Student Lawsuits
During the spring of 2020, more than
4,000 universities closed their campuses and switched to online
learning, affecting at least 25 million students. In response to the
shift, various class action lawsuits were filed against colleges and
universities across the country by students who argue that schools
failed to adequately refund or reimburse them for tuition and other
fees. By June 2020, more than 70 universities were facing lawsuits, with
students arguing that online-only instruction is less valuable and
should cost students less in tuition. The lawsuits primarily alleged
breach of contract, with students contending that universities had
failed to fulfill their obligations outlined in enrollment agreements to
provide a certain standard of education and support. Additionally, many
lawsuits also included allegations that universities retained payments
for unused services, such as campus amenities, facilities, and
resources, constituting claims of unjust enrichment.
These
lawsuits present complex legal questions regarding the nature of the
contractual relationship between students and universities, especially
in unprecedented circumstances such as a global health crisis. While
some universities argued that they made reasonable efforts to adapt to
the challenges posed by the pandemic, students countered that these
efforts fell short of what was necessary to justify the retention of
tuition and fees. The outcomes of these lawsuits varied, with some
universities opting to settle to avoid prolonged legal battles, while
others defended their positions in court. Despite initial skepticism
from courts about the legal basis for such claims, appeals courts
reversed several other lower-court dismissals, including cases against
New York University and American University. The class-action lawsuit
against American University recently reached a preliminary settlement.
The U.S. District Court for D.C. granted preliminary approval on January
10th to a $5.439 million class-action settlement between the University
and a group of approximately 7,000 eligible students. Additionally, in
January 2024, George Washington University settled a lawsuit for $5.4
million with former students who alleged a breach of contract due to the
abrupt transition to online-only classes. Many other universities like
Johns Hopkins and Columbia have also reached multi-million dollar
settlements in similar lawsuits.
Coronavirus Lawsuits Against China
During
the COVID-19 pandemic, numerous lawsuits were filed in the United
States against China and related entities, blaming them for the
outbreak. However, these lawsuits faced significant hurdles due to
China's immunity under the Foreign Sovereign Immunities Act. In 2022,
the U.S. District Court for the Eastern District of Missouri dismissed a
prominent lawsuit filed by the state on these grounds. The court ruled
that China and its affiliated entities were immune from suit, and none
of the exceptions to immunity applied. However, in January 2024, a panel
of the U.S. Eighth Circuit Court of Appeals ruled that one claim
included in the suit may proceed: an allegation that China hoarded
personal protective equipment. In the ruling, Judge David Stras wrote,
“Missouri’s overarching theory is that China leveraged the world’s
ignorance about Covid-19. One way it did so was by manipulating the
worldwide personal-protective-equipment market. Missouri must still
prove it, but it has alleged enough to allow the claim to proceed beyond
a jurisdictional dismissal on the pleadings.” Aside from this one
claim, the panel otherwise agreed with the lower court’s 2022 ruling
that dismissed the case. The Chinese government has labeled the lawsuit
as "highly absurd" and asserted that it lacks both factual and legal
merit. Legal experts have largely dismissed it as a stunt intended to
deflect responsibility onto China for the COVID-19 pandemic.
Resident Lawsuits
During
the height of the COVID-19 pandemic, tensions ran high as residents and
lawmakers challenged the constitutionality of their states' governors'
stay-at-home orders. Across various states, lawsuits were filed,
contesting the restrictions imposed to curb the spread of the virus.
Residents argued that these measures infringed upon their fundamental
rights, including freedom of movement and assembly. Lawmakers, in turn,
questioned the extent of executive power wielded by governors in issuing
such orders, advocating for a more balanced approach that considered
both public health concerns and individual liberties.
One major
development in this area of litigation occurred in October 2020, when
the Supreme Court of Michigan, in a 4-3 majority opinion, ruled that
Governor Gretchen Whitmer lacked the authority to extend or declare
additional states of emergency in response to the COVID-19 pandemic.
