What is the Risk?
As businesses begin to reopen during the COVID-19 pandemic, many leaders are rightfully concerned about the potential civil liability that businesses and non-profit organizations may face as they start inviting employees and customers back into workspaces and shops. Will insurance policies provide coverage if the business is sued by its employees or customers for COVID-19 related claims? Will such claims be difficult to defend against? What can businesses do to mitigate risk?
Federal and state governments are aware of “reopening risks.” Legislation is working its way through Congress that may provide temporary liability protections to businesses who comply with public health guidelines. Calls have also been made for the enactment of enforceable federal standards that would preempt often-conflicting guidance issued by state and local authorities on implementing protections against the spread of COVID-19. Several states have enacted or are considering enacting legislation that grants businesses immunity from civil liability for COVID-19 related claims and/or legislation that would broaden the applicability of business insurance policies to cover COVID-19 related losses.
This article reviews some of the sources of potential claims for “reopening risks” to businesses, the potentially applicable provisions in typical policies of insurance, the likelihood of success of COVID-19 claims brought against a business, the actions that businesses should consider to reduce the risk of liability, and the approaches that federal and state authorities may take to protect businesses from liability.
Likely types of COVID-19 claims
The greatest exposure to liability comes from potential claims by people working on or visiting the real property used by the business. Employees, customers and other third parties (e.g. vendors), may claim to have contracted or been exposed to COVID-19 due to the failure of the business to observe social distancing guidelines, sanitize its premises, or provide effective personal protective equipment. Third parties may also bring claims alleging “wrongful acts” by the owners or managers of a business for making misleading statements or for failing to act in respect of making disclosures about, or preparing for the effects of, COVID-19 on the business. Regardless of the merits of any such claims, businesses may be faced with the burden of having to defend against COVID-19 related lawsuits.
Business insurance policies may provide some relief
Commercial General Liability, Workers Compensation, and Directors and Officers insurance policies may offer some protection to businesses for claims brought by employees and third parties relating to COVID-19.
Commercial General Liability (“CGL”) policies may provide defense and indemnity benefits for claims brought against a business by customers or other non-employees who contend they have contracted or been exposed to COVID-19 due to the acts or omissions of a business to protect such persons while they are on the business’ premises or otherwise engaged with the business. In general, CGL policies protect businesses in the event of “bodily injury” or “property damage” caused by an “accident.” What constitutes “bodily injury” or an “accident” invoking coverage under the policy depends on the policy language and is subject to interpretation. It is important for businesses to review their policy language to determine if coverage may exist. CGL policies may include exclusions for virus and bacterial-related bodily injury, communicable diseases, or “expected or intended injury.” Conversely, CGL policies may include special endorsements providing “extra” coverage for a business. For example, insurers of restaurants and hotels typically offer special endorsements expressly providing coverage for the transmission of diseases among customers.
Workers Compensation policies may also provide benefits to businesses for claims brought by employees who contend they have contracted COVID-19 on the premises of the business or during the course of their employment. Although “ordinary diseases” are not covered under workers compensation plans, repetitive exposure to a virus or exposure through employment that creates a greater risk than the public generally could be found to constitute an “occupational disease” and therefore covered under workers’ compensation. However, as discussed below, employees would likely encounter considerable difficulty proving contraction of the virus arose out of the course of employment.
Directors and Officers (“D&O”) policies protect directors and managers in the event they are personally sued by employees, investors, vendors, or other parties for “wrongful acts” in managing the company. D&O policies provide coverage for economic losses of a business. Such lawsuits could relate to information communicated or not communicated to shareholders or others relating to the impact of COVID-19 on the business, or actions taken or not taken by management to protect employees and third parties, or failure to implement measures to mitigate the negative impact of COVID-19 on the business.
