Media reports are that many businesses and non-profits are looking to their insurers for “business interruption” and other coverages due to the COVID-19 pandemic. At first blush, it would appear that these claims for coverage face an uphill battle based upon what might be termed clear policy language (specially manuscripted policies notwithstanding).
But it would be premature for the insurance industry to declare victory on the coverage issues. For if history is any guide, policyholders may win most of the coverage cases.
Mr prediction is based on the insurance industry’s experience in litigating various policy issues for environmental claims coverage 30 years ago. As a former Director of Environmental Claim for two insurers during the environmental claims coverage wars, I witnessed first hand how clear and otherwise unambiguous policy language did not save the insurance industry by and large from having to provide coverage for environmental claims and their massive clean-up costs.
Some will say that the skill of many of the insureds’ coverage attorneys was a big factor in the policyholder victories. And many were very skillful. But the biggest factor in my judgment in determining the final outcome in the environmental coverage wars was a very obvious willingness of so many courts to bend over backwards (and then some) to buy into often unique and novel arguments in order to find coverage.
I strongly suspect that the chief reason state courts in particular found coverage in so many cases was to give a needed lifeline to state governments. This lifeline was needed because states were on the hook for the massive costs of environmental claims cleanup costs as insolvent or nearly insolvent businesses were unable to pay without insurance coverage.
Of course, what happened in the environmental claims coverage wars may not repeat itself in the COVID-19 coverage wars. But there is one thing for certain. Just like in the environmental claims coverage wars, insurers and their policyholders are going to be involved for years to come in multiple battles fought in state and federal courts throughout the U.S.
After having experienced the environmental claims coverage wars firsthand and seeing what worked and didn’t work so good, I think I am in a good position to give an important piece of advice to both insurers and policyholders. And that piece of advice is to spend some extra money to hire competent coverage counsel.
For insurers, this is not business as usual. It is not the time to assign the first COVID-19 coverage cases to local panel counsel – especially those who mainly handle defense and only occasionally handle coverage claims.
For insureds, I offer similar advice. This is not the time to turn over your COVID-19 coverage case to the same attorneys who handles your H.R., tax, or general business matters. While these attorneys may be very competent and get good results for you in their own areas of expertise, insurance coverage is a very specialized discipline. It is not for some attorney who only does this part-time.
Engaging competent coverage counsel to handle complicated insurance coverage matters usually means engaging a good regional or even national law firm that specializes in insurance coverage. If you are an insured, look for a regional or national firm with attorneys who specialize in “insurance recovery.”
Now if you have read my past blog posts, you will know that I have repeatedly cautioned against hiring a BIG law firm if a smaller law firm is available that can handle the case. Well, this is the exception to that advice. If there was ever a time for insurers and insureds to go BIG, now is the time. For only large regional or national law firms will have attorneys who not only have the capabilities needed, but also have the firm resources that will be needed to handle coverage cases that may take years to litigate.
One final piece of advice and this applies just to insurers. Since even smaller insurers may face multiple coverage suits in different jurisdictions, a “coordinating counsel” should be appointed. Larger insurers routinely do this in product cases where similar suits arise throughout the U.S. But all insurers – including smaller insurers – should appoint a coordinating counsel to oversee all the COVID-19 coverage litigation. And while it may seem counterintuitive to believe, I can tell you without reservation that having a competent coordinating counsel assisting local counsel should actually save on litigation costs. But even more importantly, it will help ensure that consistent positions are being taken.
Unfortunately, not all policyholders or insurers read this blog. Thus it is very likely that many coverage cases will be litigated by counsel on both sides who are not skilled coverage attorneys. So the wild card in this mix will be the courts. To bail out policyholders (as well as local and state governments) who face grave economic peril, will judges again bend over backwards to find coverage in COVID-19 coverage cases just as they did in the environmental claims coverage wars?