Michigan citizens and Republican lawmakers had argued that Governor
Whitmer exceeded her constitutional authority when she extended
Michigan’s state of emergency and stay at home order beyond the original
April 30 deadline. The Court rejected the Governor’s arguments that she
derived authority for the extensions from the state’s Emergency
Management Act of 1976 and Emergency Powers of the Governor Act (EPGA)
of 1945. The Court also held that the EPGA violates the Michigan State
Constitution because it illegitimately delegates to the executive branch
the plenary police powers of the legislative branch. Additionally, in
Wisconsin, the state Supreme Court overturned Governor Tony Evers'
extension of the stay-at-home order in May 2020, ruling it
unconstitutional due to procedural issues. In Pennsylvania, a federal
judge ruled in September 2020 that some of Governor Tom Wolf's lockdown
measures were unconstitutional, particularly targeting restrictions on
gatherings and business closures. Conversely, in California, multiple
lawsuits challenged Governor Gavin Newsom's orders, with courts
generally upholding the state's authority to implement necessary
restrictions to protect public health. These varying rulings underscored
the complexities of navigating a global health emergency within the
framework of democratic governance, prompting ongoing debates about the
appropriate scope of government intervention in times of crisis.
Wisconsin Election Lawsuits
After
Wisconsin Governor Tony Evers issued an executive order postponing
state in-person voting for the presidential primary election to June
because of the coronavirus, the State Supreme Court put the election
back on track. Republican lawmakers argued that Evers did not have the
authority to unilaterally postpone the election and accused the Governor
of “unconstitutional overreach” The state Supreme Court agreed. In a
separate lawsuit brought by the Wisconsin Republican Party, the U.S.
Supreme Court voted 5-4 to overturn a federal judge’s decision to extend
the time for absentee voting by a week. The joint result of these legal
actions meant that Wisconsin voters had to vote in-person for the April
7 primary election, despite the state stay-at-home order and national
social distancing guidelines. On election day, the city of Milwaukee
consolidated its 180 polling places to just 5 locations, leaving voters
waiting in long lines stretching across multiple blocks. Many poll
workers quit due to fears of virus exposure, leaving nearly 300 of the
state’s National Guard troops to replace those volunteers and help run
the polling places. At least 52 new cases of coronavirus in Wisconsin
were linked to in-person voting at the state primary election.
Business Interruption Claims
During
the pandemic, government-mandated closures and operational restrictions
affected businesses around the world. In response, a wave of litigation
has emerged as policyholders seek coverage under their business
interruption insurance policies for the resulting financial losses.
These lawsuits have spanned various sectors, from restaurants and retail
establishments to manufacturing facilities and professional services
firms.
According to the NAIC, approximately 17% of the commercial
property insurance policies issued prior to the pandemic did not
include an exclusion for losses caused by virus, communicable disease,
or pandemic. Consequently, policyholders with broad policy wordings and
strong claims are now pursuing coverage, leveraging the ambiguity
present in the policy language. These legal battles primarily revolve
around the interpretation of policy language and the extent of coverage
offered by business interruption insurance. Courts have grappled with
questions regarding the requirement of physical loss or damage, with
plaintiffs arguing that the presence of the virus constitutes such harm,
while insurers contend that traditional property damage is necessary to
trigger coverage. APCIA senior vice president and general counsel
Claire Howard expressed insurers’ stance that property policies are only
intended to cover “actual physical loss”, such as fire or tornado.
“These policies are not intended to cover diseases or pandemic-related
losses,” Howard said. “In the vast majority of cases, insurers did not
price policies to include such coverage, and policyholders did not pay
for it.” In New York alone, APCIA has estimated that business
interruption losses would range from US$5.8 billion to US$21.5 billion
per month for businesses with under 250 employees. This is at least 18
times the US$300 million total monthly premiums written for commercial
property in the state, according to an APCIA and National Association of
Mutual Insurance Companies Amici brief.