Careful review of the alleged facts in any lawsuit is important to determine whether coverage exists under an insurance policy. A denial of coverage letter received from an insurer is not necessarily conclusive of whether the insurance policy affords coverage. Also, in many states, including Maryland, an insurer’s duty to defend a business against claims is considerably broader than an insurer’s duty to indemnify a business should liability be determined by a court of law. An insurer may owe a business a duty to defend against claims if coverage under a policy is remote, but possible. It is important that policy language, including exclusions and special endorsements, be reviewed carefully. Businesses should seek opinions of counsel if questions arise regarding potential coverage under a policy of insurance for a particular claim.
COVID-19 claims are unlikely to be legally successful
In both work-related claims and third-party claims, establishing liability will likely be difficult because claimants will have the burden of proving they contracted COVID-19 through their contact with a particular business.
Claimants seeking compensation for accidental personal injury in the workplace generally must demonstrate that the injury both arose out of and in course of employment.
It is not novel for employees to make workers’ compensation claims for injuries resulting from “occupational diseases” contracted in the workplace. “Occupational diseases,” however, are very different from contracting COVID-19, which can be picked up anywhere by anyone and is not an occupational hazard for a particular type of workplace or occupation. An “occupational disease” for purposes of workers’ compensation arises from causes incident to a particular profession or the party’s occupation. Typically, occupational diseases are compensable under workers’ compensation if risks of disease are inherent to the nature of employment. So, for employees to make a successful workers’ compensation claim as a result of contracting COVID-19, they will have to establish that contraction of the virus was incident to their profession, or that they were more likely to contract the disease because of their profession. This could hold true for first responders, but probably not for most professions.
The Maryland court case titled Montgomery County v. Athey, 227 Md. 312, 176 A.2d 766 (1962) illustrates the difficulty in proving the element of causation in workers’ compensation cases involving occupational diseases. In this case, a police officer filed a workers’ compensation claim asserting that he suffered injury after contracting tuberculosis from a prisoner with whom he had direct contact on the job. Maryland’s highest court denied the claim based on the issue of “causation,” stating that the police officer failed to demonstrate a reasonable probability that his disability came from an accidental injury which arose out of and in the course of his employment. Id. at 314. The police officer was able to establish through medical testimony that he had tuberculosis but was unable to establish that he contracted the disease as a result of having been in the presence of a prisoner. Employees bringing COVID-19 related cases against their employers will have to overcome this type of causation issue to be successful.
Third parties who bring claims against a business will have to establish that the business breached a duty owed, i.e. acted unreasonably, and that such breach caused them to contract the COVID-19 virus. This burden is difficult to overcome, especially if the business could show that it complied with all laws and regulations, followed recommended federal, state and local guidance, and took reasonable precautions to protect the general public from any employees or customers who appear symptomatic. Of course, if it can be proven that a business knew or reasonably should have known its employee (or a customer) had the virus and was in direct contact with patrons or other third parties on the business premises, then such business could have an issue.
Claimants may also have to overcome certain defenses. Third parties who knowingly and voluntarily assume the risk of COVID-19 infection or who do not follow published guidelines may be barred from any recovery. For instance, customers of a crowded store or restaurant where many individuals are not wearing masks may be found to have assumed the risk of infection, and therefore, unable to recover damages against the business.
What can businesses do to mitigate risk?
There are a number of things that a business can do to reduce the risk of liability for injury relating to COVID-19. A business should follow all state and local government regulations and guidelines relating to protecting against COVID-19, including social distancing executive orders and guidelines. In addition, businesses can reduce possible liability risks by following guidance published by the Centers for Disease Control and Prevention (CDC), the Occupational Safety and Health Administration (OSHA), and the Equal Employment Opportunity Commission (EEOC), on how best to slow the spread of COVID-19 and protect workers, customers, and the general public. Businesses should keep in mind that guidance from these agencies and other public health authorities is changing as COVID-19 pandemic evolves. Thus, businesses should continue to monitor and follow the most up-to-date information on maintaining safety in the workplace.
