Insurance recovery lawyer lifts lid on COVID BI claims

"I feel pretty confident that there’s going to be a lot more policyholder-friendly decisions coming down the pike soon"

Insurance recovery lawyer lifts lid on COVID BI claims

Insurance News

By Bethan Moorcraft

A nationally renowned insurance recovery group, led by noted policyholder advocate Robin Cohen, has launched its own law firm. In January, Cohen Ziffer Frenchman & McKenna opened in New York with over 20 lawyers and staff, many of whom have worked together for more than 20 years at prestigious litigation firms, recovering billions of dollars for policyholder clients and securing landmark judicial rulings.

Cohen most recently led the insurance recovery practice at trial firm McKool Smith, where she worked alongside her longtime partners Adam Ziffer, Kenneth Frenchman and Keith McKenna. The group has earned a national reputation as fierce advocates for policyholders in high-profile disputes against insurance companies with the biggest monetary stakes.

The launch of Cohen Ziffer Frenchman & McKenna coincides with a very active period in insurance recovery litigation, particularly concerning coverage for business interruption (BI)-related losses caused by the COVID-19 pandemic.

“Our business has increased dramatically because of COVID-19. Tons of our clients have BI losses as a result of the pandemic, and they believe they should be compensated under the policies they purchased,” said McKenna. “That’s certainly going to be a significant part of our case load going forward, but by no means the dominant part. We deal with lots of big matters in lots of different areas, COVID-19 being just one of them, but it is a high-profile area in which I expect there’ll be a lot of lawsuits coming in the near future.” 

So far, a lot of the early BI lawsuits have involved smaller companies (e.g. small restaurants and hotels) and they’ve been dealt with in the district courts. As we approach the year anniversary since COVID-19 was officially declared a global pandemic by the World Health Organization, McKenna expects the litigation landscape to evolve.

“I think the bigger companies are now going to start filing claims,” McKenna told Insurance Business. “A lot of policies have a built-in statute of limitations which requires policyholders to bring a claim within a certain time period, which is often one or two years. Because of that, and the uncertainties created around that, some policyholders may be required to sue just so they’re not barred by the limitations in their policy. The World Health Organization declared COVID-19 a global pandemic in March 2020, so we’re approaching that one-year mark. I would expect a lot of companies who have those limitations in their policies to start pulling the trigger on lawsuits if their carriers have not agreed to provide coverage.”

McKenna also expects to see follow-on lawsuits related to the pandemic. For example, commercial general liability (CGL) policies could potentially be implicated by work-related mandates. If an employer demands their employees work from an office, and, as a result, an employee catches the coronavirus and falls sick, that employee could potentially bring a negligence claim against the employer, or a complaint based on the unreasonableness of requiring employees to work from an office during a pandemic. There are also some potential director and officer (D&O) liability issues that might arise, especially if someone claims the pandemic was a foreseeable event and the D&Os failed to properly obtain coverage.

These issues could impact the insurance sector at a time when public opinion of the industry is somewhat damaged. The industry’s “bad rep,” hurt in 2020 by the arguments around BI coverage, could negatively impact court rulings and jury verdicts.

“At the end of the day, you can’t divorce reality or people’s perceptions from the facts,” said McKenna. “To the extent that something goes to a court or a jury, the fact finders are going to review those facts through the lens of their own experience and their perceptions. And that’s a real issue for the carriers. In some instances, when they deny BI coverage, they may have debatable legitimate positions, but in others, I see them taking these ridiculous positions because it’s a nationwide position and they don’t want to budge an inch. If they budge an inch, they’ve got to give coverage to everybody, and so they take these hardline positions that sometimes are not dictated by the circumstances of the case. Policyholders and jurors are seeing that.”

In January, the United Kingdom Supreme Court dismissed an appeal brought forth by some of the world’s largest commercial insurers, instead ruling in favor of policyholders, stating that the vast majority of policyholders with non-property damage BI cover can make valid claims for their BI losses caused by the national response of the UK Government to COVID-19. The move has captured the attention of insurers and insurance recovery lawyers worldwide. 

“I feel pretty confident that there’s going to be a lot more policyholder-friendly decisions coming down the pike soon, especially because I think the big companies are going to start getting in the mix,” McKenna commented. “Their counsel is going to be much more prepared and able to fight the fight – and they can bring that fight up to an appellate level because they have the resources to do so. For the most part, I don’t think these issues are going to be determined at the trial level. Some of these big picture issues are going to go to appellate courts, and I feel pretty confident that, like the UK Supreme Court, that’s going to result in favorable rulings for the policyholders in many jurisdictions.”    

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