The complexity of this
legal landscape has been further compounded by the sheer volume of
litigation and the lack of uniformity in judicial rulings across various
jurisdictions. According to the University of Pennsylvania Carey Law
School’s COVID Coverage Litigation Tracker, over 2,300 lawsuits have
been filed since March 2020 in state and federal courts. About 73% of
insurers' motions to dismiss decided by state courts have been granted,
and about 93% in federal court, according to the tracker. However, a
recent article describes how momentum may be shifting in favor of
policyholders. The shift comes in part as a growing number of state
appellate courts are recognizing that many previous COVID-19 BI rulings
actually represent a deviation from the “well-established precedent”
that damage is tangible and subject to coverage even when the “property
is not structurally altered, the principal consequence is a loss of
functionality and neither the cause of the damage nor the damage itself
is visible to the naked eye”. Courts are now considering pre-pandemic
holdings that losses from fumes, bacteria, and other causes of
non-structural damage are covered, and allowing more COVID-related
business interruption claims to proceed toward trial. A significant
milestone signaling this shift occurred in September 2022, as the
Vermont Supreme Court became the first state high court to establish
that well-supported claims of "direct physical loss or damage" to
property from COVID-19 could potentially justify coverage for business
interruption losses. The decision followed a growing number of state
appellate court decisions, including California, Louisiana, and Alaska,
favoring policyholders on this critical issue.
Another emerging
trend related to COVID-19 business interruption losses involves
increased litigation between insurers and reinsurers. Reinsurers have
become implicated in disputes over the extent of their liability for
business interruption losses stemming from the pandemic. As primary
insurers face mounting claims from policyholders seeking coverage for
their financial losses, those insurers have begun turning to their
reinsurers to share the burden of indemnification. Central to these
conflicts is the interpretation of contractual language where reinsurers
may argue that their agreements contain exclusions or limitations that
absolve them of liability for pandemic-related losses. Conversely,
insurers may contend that their reinsurance contracts provide broader
coverage or lack explicit exclusions for such events. Disputes also
emerge over the causation and triggering events for coverage, with
insurers arguing that the presence of the virus constitutes physical
loss or damage, while reinsurers insist that tangible structural harm is
necessary. The resolution of these disputes can have significant
implications for the insurance industry as a whole, impacting the
availability and affordability of coverage for future catastrophic
events. The legal landscape remains fluid, with ongoing litigation
shaping the interpretation of insurance contracts and setting precedents
for future claims arising from unforeseen events.
Unipolsai Assicurazioni SpA (substituted as claimant for UnipolRe Designated Activity Co., Ireland) v Covea Insurance Plc (2024)
The
UK Commercial Court recently delivered a landmark ruling in favor of
insurers Covéa and Markel concerning a non-damage business interruption
case stemming from the pandemic. The appeals were heard before the same
judge on consecutive days, and a single judgement was issued by Justice
Foxton given the “substantial overlap” between the issues. To date the
majority of litigation has involved policyholders and insurers, however,
disputes over reinsurance coverage are becoming increasingly common. In
this case, the dispute involved the insurers and their respective
reinsurers, General Reinsurance AG for Markel and UnipolRe Designated
Activity Company for Covéa. This decision holds significant
implications, potentially establishing a precedent for similar
pandemic-related business interruption lawsuits.
The cases
involved claims by parties seeking compensation under property
catastrophe excess of loss reinsurance policies related to business
interruption losses due to the pandemic. These policies provided
coverage to businesses operating nurseries and childcare facilities. The
closure of schools and childcare centers prompted the businesses to
file claims under these policies. The parties seeking indemnity argued
that the losses were directly caused by the pandemic, constituting a
catastrophe as per the terms of the reinsurance agreements. Central to
the judgement was the interpretation of certain reinsurance contract
provisions, specifically the definition of “catastrophe” and the
application of the hours clause. The Court ultimately ruled in favor of
the insurers, permitting them to recover their losses under the
reinsurance contracts. The case was decided in part on the court’s
ruling that “catastrophe” is not limited to those which cause or are
capable of causing physical damage. Additionally, the Court rejected the
argument that “a catastrophe was necessarily sudden in onset or short
in duration, or that it was violent.” The court's ruling represents a
broader interpretation of these policy terms, potentially establishing a
precedent for recognizing a wider array of business interruption
claims. This ruling has the potential to greatly impact pending COVID-19
reinsurance claims and, consequently, the broader reinsurance market.