Another way to reduce risk is for businesses to work with their employees to implement measures to maintain their health and safety. Workers who are hesitant to return to work out of fear of contracting COVID-19 may have legal protections under the Americans with Disabilities Act (ADA), Occupational Safety and Health Act (OSH Act), Family and Medical Leave Act (FMLA), Families First Coronavirus Response Act (FFCRA), as well as similar state or local laws. As a result, when confronted with an employee who expresses concern about returning to work, an employer should treat the issue as serious and deserving of dialogue with the employee. The employer should have a conversation with the employee about his/her worries and explore the employee’s specific concerns to determine whether they are reasonable and whether an agreeable, reasonable, solution could be reached to address such concerns.
Although specific facts are important, in general, an employer should consider treating an employee’s request to remain at home because of a COVID-19-related concern as a request for a reasonable accommodation under the ADA and equivalent state or local laws. Such a request could trigger the employer’s duty to engage in a mandatory interactive process with the employee. Communication is key to the interactive process and should involve a specific conversation about alternative options if a requested accommodation cannot be made as a result of undue hardship. Counsel should be consulted as needed given the complexity of employment law.
In situations where an employer fails to provide a reasonable accommodation because of undue hardship, evidence that the employer engaged in the interactive process can demonstrate a “good faith” effort, which can protect an employer from having to pay certain damages, should a lawsuit be brought by the employee. For additional information about an employer’s obligations under the ADA see the EEOC’s “Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA”:
Employees who cannot work remotely and are unable to return to work may qualify for FMLA if their condition is an FMLA-qualifying “serious health condition.” The FMLA entitles eligible employees of covered employers to take up to 12 weeks of unpaid leave for specified family and medical reasons. In addition, under the FFCRA, employees of businesses with fewer than 500 employees may also qualify for paid sick leave and/or expanded family leave for specified reasons related to COVID-19. Similar state and local leave laws may also provide employees with time off for COVID-19 related reasons.
Under the OSH Act, employees are generally protected from discriminatory action by an employer if they refuse to work because they reasonably believe that they will be required to work under dangerous conditions, risking death or serious injury, and they have no other reasonable alternative but to avoid the workplace. For the OSH Act’s anti-discrimination provision to apply the condition causing the employee’s apprehension of death or injury must be of such a nature that (i) a reasonable person, under the circumstances then confronting the employee, would conclude that there is a real danger of death or serious injury; (ii) there is insufficient time, due to the urgency of the situation, to eliminate the danger through resorting to regular statutory enforcement channels; and, (iii) the employee, where possible, must also have sought from his employer, and been unable to obtain, a correction of the dangerous condition. See 29 CFR § 1977.12(b)(2).
Because the medical community’s knowledge regarding COVID-19 is changing daily, it is unclear at this time whether exposure to the virus in a workplace would qualify as a real danger of death or serious injury. Nevertheless, an employer should take precautions to avoid potential liability for discriminatory conduct if employees raise concerns or refuse to come to work out of fear of contracting COVID-19.
Federal and state governments may act to protect businesses
Governments generally approach controlling activities that create risks of harm to others through legislation governing tort liability and regulation. Congress has been debating enactment of a “Safe Harbor” to protect businesses from liability lawsuits. A “Safe Harbor” is a series of clauses which grant a liability immunity or limitation in return for complying with certain requirements. Essentially, actions will not result in liability if the actor has complied with and enforced certain specified requirements in order to prevent harm. Oftentimes, the liability detection under a safe harbor provision requires a showing of “good faith” that such provisions are being implemented. Current examples of safe harbor provisions in federal law are liability protection if the due diligence requirement in a phase 1 environmental site assessment is met, copyright liability protection for Internet service providers stemming from statements and postings by their users, and protection against a tax penalty for insufficient estimated quarterly tax payments if the taxpayer paid 100% of her tax liability for the previous year. Enactment of enforceable federal standards that preempt often-conflicting guidance issued by state and local authorities would lesson the compliance burden of businesses.
