A pandemic for the litigious age
COVID-19 has come to mean many things to many people, from a global public health crisis to a logistical nightmare to a political hot potato. It has also presented a new set of legal challenges.
With lockdowns, re-openings, and a hodgepodge of rules, business owners are worried about lawsuits related to exposure, workplace health and safety, termination, and discrimination. As of this writing, more than 3,900 COVID-19-related complaints have been filed in federal and state courts.
At the heart of these issues is fear of uncertainty coupled with the lack of a national liability shield. This measure would protect entities from lawsuits if they took appropriate measures to safeguard customers and employees.
While national politicians on both sides of the aisle have presented arguments for and against such protection, their lack of agreement has resulted in some states enacting their own liability reform legislation. These measures have provided some assistance for businesses located in a specific state, but they have also created a patchwork of confusion for organizations with interests in multiple states.
A look at liability at the federal level
From the outset of the COVID-19 stimulus efforts, groups from all corners of the economic spectrum—the US Chamber of Commerce, colleges and universities, national manufacturers, independent business owners, and a host of others—embarked on lobbying efforts to get Congress to back liability reform.
The idea is at the center of the GOP’s most recent proposal, introduced in July. Senate Majority Leader Mitch McConnell has indicated that the liability protection included in the Safe To Work Act is non-negotiable. Democratic critics, on the other hand, see the effort as an infringement on workers’ rights, with wording that makes it nearly impossible for a suit to get to court.
Consequently, the trick for Congress is to find a middle ground. And when, where, and if that will happen, no one knows.
States take their own steps
Without a liability policy coming out of Washington, many businesses and organizations began asking patrons and employees to sign waivers. States then rose to the challenge, and by the end of July 2020, 12 of them had enacted versions of liability reform to fend off frivolous legal attacks.
While each of the separate initiatives share similarities, they are nevertheless different—and this, in turn, can leave certain individuals and businesses vulnerable.
- To create all-encompassing COVID-related protections, many states have intentionally used broad language. The more general the language, though, the greater the room for error in its interpretation. Phrases like “reasonably attempt to comply with public health guidance” can easily lead to questions on what represents compliance and which applicable health guidelines are to be followed. Remember, we are more than six months into this, and we still can’t all agree on masks.
- Many of the state measures are not meant to act as a blanket liability shield. Businesses are still required to adhere to standards that forbid grossly negligent and reckless behavior.
- Legislation in Georgia contains a Rebuttable Presumption. Through warning signs posted at various points, patrons are essentially waiving civil liability claims against the business.
To avoid confusion, it’s in the best interest of businesses to perform their due diligence. Does their local jurisdiction have a liability shield? Does it protect those outside of the healthcare field? What type of infection is covered? Does it contain a rebuttable presumption, and what are the requirements?
The battle for insurance
In addition to liability reform efforts, another legal battle is also taking shape—this one between businesses and insurance companies that have been rejecting business interruption claims.
Typically, business interruption insurance covers three main areas: business income coverage, contingent business interruption coverage, and order of civil authority coverage.
These claims are only covered under specific circumstances, and at the heart of the matter is whether COVID-19 constitutes “physical damage.” Plus, as of 2003, most insurance companies added exclusion clauses specifically aimed at bacterial and viral incidents.
It’s also important to understand the practical reasons for insurance companies avoiding COVID-19 payouts: lockdowns created such widespread business interruption that successful claims would bankrupt the insurance industry.
As discouraging as that sounds, some business owners aren’t backing down and are taking their claims to court. According to the National Restaurant Association, lawsuits filed in both state and federal courts are “too numerous to count.” In Philadelphia and Chicago, more than 100 plaintiffs filed a federal petition to have all COVID-19 business interruption cases heard by a single judge.
At the same time, groups are lobbying Congress and states for business interruption insurance coverage relief packages. The essence of both efforts is two-fold: to include pandemics as part of business interruption and to eliminate coverage confusion.
Searching for a safe harbor
Anything related to COVID-19 is fluid—from the course of the disease to preventative measures to legal ramifications and legislation. In this environment, it’s essential to keep a close eye on developments, thoroughly understand your insurance documents and the ratings of your provider, and work with your professional organizations and their lobbying groups to advocate for political solutions.
Safe Harbor provisions have existed in various areas of law for years, including taxation, environmental regulations, and the Affordable Care Act. The time has come for a similar provision to be added to liability law at the national level. Until then, I’m advising clients to think carefully about re-opening, closely follow local and CDC guidelines, and consider having patrons and employees voluntarily sign waivers as a means of legal protection.
If you need guidance on re-opening or any commercial real estate issues, please call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
Tags: COVID-19, Legal Challenges, Review insurance policy