Huntington Ingalls Industries V. Ace American Ins. Co. (2022)
The
Vermont Supreme Court made a landmark decision in COVID-19-related
business interruption litigation, becoming the first state high court to
rule in favor of policyholders. The lawsuit was filed by Huntington
Ingalls Industries, a major military shipbuilding company based in
Newport News, Virginia, and its captive, Huntington Ingalls Industries
Risk Management LLC, headquartered in Burlington, Vermont, against their
reinsurers, including Chubb Ltd. unit Ace American and several others.
The court found that the complaint sufficiently demonstrated that
COVID-19 caused direct physical damage to the insured’s shipbuilding
facilities. The virus’s presence at the facilities and its adherence to
surfaces were deemed to have led to detrimental physical effects that
altered and impaired the functioning of the property. Consequently, the
property could no longer serve its intended purpose, necessitating
physical alterations such as installing barriers to address these
effects. The court concluded that the statements in the complaint
provided enough evidence to support the claim that the virus physically
altered the property, leading to the reinstatement of the litigation and
remanding the case for further proceedings.
Consolidated Restaurant Operations, Inc. v. Westport Ins. Corp. (2022)
The
lawsuit involves Consolidated Restaurant Operations (CRO), a company
managing numerous restaurants, and Westport Insurance Corporation
(Westport). CRO held an "all-risk" commercial property insurance policy
with Westport, covering "all risks of direct physical loss or damage to
insured property." When the COVID-19 pandemic forced CRO to suspend or
significantly reduce its operations due to virus presence in its
restaurants and government-imposed restrictions on nonessential
businesses, CRO sought coverage for resulting revenue loss. Westport
refused coverage, arguing that the coronavirus didn't cause "direct
physical loss or damage" to CRO's properties. Consequently, CRO filed a
lawsuit seeking a declaration of Westport's policy obligations and
damages for breach of contract.
The Supreme Court of New York
dismissed the complaint, ruling that the policy didn't encompass CRO's
purported losses. The Appellate Division upheld this decision,
interpreting "direct physical loss or damage" to necessitate a tangible
alteration of the property, which CRO failed to prove. Subsequently, the
case was brought to the New York Court of Appeals. On February 15,
2024, the court rendered its decision. The court agreed that “direct
physical loss or damage” requires a substantial alternation or complete
and ongoing disposition of insured property. It was determined that the
presence of the virus in the restaurants and the resulting interruption
of in-person dining didn’t satisfy this requirement. As such, the court
affirmed the dismissal of the complaint.
K.C. Hopps, LTD v. Cincinnati Ins. Co. (2021)
K.C.
Hopps, a company managing various entertainment establishments in
Kansas City, faced significant financial losses due to COVID-19 pandemic
restrictions in 2020, estimating a loss of $2 million in business
income. Seeking reimbursement, K.C. Hopps filed a claim under its
all-risk insurance policy with Cincinnati, which was denied. K.C. Hopps
then sued Cincinnati, alleging breach of contract for refusing to honor
the claim. A distinguishing aspect of this lawsuit was K.C. Hopps'
assertion that COVID-19 had physically damaged its properties by
altering air particles and surfaces. Cincinnati sought summary judgment,
but the district court found a genuine dispute regarding whether K.C.
Hopps had experienced physical loss or damage.
The case proceeded
to a jury trial (the first jury trial in a COVID-19 business
interruption coverage lawsuit) where both parties moved for judgment as a
matter of law at the close of evidence. The district court denied both
motions, and the jury ruled in favor of Cincinnati. Following the
verdict, K.C. Hopps renewed its motion for judgment as a matter of law
and sought a new trial, both of which were denied by the district court.
K.C. Hopps appealed the decision.
