. There are 216 cases in which at least one insurer has filed an answer and not filed a motion to dismiss, suggesting that those cases are proceeding toward the summary judgment phase of the litigation.
  2. As shown in the table below, 197 cases have been voluntarily dropped, 43 cases have been ordered dismissed without prejudice, and 99 cases have been ordered dismissed with prejudice.

The true number of cases that are proceeding toward the summary judgment phase of the litigation almost certainly is higher than our data indicate, because we don’t have good state court data on answers and dismissal motions.  For the same reason, the true number of voluntary dismissals is likely to be higher than our data indicate.  By contrast, our data regarding “on the merits” dismissal orders should be very close to the mark.

Dismissal Event
Number of Cases
Voluntary Dismissal
197
Order of Dismissal Without Prejudice
43
On the Merits
Not on the Merits
26
17
Order of Dismissal With Prejudice
99
On the Merits
Not on the Merits
87
12

The numbers in this table don’t line up exactly with those on the judicial rulings page because (a) a case only appears in this table if all the defendants have been dismissed and (b) the judicial rulings page doesn’t include dismissals that are not on the merits.

Categories
Business Income Cases

CCLT is back in the Wall Street Journal

Author: Tom Baker Date: 12.29.20

CCLT is back in the Wall Street Journal

Leslie Scism’s latest WSJ article uses CCLT data to provide context for the story of the North Carolina restaurant that won a summary judgment victory against Cincinnati Financial.  We’re pleased to be a trusted source of objective information about the Covid coverage litigation.

Categories
Business Income Cases Litigation strategy

Business Interruption Makes its Way to the Big Leagues

Author: Jordan Einstein Date: 12.04.20

Business Interruption Makes its Way to the Big Leagues

Over the past eight months, Covid-19 has forced countless businesses across the country and around the world to shut down their operations. Virtually every industry has been impacted, and professional sports leagues are no exception. According to a complaint recently filed on behalf of Major League Baseball (“MLB”) and all 30 MLB clubs in Alameda County Superior Court, the league and its clubs have suffered billions of dollars in losses due to Covid-19.  MLB and the clubs filed business interruption claims with their insurers under their “All Risk” policies.  The insurers issued blanket rejections of these Covid-19 coverage claims, carefully cultivated to avoid absolute statements, while simultaneously denying claims on a broad basis.

After taking their time to prepare a strong opening pitch, MLB and the clubs filed suit seeking declaratory relief and money damages in state court, traditionally a more welcoming home for policyholders than federal court.

MLB is far from the first business to file suit against their insurers for business interruption coverage. The Covid Coverage Litigation Tracker is aware of more than 1,400 such cases filed in state and federal courts since March.  We estimate that several hundred more have been filed in state courts but have yet to be identified due to the imperfect state case identification process.

In fact, this complaint is not even the first by a professional sports organization nor the first baseball-related case. The Houston Rockets and Atlanta Falcons have both filed suits in Rhode Island state court, and several Minor League Baseball cases are currently pending, with one MiLB case already been resolved in favor of the insurers due to the presence of a virus exclusion in the policy at issue in that case. Despite their first win in one minor league case, insurers are still in the early innings of a long legal battle for pandemic-related losses and as one might expect, MLB came out swinging in their 66-page complaint.

As I explained in a summer blog post about the first MiLB case, the sports-related cases for business income coverage do not differ radically from cases in other industries. The central, hotly contested issue is whether Covid-19 causes “physical loss or damage” to property, but each case’s outcome depends on the specific language contained in their insurance policy. As the Tracker shows, insurers have had the upper hand in judicial rulings thus far.  But most of the dismissals result from defective pleadings or the presence of strongly worded exclusions in the insurance policies at issue that specifically refer to losses from viruses that cause disease.

The MLB complaint is crafted to avoid these pitfalls. Consequently, the case has a strong chance of surviving a potential motion to dismiss the case. Assuming the case does not get dismissed, MLB will have the burden of proving that Covid-19 does indeed cause physical loss or damage to property; if so, defendant insurers are potentially on the hook for billions of dollars in coverage, unless they can prove that an exclusion or sub-limit applies.

The key Factory Mutual insurance policy at issue appears to contain what the CCLT classifies as a “hidden virus exclusion” as well as “specific coverage for communicable disease.” A “hidden virus exclusion” is an exclusion for pollution, or as here, “contamination” where the policy defines “contamination” to include “virus[es].” “Specific coverage for communicable disease” means exactly what it says – the insurance policy provides specific coverage for losses due to interruption by communicable disease.

Courts have not yet addressed the merits of specific communicable disease coverage provisions, but of the five buckets in the CCLT database, specific coverage is the most favorable coverage bucket for policyholders. Indeed, the MLB complaint alleges that this communicable disease coverage undermines the insurers’ assertion that the hidden exclusion applies, because the specific coverage implies that covered communicable diseases are distinct from the viruses referenced in the contamination exclusion.

