Wednesday, August 26, 2020
Christopher French has posted to SSRN Forum Shopping COVID-19 Business Interruption Insurance Claims. The abstract provides:
Insurance disputes are typically governed by state law, and state insurance laws vary considerably, with some states being favorable to policyholders and others being unfavorable. With forum shopping, a plaintiff often has many choices regarding where it can bring a lawsuit, including multiple states in which to bring the case and whether to bring the case in federal or state court. Of the over 900 COVID-19 business interruption insurance lawsuits filed thus far, more than 600 of them have been filed in federal court, with more than 100 filed as class actions. Many of them were also filed in states with insurance laws that are not favorable to policyholders.
Conventional wisdom provides that a plaintiff’s chances of winning are generally much higher in state court than in federal court and that historically federal class actions against insurers have been successful only approximately twenty-five percent of the time. So, why were so many of the COVID-19 business interruption insurance cases filed in federal court in unfavorable states and as class actions when the historical chances of winning are so low in such forums, particularly as class actions?
This Essay provides some possible answers to that question. In doing so, it explores forum shopping considerations in general, the conventional wisdom regarding litigating in federal versus state court, and the empirical data regarding the odds of winning in state versus federal court.