The appeals court reviewed the
denial of judgment as a matter of law de novo, using the same standards
as the district court. K.C. Hopps argued entitlement to coverage under
two policy provisions: the General Coverage provision and the Business
Income provision. These provisions protected K.C. Hopps from direct
loss, defined as “accidental physical loss or accidental physical
damage.” The court cited previous cases to establish the legal standard
for what constitutes a "physical loss" under the insurance policy. It
emphasized that the loss or damage must involve some physical
alteration, contamination, or destruction of property. Additionally,
under the policy terms, the direct physical loss or damage must be
responsible for the loss of income. The court clarified that while
contamination could be considered a physical loss, the COVID-19 virus
itself does not cause the type of physical harm required to trigger
coverage under the policy. Furthermore, the court argued that any
contamination wasn’t the cause of the lost business income. The shutdown
orders imposed by the government, rather than the presence of COVID-19
particles, were the primary reason for K.C. Hopps’ business
interruption. Therefore, the court concluded that K.C. Hopps' claim did
not meet the standard for physical loss under the insurance policy, and
the district court's decision to deny judgment as a matter of law was
upheld.
Tambellini v. Erie Insurance Exchange (2020)
Joseph
Tambellini, owner of the Tambellini Restaurant in Pittsburgh,
Pennsylvania, along with HTR Restaurants Inc., and several other
businesses filed suit against their insurance company, Erie Insurance
Exchange seeking declaratory, compensatory, and injunctive relief with
respect to coverage for losses caused by the COVID-19 pandemic and the
government orders connected to it. In full force and effect is an Erie
Insurance Exchange “Ultra Plus Commercial General Liability Policy”
(“Erie Policy”) that includes coverage for business and business income
losses. The Plaintiff asserts that the Erie policy does not exclude
losses caused by the coronavirus pandemic and is entitled to receive
coverage for losses incurred by the restaurant as a result of the
pandemic. Such losses include government mandated business closures and
the forced furlough of restaurant employees. Tambellini argues that the
coronavirus is susceptible to person to person, person to property, and
property to person transmission and contamination. Thus, the plaintiff
argues that the COVID-19 pandemic has adversely affected the operations
of his restaurant by causing damage to the property and its occupants
resulting in related losses which are covered under its Erie insurance
policy.
Given the factual and legal overlap between various
claims filed in courts across Pennsylvania, the businesses moved for all
state-wide litigation to be coordinated in Allegheny County for all
pre-trial and trial purposes under Rule of Civil Procedure 213.1. Erie
appealed to the Superior Court, which partially upheld and partially
reversed the lower court’s decision. The Superior Court determined that
the trial court exceeded the authority of Rule 213.1 by ordering the
coordination of similar actions against Erie that had not yet been
filed. The Superior Court further held that the businesses did have the
right to initiate the motion for coordination of already filed lawsuits
under Rule 213.1. Following the parties’ cross-appeals, the Supreme
Court of Pennsylvania granted review of both holdings. On December 8,
2023, the Supreme Court of Pennsylvania rendered its decision. The
Supreme Court agreed with the Superior Court that the trial court lacked
authority to coordinate actions that had not yet been filed.
Additionally, the Supreme Court found that Erie had waived the
opportunity to argue against the businesses seeking coordination by
failing to raise it as an issue in trial court. Therefore, the Supreme
Court affirmed the Superior Court’s order.
Simon Wiesenthal Center, Inc. et al v. Chubb Group (2020)
A
Los Angeles nonprofit group that advocates for human rights and combats
anti-Semitism sued Chubb Ltd. in the U.S. District Court for the
Central District of California, asserting that it is entitled to
business interruption coverage under its August 2019 Chubb policy. The
Simon Wiesenthal Center is a Jewish human rights organization that
supports Holocaust research and is dedicated to Holocaust and Nazi-death
camp survivor, Simon Wiesenthal. The Center was closed on March 19th by
California stay-at-home orders and forced to cancel several events and
fundraisers due to COVID-19. The Center alleges that its business
interruption policy should cover its lost profits because its policy
covers “physical” property loss and damage. The center argues that this
requirement is met since COVID-19 can attach to surfaces and because
viruses are not listed on its policy as “pollutants” that are excluded
from coverage. On June 1, 2020, the policyholder filed a notice of
dismissal and the court entered an order dismissing the action without
prejudice.
