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North America

Published on 13 January 2021

In this chapter of our Annual Insurance Review 2021, we look at the main developments in 2020 and expected issues in 2021 for North America.

Key developments in 2020


The worldwide COVID-19 Pandemic has dominated every aspect of American life in 2020, including the insurance industry and insurance coverage litigation.  
Not long after the COVID-19 shutdowns and government “stay-at-home” orders began in mid-March, businesses across the US began submitting insurance claims, predominately claims for business interruption losses, extra expenses, and civil authority losses under first-party property policies.  

As of mid-November, more than 1,300 coverage actions have been filed in state and federal courts across the US.  Nearly 400 of these cases were filed as class actions and over 400 include bad faith claims against insurers.  

Coverage lawsuits have been filed by various businesses with restaurants, bars, hotels, barbers, ambulatory health care services, amusement/recreation, and professional service providers leading the charge. Efforts for multi-district litigation joinder have largely failed meaning the issues will be resolved largely through individual coverage actions. The initial phase of the litigation has been dominated by motions to dismiss, with insurers prevailing in approximately two-thirds of the less than 70 rulings as of mid-November. 

In some instances, policyholders have leave to replead their claims.  Most of the dismissals have been based upon COVID-19 claims not satisfying the “direct physical injury” requirement for business interruption and civil authority coverage under most US policy wordings and the application of exclusions such as virus and pandemic exclusions. Court’s denying motions to dismiss generally have done so to permit factual discovery of the clams.  

There are numerous state and federal legislative proposals that could impact coverage, but none have passed to date. Although the early results have favored insurers, the COVID-19 coverage wars have only just begun and will impact insurers substantially. As of the time of preparing this summary, there have been no substantive appellate court rulings.   

Protests that give rise to rioting and looting caused significant property damage which resulted in first-party claims and, when coupled with COVID-19 related shutdowns, presented concurrent causation issues. Wildfire, hurricane, and tornado activities continue to impact insurers.     

Cyber insurers saw a steep increase in claims in 2020, driven primarily by ransomware claims. The costs associated with ransomware claims rose dramatically due to increased ransom demands, threats to disclose extracted data, and related business interruption costs. As a result, a hardening of the cyber insurance market, as well as increased premiums and underwriting scrutiny are anticipated.

In the absence of comprehensive federal privacy laws in the US, individual states continue to adopt privacy regulations. For example, the groundbreaking California Consumer Privacy Act (CCPA) went into effect in January 2020. Similar to the EU’s General Data Protection Regulation, the CCPA created a number of privacy rights for California consumers and obligations for businesses that collect and process personal information. Several class action lawsuits already have been filed pursuant to the CCPA’s limited private right of action. California residents voted in November to approve the California Consumer Privacy Rights Act (CPRA), which further expands the privacy rights afforded to California consumers. Most of the substantive provisions of the CPRA will go into effect in 2023. 

The CPRA also creates a statewide privacy agency that will be charged with enforcement of privacy laws. This likely will lead to increased enforcement actions for privacy violations in California. In July 2020, the New York Department of Financial Services instituted its first enforcement action over alleged violations of its first-in-nation 2017 cybersecurity regulation. 

In addition, comprehensive privacy laws, as well as biometric privacy laws, have been proposed in several states. These proposed laws often provide for substantial statutory damages and/or private rights of action.  The Illinois statute enacted several years ago has produced substantial litigation and coverage claims.  

The opioid epidemic continues to result in numerous suits brought by states, political subdivisions, third-party payors, hospitals and individuals against pharmaceutical manufacturers, distributors and others seeking a variety of damages allegedly resulting from the diversion and misuse of prescription opioids such as hydrocodone and OxyContin. Multiple million-dollar settlements have been reached, with hundreds of cases pending (most consolidated in federal court in Ohio). 

In November of 2020, it was reported that three major drug distributors and a large drug manufacturer were closing in on a $26 billion deal with state and local governments that would end thousands of lawsuits over the companies’ role in the opioid epidemic. The deal is $4 billion more than the offer rejected last year by many states and municipalities. Some predict overall losses may reach $1 trillion.

Talc litigation continues, with thousands of cases pending against a much more limited universe of defendants. The multi-district litigation focused on expert testimony and causation issues. The most interesting development concerned reports that a talc manufacturer knew its talc contained asbestos. A talc mine company filed for bankruptcy court protection. The stay of the New Jersey insurance coverage dispute over Johnson & Johnson talc claims has been lifted and discovery is ongoing.  

The public nuisance liability theory failed in lead paint litigation across the U.S. for years until ten California cities and counties scored a $1.15 billion abatement award in California, later reduced to $409 million. Resulting coverage litigation is pending in California, New York, and Ohio. In the Spring of 2020, a judge in San Francisco California ruled that paint manufacturer ConAgra’s insurers did not have to pay ConAgra’s $102 million share of a settlement in a suit over the widespread use of lead paint in California, finding that coverage is barred by a state law prohibiting insurance for intentional acts.  An appeal is pending. There is a concern over a potential broadening of the tort of public nuisance in other areas.  

