The government-enforced lockdowns around the country have led to a wave of COVID-19 related business interruption claims. Insurance carriers that denied these claims now face class action suits from their insureds. While it is generally the case that an insured can bring breach of contract actions against carriers that deny claims, insureds seeking to sue their carriers in class action suits face additional obstacles.
Case in point, in the pending federal Western District of Washington case Germack DDS v. The Dentists Ins. Co., the insurer, The Dentists Insurance Company (TDIC) filed a Motion to Strike and Dismiss All Class Action Allegations in Plaintiff’s Complaint on the grounds that “[b]ecause these are highly individualized inquiries that will depend on the individual facts of each insured’s coverage situation and lost business income, this case is wholly unsuitable for class treatment.” In Germack DDS, the Plaintiff essentially asks the Court to take jurisdiction over every claim filed against TDIC for Business Interruption coverage caused by the COVID-19 outbreak for which the insurer has denied coverage for any reason. Further, “Plaintiff is then asking this Court to enter a blanket ruling that coverage should have been extended to each and every claim regardless of the law of the jurisdiction where each claim originated. Plaintiff also asks the Court to “award monetary damages to each insured, without any regard for how the Court could possibly make such an award without individually evaluating the financial records of each insured.”
As explained in TDIC’s motion, each insurance policy, loss, and denial is highly individualized. While the various members of the purported class all had business interruption policies with the same insured, the exclusions and coverages of each policy would potentially vary wildly from insured to insured. Likewise, “[t]here is simply no way that the Court can determine the amount of damages that each dentist insured by TDIC suffered as a result of the COVID-19 related partial closures without an individual assessment of the complete financial records of each individual dentist/insured.” Further, not all members of the purported class are domiciled in Washington state. Different states have different laws regarding insurance coverage. This is particularly crucial with respect to proximate causation. In Washington state, for example, it is the insured’s burden to prove entitle to coverage in the first instance. Yet in other states assess coverage under a concurrent cause rule. Simply put, TDIC argues that the Plaintiff cannot establish the elements of Rule 23, namely the elements of “commonality” and “predominance.”
It remains to be seen whether the court will accept TDIC’s reasoning. A favorable ruling to TDIC indeed may help stem the tide of potential class action lawsuits that insurers can expect to face in the coming months.