The Financial Conduct Authority v. Arch and Others (U.K. 2020)
Many
policyholders suffered significant losses to their businesses affected
by COVID-19. These losses resulted in a large number of claims arising
under business interruption insurance policies. Most policies focus on
property damage and uncertainty existed as to whether these policies
would cover economic losses resulting from the pandemic. On June 9,
2020, the Financial Conduct Authority (FCA) initiated proceedings
seeking a judicial determination on the scope and meaning of sample
insurance wordings of Business Interruption policy coverage. The FCA
brought the test case in the High Court of Justice in London against
eight insurer defendants —Arch Insurance (UK) Limited, Argenta Syndicate
Management Limited, Ecclesiastical Insurance Office Plc, Hiscox
Insurance Company Limited, MS Amlin Underwriting Limited, QBE Limited,
Royal & Sun Alliance Insurance Plc, and Zurich Insurance Plc —
representing the interests of medium sized business policyholders. The
outcome of the case affects over 700 insurance policies, 60 insurers,
and 370,000 policyholders. The goal of the case was synthesized by
Christopher Woolard, Chief Interim Chief Executive of the FCA, who
explained that, “Coronavirus is causing substantial loss and distress to
businesses and many are under immense financial strain to stay afloat.
Our aim throughout this court action has been to get clarity for as wide
a range of parties as possible, as quickly as possible.”
The
arguments in this case were heard on an expedited basis and the Court
considered 21 policy wordings from the eight Defendant insurers.
Although the High Court reached different conclusions for each of the
differently worded policies, on September 15, 2020, the Court held in
the general favor of the FCA and found that most disease clauses in the
sample business insurance policies do provide coverage for
policyholders. Following appeals by both the FCA and the insurers
regarding the High Court’s decision, the case was expedited to the
Supreme Court of the United Kingdom to promptly resolve the
consequential legal questions central to this case. In January 2021, the
Supreme Court delivered its highly anticipated judgment, largely
upholding the High Court's decision and providing clarity on the issue.
The Supreme Court addressed the following issues raised by the appeals:
- Disease
Clauses: The Court interpreted disease clauses as covering business
interruption losses resulting from COVID-19 occurrences within the
specified geographical radius.
- Prevention of Access and Hybrid
Clauses: The Court broadened the interpretation of “restrictions
imposed” to include an instruction given by a public authority that is
in “mandatory and clear terms and indicates that compliance is required
without recourse to legal powers.” The Court also broadened the
interpretation of the “inability to use” requirement.
- Causation:
The Court ruled that business interruption losses resulting from public
health measures were caused by cases of COVID-19 occurring within the
specified radius, rejecting the “but for” test of causation.
- Trends
Clauses: These clauses are used to quantify BI losses by considering
what the business's performance would have been if the insured peril had
not occurred. Insurers argued they were not liable for losses that
would have happened regardless of the insured perils due to the broader
effects of the COVID-19 pandemic. However, the Supreme Court disagreed.
They interpreted trends clauses to mean that adjustments should only be
made for circumstances unrelated to the insured peril, not those
inextricably linked to it.
- Pre-Trigger Losses: The High Court
initially allowed adjustments under trends clauses to account for
business downturn due to COVID-19 before the insured peril was
triggered. However, the Supreme Court rejected this. They stated that
pre-trigger losses caused by the pandemic should not be assumed to
continue during the operation of the insured peril. Adjustments should
only be made for circumstances unrelated to COVID-19.
- Status of
Orient-Express: The Supreme Court overruled the decision in the
Orient-Express case, where the business interruption was attributed to
two concurrent causes, neither of which was the sole cause of the loss.
The Supreme Court found that the treatment of the trends clause in the
previous proceedings was incorrect. They emphasized the exclusion from
loss assessment of circumstances with the same underlying or originating
cause as the damage. Overall, the UK Supreme Court ruling was seen as a
victory for policyholders, as it affirmed that many business
interruption insurance policies did indeed cover losses resulting from
the pandemic and government-mandated closures, subject to the specific
policy wording.