Given the importance of the physical loss or damage requirement, it is no surprise to see so much discussion of physical loss and damage in the complaint. The league relies heavily on an assortment of scientific studies pertaining to Covid-19 fomites and their persistence on objects and surfaces, in the air, and their ability to spread through HVAC systems. Moreover, the complaint details government shut down orders, as well as those imposing gathering limitations that specifically refer to the physical loss and damage caused by Covid-19.

Note that the previous sentence reads: “physical loss and damage” as opposed to “physical loss or damage.” Unlike most complaints, MLB consistently uses “and” instead of “or.” The slight phrasing variation could prove important and signify a change in future Covid coverage pleadings. Insurers’ use of the disjunctive “or” in their insurance policies suggests that loss and damage are distinct. As such, MLB need only prove one of the two.  Yet MLB asserts that Covid-19 causes both physical loss and physical damage, suggesting that they are marshalling the evidence and arguments to prove both, increasing their odds of success. The following quoted paragraph is excerpted from the complaint and provides a very basic example of the difference between damage and loss.

“The presence of the coronavirus and COVID-19, including but not limited to coronavirus droplets or nuclei on solid surfaces and in the air at insured property, has caused and will continue to cause direct physical damage to physical property and ambient air at the premises. Coronavirus, a physical substance, has attached and adhered to Plaintiffs’ property, and by doing so, altered that property. Such presence has also directly resulted in loss of use of those facilities.”

Here, the physical adherence of droplets and nuclei to property and in the air physically alter property and thus, constitute physical damage to property. Conversely, the last sentence states that the presence also resulted in “loss of use” of facilities which constitutes “physical loss.”

Just as an umpire’s view of a pitch a mere inch off the plate can determine the outcome of a playoff series, a judge’s interpretation of a single phrase, or even word, could determine the outcome of this case. Perhaps then it is fitting that these cases rest in the hands of judges, whom Chief Justice of the United States John Roberts so aptly compared to baseball umpires.

 

Other Interesting Notes from the Complaint

  • According to the complaint, Factory Mutual covers 60% of the Insurers’ total limits of liability, AIG covers 30%, and Interstate Fire & Casualty Company covers 10%.
  • Plaintiffs include all 30 MLB Clubs, the Office of the Commissioner of Baseball, MLB Advanced Media, MLB Network, and Tickets.com.
  • The complaint alleges that Covid-19 was physically present at every plaintiff’s property.
  • MLB asserts eight total bases for coverage including: Time Element Loss, Civil Authority Coverage, Ingress/Egress Coverage, Leasehold Interest and Rental Insurance Coverage, Contingent Time Element, Crisis Management Coverage, Communicable Disease Coverage, Protection and Preservation of Property Coverage.
  • According to the complaint, policy limits apply on a “per occurrence” basis, providing up to $1,635,869,608 in coverage for any single occurrence and potentially more for multiple occurrences. The AIG Policy’s Crisis Management coverage is subject to a $10 million sub-limit, but it applies on a “per occurrence” basis and sets no aggregate limit.
  • The complaint provides some background and detail about the extent of financial losses, including some explanation of the league’s and clubs’ various revenue sources.
  • The outcome of this litigation may significantly impact the operations of the league and individual clubs and may even reach player contracts. If clubs recover their losses through insurance, they will have more to spend in Free Agency.
  • The Atlanta Falcons case was actually filed several weeks after the MLB complaint.
  • MLB is represented by the Covington and Burling law firm.
Categories
Analytics Business Income Cases

More than 15% of BI cases have been terminated already, mostly voluntarily

Author: Tom Baker Date: 12.02.20

More than 15% of BI cases have been terminated already, mostly voluntarily

For some time now I’ve been concerned that our case count is misleading, because our team reports that many cases have been dropped voluntarily, and a not insignificant number have been dismissed, either on the merits or for a technical reason.   Here’s a snapshot, as of today, of what we’re seeing in terminations:

Apologies for the small size (we’re working on adding this in dynamic form to the CCLT website), but what the snapshot shows is that 137 cases have been voluntarily dropped, most often before a response to a motion to dismiss is due, 45 case have been dismissed with prejudice, and 31 cases have been dismissed without prejudice.  My impression (not thoroughly checked) is that all of the dropped cases are business interruption cases.  That means that more than 15% of the business interruption cases in our database no longer are active.

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Business Income Cases

The Cajun Conti case is heading to trial!

Author: Date: 11.10.20

The Cajun Conti case is heading to trial!

I just learned that the trial court in Cajun Conti v. Certain Underwriters at Lloyds (No. 2020-02558, Louisiana, New Orleans Parish) denied the insurer’s motion for summary judgment in a judgment entered on November 4, 2020.  The policy does not contain a virus exclusion.

This development is significant, among other reasons, because the Cajun Conti case may well be the very first Covid Coverage Litigation case filed.  For more information see this story.