Redesigning Widespread Insurance Coverage Disputes: A Case Study of the British and American Approaches to Pandemic Business Interruption Coverage

Abstract

In the 18 months since the pandemic’s onset in March 2020, businesses have filed approximately 2,000 different lawsuits in state and federal courts seeking insurance coverage under their business interruption policies. Notwithstanding this “nationwide flood of insurance-related litigation,” clear answers regarding insurers’ coverage obligations remain elusive: although courts have dismissed many of these cases, policyholders have scored a meaningful number of victories in federal, and especially state, courts. The United States’ chaotic and costly process for resolving pandemic-related business interruption coverage disputes contrasts sharply with the experience of the United Kingdom. Within eight months of the pandemic’s onset, the legal obligations of British business interruption insurers had been definitively resolved through a novel “test case scheme” led by the country’s primary market conduct regulator for financial firms, the Financial Conduct Authority (FCA). Focusing on these divergent experiences, this Article suggests that the U.S. can substantially improve its process for resolving future widespread insurance coverage disputes by adopting a limited reform that is inspired by the British test case scheme. In particular, the Article proposes that states should consider empowering their insurance department and attorney general to request that federal courts adjudicating cases raising novel coverage questions implicated in emerging and widespread coverage disputes certify those questions to the state’s supreme court.