WASHINGTON, D.C. — Business interruption insurance coverage is vital to the survival of businesses when forces beyond their control compel their firms to close unexpectedly. Businesses who are seeking coverage for losses due to business interruption because of the novel coronavirus pandemic and the resulting disease, COVID-19, demand their insurance carriers pay claims for business interruptions. Insurance companies are trying to evade their responsibility. Insurance companies have refused to cover losses due to business interruption because of COVID-19, according to a report in Insurance Business Magazine. To resolve their differences, businesses that purchased covered for business interruption have filed several lawsuits throughout the country seeking the performance of the insurance contract.
The question for insurance companies, who are teetering on the brink of extinction because of the pandemic, as are most businesses, is whether the plain language of the insurance contracts allows them to avoid liability. The question is essential for the businesses seeking coverage for their losses and for the insurance companies whose executives hope their firm does not have to pay these claims.
Plaintiffs who filed lawsuits federal courts across the country have asked the federal panel on multidistrict litigation to consolidate the cases. The issue is whether the insurance companies are liable to pay for damages caused by the decision of a governmental authority motivated by a desire to stop the spread of the novel coronavirus rather than the coronavirus itself. Another critical issue driving these lawsuits is whether the insurance coverage for business interruption should kick in when the virus is on or near the property covered by insurance. Consolidating the cases will streamline the decision process by the courts, as well as provide consistency in the decision-making process.
The legal questions raised in these lawsuits are incredibly complicated. Insurance law is primarily left up to individual state courts and legislatures to establish. Therefore, consolidating all of the cases in one federal court, while efficient and economical in one sense, could be rendered useless if the law of insurance contract interpretation differs from one case to the next.
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