Allocation of losses continued to be an issue driving long-tail coverage claims in the US such as asbestos and environmental claims. Most states have applied a pro rata approach over the inferior “all sums” approach for allocation of continuing or progressive injuries or damages among multiple periods. Some states that previously ruled in favor of the “all sums” approach have reversed course based upon updated policy language.


Like everywhere else in the Western world, 2020 was dominated by the prospect of litigation to determine what obligations insurers would have to their insureds on COVID-19 related losses.

Nursing Home and Private Business Liability

The most profound effect in Canada of Covid-19 related deaths arises from the operation of Canadian nursing homes, where some 80% of Canada’s fatalities due to COVID-19 were recorded, the highest rate in the OECD. 

The Government of Ontario has announced that it will provide liability protection to some workers, businesses and non-profits against COVID-19 exposure-related lawsuits.

The bill, if passed, would ensure anyone making an "honest effort" to follow public health guidelines while working or volunteering not be exposed to liability in civil proceedings.  The bill will not prevent lawsuits against those who willfully, or through "gross negligence", endanger others.

Several class actions have already been brought against nursing homes and home operators, including public homes operated by municipalities.

Ontario Class Action Reforms

The Government of Ontario, Canada’s largest province and whose legislation often inspires other Canadian provinces, has proposed changes to the Ontario Class Proceedings Act, 1992 . 

Proposed legislation may restore some balance for insurers and insureds in litigating these matters by making it easier for defendants to narrow issues prior to certification, and correspondingly, make it easier to obtain dismissal of such matters.  Other proposed provisions would also prevent duplication of proceedings in other provinces, improve appeal access and provide for costs liability for funders of class action litigation.

The highlights of the legislation include:

  • Certification will only be granted if “the questions of fact or law common to the class members predominate over any questions affecting only individual class members.”   It is thought currently that too many cases with individual as opposed to class interests are being approved as part of class proceedings, thus defeating the legislation and slowing the courts.  The Courts will be directed to 
  • Striking Actions Prior to Certification or narrowing issues will be permitted. Parties wrongly named in Class Actions or those facing suits that show no cause of action will have the opportunity of moving for judgment prior to certification.  While this amendment will be useful in many cases, there is recognition that many judges do not like striking pleadings before all evidence is presented.    Additional provision is made to move to strike proceedings for want of prosecution.
  • Multijurisdictional Canadian Class Actions if brought in other provinces may, upon motion, seek an order from the Ontario Superior Court to require determination of whether it or the Courts of another province would be preferable for some or all of the claims or common issues.  As the Ontario courts are generally more familiar with Class Action proceedings, this change should be good news for insurers and insureds alike.
  • Certification Orders will be able to be appealed directly to the Ontario Court of Appeal instead of having to undertake an initial appeal in the province’s Divisional Court.
  • Third-Party funders would be made subject to costs awards to the extent that the funder undertook to provide indemnity protection to the representative Plaintiff.
It is generally thought that these initiatives will restore some balance to the Class Action Proceeding process and promote more cautious claims.

What to look out for in 2021 


Courts will continue to address numerous COVID-19 business interruption (BI) claims under first-party property policies in 2021 and some appellate court decisions likely will be rendered.  The activity level on other lines of policies such as general liability, professional liability, and D&O policies will increase. More SEC enforcement activity is likely to follow as the SEC’s Enforcement Division has formed a “Coronavirus Steering Committee.”

Cyber and technology-related claims will continue to flourish. The year ahead promises to produce court rulings under cyber-related policies and additional product offerings to address technology-related risks and emerging gig economy issues. 

Climate change will continue to be a major topic for insurers in a variety of contexts.  

Insurers are taking steps to prepare for the opportunities and challenges on the claims and underwriting sides that may result from policy changes associated with a Biden administration.  


So far the courts have not had sufficient proceedings before them to issue many pronouncements, but as we move into 2021, and the courts adjust themselves to the new reality of virtual hearings, we can expect that several key issues will be decided, including:
  • whether business closure due to interpretations of orders of “Civil Authorities” are sufficient to trigger business interruption insurance policy provisions;
  • whether insurance brokers will have been negligent in failing to recommend pandemic coverage in past policy sales;  
  • whether pandemic exclusion clauses will be upheld;
  • whether physical damage need be present to trigger standard insurance coverage language in insurance policies; and,
  • whether the rationale in the UK test case in FCA v. Arch et al. will be implemented in Canada.


Authored by Hinshaw & Culbertson & Miller Thomson.

Download our full Annual Insurance Review 2021 for more insights.