02 Apr COVID-19 and the Litigation That May Arise From it
The coronavirus has wreaked havoc on our lives, and not only affected our health, but also businesses and employment. By upending markets, disrupting supply chains and forcing us all into quarantines, there is no question that a significant amount of litigation will result from the outbreak.
We have already discussed a number of legal concerns for employers, such as protecting themselves from premises liability and ensuring their employees are safe at work. Some additional litigation that is likely to arise in the coming months includes the following:
Businesses: Suing insurance companies for failing to provide coverage under business interruption policies.
Shareholders: Suing companies that failed to effectively respond to the epidemic.
Day care centers, hospitals, hotels, nursing homes: Claims filed against them that they did not take adequate steps to protect people from infection.
Unions: Suing employers for placing them in harm’s way (for example, the American Airlines Group Inc. pilots’ union suing the carrier to stop it from serving China).
Local governments: Suing the federal government for failing to take proper precautions (for example, the city of Costa Mesa, California has filed suit against the U.S. government for transferring quarantined cruise passengers to a state-owned facility located there).
Below, we discuss possible business litigation that could also arise due to the outbreak:
Breach of Contract Claims
There will inevitably be a significant amount of litigation filed due to the fallout from business disruptions. Missed deadlines, contracts that have gone unfulfilled/breach of contract claims, breach of fiduciary duty claims, etc. will all likely be common. There will also inevitably be a number of disputes involving force majeure clauses, which free a party’s obligations under a contract in the event of an “act of God.” A number of businesses will inevitably argue that force majeure clauses apply because of the coronavirus outbreak. Many parties will argue that their workers could not safely come to work, or they could not obtain supplies from China, etc. as justification for failing to substantially perform within an agreed-upon timeframe or other requirements of a contract.
Insurance companies will also inevitably find themselves in court after denying coverage to businesses when they seek to collect business interruption insurance benefits. Most companies have been careful to include in policy language that business interruption coverage only applies to incidents that involve physical damage, such as fires or earthquakes. After previous outbreaks, some policies even include language that explicitly denies coverage due to outbreaks (although if they are too specific and describe the exclusion applying to “bacterial” outbreaks, they may find themselves in trouble, as this outbreak obviously involves a virus). Businesses suing their insurance companies for breach of contract will likely have to get creative in arguing that their business interruption insurance policy should cover the outbreak. For example, an affected company may argue that there was physical damage to the workplace because one or more workers tested positive, which then compromised the structure of the workplace itself.
Other Potential Claims
Other litigation that could arise due to the global pandemic includes the following:
- Some businesses are suing government agencies for dragging their feet on H-1B visa applications for skilled foreign professional workers (for example, medical staffing agencies that claim that these delays have threatened the influx of medical professionals needed to address the outbreak).
- Businesses that regularly deal with the public are also at risk of having claims filed against them that they did not act quickly enough to protect customers or have the right contingency plans, such as airline and cruise companies.
- Lawsuits related to whether workers declared to be “essential” and who contracted the virus by being forced to go to work are entitled to workers’ compensation.
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