New Project Aims to Streamline Business Interruption Insurance Lawsuits

IAALS initiative builds on previous protocols designed to make discovery quicker and easier

The Institute for the Advancement of the American Legal System recently announced it is developing litigation protocols aimed at helping coronavirus-affected businesses and their insurance companies resolve disputes. 

Over the next several months, a working group of lawyers and judges will develop the Initial Discovery Protocols for COVID-19 Insurance Claims, which will be published on the IAALS website and shared with judges around the country. The protocols are expected to be finalized and released by the end of the year, according to Brittany Kauffman, a senior director at IAALS.

“Our goal is to get ahead of the tsunami of cases that will be coming and trying to get these out in advance so that the courts and judges and attorneys can really have these at their disposal to use when the cases really hit,” Kauffman said.

Companies have already filed hundreds of lawsuits against insurers for denying business interruption insurance claims arising from the pandemic, and the number of disputes is expected to balloon in the coming months. Restaurants, retail and other non-essential businesses hit hard by stay-at-home orders have filed business interruption insurance claims to cover losses from the pandemic, but many have been denied payouts and are looking to the courts to resolve disputes. 

“[The protocols] will come at a time where the courts really will benefit from having something to help streamline the litigation,” Kauffman said, “because courts are already facing so many other challenges with regard to how to manage people who are coming into the courthouse.”

Discovery is a costly and time-consuming part of any litigation, but the IAALS project aims to provide a pretrial procedure to streamline the process for quicker resolution of cases. Disputes over business interruption claims often center around whether there has been direct physical loss or damage to property — something that is much harder to prove in the case of a virus than, say, a fire or hurricane. Kauffman said she anticipates parties in COVID-19 insurance lawsuits will have questions about the use of experts and what information and documents are needed to show a physical loss has occurred.

“One thing our group will be talking about outlining is what are the key documents and what is the key information both parties need to discover and exchange with each other to help get to the root of that question,” Kauffman said.

The protocols are also intended to make it easier and faster for parties in insurance disputes to exchange documents and information early in the case, frame the issues to be resolved, value claims and plan for further formal discovery, if necessary. In addition to sharing the protocols with courts, IAALS plans to get the word out to attorneys so they can take the protocols to the judge and propose they be used in their cases, according to Kauffman. 

IAALS has been adjusting its work in response to the pandemic and the new legal issues it has created, Kauffman said, and the Denver-based organization found there was demand for a set of protocols to make discovery easier in coronavirus-related insurance cases. “As we were in that process of shifting our work and adding new projects, a number of people reached out to us—experts in the business and insurance community— with the possibility of this project,” she said. 

The project builds on past IAALS efforts to create discovery protocols for other types of cases, including employment, Fair Labor Standards Act and disaster cases. Judges across the country have opted to implement the protocols, and jurisdictions in Oregon, California and Connecticut have adopted IAALS protocols district-wide for employment cases. 

The COVID-19 protocols will follow the model IAALS developed for property insurance claims arising from natural and man-made disasters, according to Douglas Pepe, a partner at New York firm Joseph Haage Aaronson and member of the IAALS pandemic protocols working group. The IAALS disaster discovery protocols, released in 2019, specify the information and documents each party must provide and deadlines for doing so. 

Kaufmann said she hopes the latest IAALS discovery protocols will be widely adopted by judges since the coronavirus has led to business losses nationwide. “Unlike disasters that hit in pockets around the country, and then maybe the judges would adopt them in those areas where disasters have hit, I think one thing that’s really unique about this particular pandemic is it’s akin to a disaster in every single state of our country,” she said.

The working group for the Initial Discovery Protocols for COVID-19 Insurance Claims includes plaintiff’s and defense attorneys from across the country with expertise on insurance matters as well as federal judges from Texas and New York. “It includes several members who were on the disaster protocols team, as well as some new voices we’re excited to work with,” Kauffman said.

—Jessica Folker

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