Another approach that federal legislation could take is to grant absolute immunity from civil liability. Usually, immunity from civil liability comes with a carveout excepting gross negligence or willful misconduct, which is a qualified immunity. This approach could be implemented either through federal legislation or by executive order. Current examples of absolute immunity on a federal level can be seen in the 11th Amendment to the U. S. Constitution which stipulates that a state has immunity from suit in federal court by a citizen of any other state. Another example can be seen in federal statute 28, where U.S. government officers sued as individuals have civil immunity as long as they are acting within the scope of their employment, 28 U.S.C. § 2679(b)(1). Foreign nations have absolute immunity from civil liability under the Foreign Sovereigns Immunity Act, 28, §§ 1330 et seq. Absolute immunity statutes will be closely scrutinized by a court, and granting absolute immunity to businesses or employers is likely to be politically unpopular because of their ability to quash any and all dispute in the case.
Immunity could also be enforced on the state level. Maryland grants a qualified statutory immunity to healthcare providers who act in good faith during a health emergency following invocation of emergency powers by its governor. Similarly, Virginia grants a qualified statutory immunity to teachers from civil liability for damages resulting from the supervision or discipline of students as long as the teacher acts in good faith, was not grossly negligent, and did not engage in willful misconduct. Governor Pritzker of Illinois issued an executive order granting healthcare workers immunity from civil liability for an injury or death that occurred during the response to COVID-19 unless there was gross negligence or willful misconduct. North Carolina enacted a qualified immunity from civil liability for the healthcare industry, essential businesses, and emergency responders as long as certain conditions are met: healthcare services occurred during the COVID-19 emergency, the services were impacted by COVID-19, and the services were performed in good faith. No immunity is granted if there was gross negligence, reckless misconduct, or intentional infliction of harm.
Another form of protection to a business could be a pre-suit certification requirement designed to limit lawsuits against businesses unless the plaintiff establishes certain prerequisites. In Maryland, for example, plaintiffs alleging medical malpractice must file a certificate from a qualified expert that the defendants failed to meet an accepted medical standard of care. This approach might be impractical given the wide variety of businesses and employee workspaces.
Finally, the federal or state government could establish a government fund and a claims settlement procedure. This fund would be used to compensate injured persons due to COVID-19, paying for damages and all fees incurred. The well-known September 11 Victim Compensation Fund, which was created to support the families of victims in the 9/11 attacks, uses this approach. The fund was set up to support the families of victims that died in the crash and rescue and debris removal workers present at the crash site when it occurred. There are registration and claim filing requirements, and to receive an award a victim must forfeit her right to sue an airline in federal or state court. The universe of persons who qualify for benefits from this 9/11 compensation fund has a degree of commonality and is relatively limited. Due to the diversity and number of persons infected by COVID-19, this approach may be impractical.
Industry specific considerations
Industry specific workplace guidance can be found on the CDC website. Specific guidance is provided for manufacturers, grocery and food retailers, nail salons, transportation companies and rideshare companies, just to mention a few. Guidance includes assessing the exposure risk among workers, creating a COVID-19 assessment and control plan, and implementing controls.
Businesses should consider taking the following steps to reduce the risk of COVID-19 related litigation:
- Read and follow any guidelines published by federal, state and local authorities regarding reopening for business and safety precautions, including federal CDC guidelines for workplaces and state and local health department guidelines.
- Read and follow guidelines issued by industry associations.
- Determine alternative ways to do business to reduce size of groups and the frequency of person-to-person contact.
- Read insurance policies (or have your agent or attorney read the policies) to determine what coverages are and are not in place.
- Speak with your attorney should questions arise regarding protection of workers or third parties, or if a claim is made against the business.
 Following the 2002/2003 SARS outbreak, many insurers added exclusions to standard commercial policies for losses caused by viruses, including the following provision recommended by the Insurance Services Office (ISO):
We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.
ISO IL F0 63 05 13.