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The COVID-19 Litigation Surge & Response

During the COVID-19 pandemic, businesses are struggling to operate and reopen safely, healthcare providers are treating patients with limited beds and staff, and manufacturers have shifted their operations to make needed personal protective equipment. The last thing they need to worry about is more lawsuits. To help reduce this concern, many states are providing assurance to businesses and others that if they act responsibility, they will have some degree of liability protection. Many governors acted early on through executive orders, most of which addressed only healthcare liability. State legislatures followed with broader laws. The American Tort Reform Association’s COVID-19 resource webpage summarizes and includes links to each of these laws.

CONSTRAINTS ON COVID-19 LIABILITY ENACTED IN 2021

Two thirds of states have responded to the concern that businesses, schools, daycare centers, entertainment and event venues, and others would be sued for a person’s exposure to COVID-19. Eighteen states enacted these laws in 2021, including Alabama, Alaska, Arizona, Arkansas, Florida, Indiana, Kentucky, Missouri, Montana, Nebraska, North Carolina, North Dakota, South Carolina, South Dakota, Texas, West Virginia, and Wisconsin. They joined Georgia, Idaho, Iowa, Kansas, Louisiana, Michigan, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Tennessee, Utah, and Wyoming, which adopted COVID-19 exposure legislation during the first year of the pandemic.

These laws vary significantly from state to state, but generally provide a safe harbor from liability to those who follow public health guidance, raise the standard of liability beyond bare negligence, or combine these approaches. For example, some states require a showing that a person recklessly disregarded a known risk that a person would be exposed to COVID-19 or was grossly negligent. The Mississippi, North Dakota, South Dakota, and West Virginia laws require a showing that a person’s exposure to COVID-19 resulted from an intentional or malicious act, or willful misconduct. Some of these laws include heightened evidentiary requirements, such as in Florida and Texas. A 2021 Missouri law, similar to legislation enacted in Georgia in 2020, creates a presumption that a business is not liable if it posts a sign warning entrants of the inherent risk of COVID-19 exposure.

Nearly every state that enacted COVID-19-related tort legislation raised the standard for medical liability cases above ordinary negligence. State legislation varies in how it defines eligibility for liability protection (healthcare professionals, facilities, or both), the scope of conduct covered (directly treating COVID-19 patients or other care impacted by a lack of resources due to the pandemic), exceptions for coverage (such as whether nursing homes are included), and the conduct that remains subject to liability (such as gross negligence).

In addition, almost half of the states have limited the risk of liability of those who make, sell, or donate personal protective equipment and other products in response to the pandemic. Many of these companies shifted to make needed supplies that they do not ordinarily produce like masks, face shields, ventilators, and hand sanitizer. Alabama, Indiana, Missouri, Montana, Nebraska, North Dakota, South Carolina, South Dakota, Texas, and West Virginia enacted product liability protections in 2021, joining Alaska, Georgia, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee, and Wisconsin. These laws vary significantly from state to state and may extend to products or parties beyond the already-robust liability protections for products covered by the federal Public Readiness and Emergency Preparedness (PREP) Act.

THE LITIGATION

The first signs suggest that these types of liability protections are working. While there has been a substantial amount of COVID-19 related litigation — well over 10,000 lawsuits – many of these cases are a predictable result of furloughs and layoffs, business shutdowns and changes in operation, and a general economic downturn.

Litigation stemming from individuals contracting COVID-19 and alleging that someone is responsible has, thus far, primarily targeted nursing homes, cruise ships, and prisons – places where there have been outbreaks among people confined to a specific area. These lawsuits have faced challenges in proving causation, though some have settled.

A wider range of businesses have faced similar claims by employees, though these types of claims are limited by state workers’ compensation systems, which are intended to be the exclusive remedy for on-the- job injuries. Some employers have faced take-home exposure claims that typically allege a person died of COVID-19 after contracting the illness from a spouse who was exposed at work, though these remain rare. Some courts have allowed take-home claims to proceed, while others have found that since they directly stem from a workplace injury, workers’ compensation provides the exclusive source of recovery.

In some instances, employees or others have brought public nuisance claims, asserting that a business’s operation poses an unreasonable risk of exposure. For example, a federal district court ruled in November 2020 that OSHA, not the courts, was in the best position to determine whether Amazon sufficiently protected workers in its Staten Island fulfillment center. That case is now on appeal to the Second Circuit.

While workers have brought relatively few personal injury claims against their employers stemming from COVID-19, the same cannot be said of employment litigation, which makes up the largest share of pandemic-related lawsuits. These include lawsuits by employees alleging they were improperly terminated when they contracted COVID-19 or needed to quarantine, or denied accommodations, such as requests to work from home. In some instances, plaintiffs allege that they were terminated for an impermissible reason, such as because they expressed concerns about workplace safety. Some lawsuits allege that the reason an employer laid off an employee was not based on financial or other permissible considerations, but discriminatory reasons, such as age or race. Changes in work schedules have also led to a significant amount of wage and hour litigation. These include claims that employers should have paid employees for time spent taking COVID-19 tests or undergoing screenings before work, that employees worked off the clock when working from home, or that employees were not reimbursed for business expenses.

Contract claims also comprise a significant portion of COVID-19 related litigation. Aside from general disputes stemming from the inability to fulfill obligations during the pandemic, common contract claims seek refunds of payments for weddings, travel and events, and tuition from schools that went virtual; involve disputes over commercial leases triggered by shutdowns and operating restrictions; and issues with fulfilling personal protective equipment orders.

There is also substantial insurance litigation. Most of this litigation involves whether a policyholder’s property insurance policy covers losses stemming from shutting down or scaling back operations during the pandemic. The issue in many of these cases is whether these business interruption losses stem from physical loss or damage to the property, as many policies require. This litigation has slowed, with the vast majority of courts finding in favor of insurers, including at least four federal appellate circuits.

While the surge of COVID-19 hospitalizations, staffing and bed shortages, and the need to postpone non-emergency elective surgery and treatment led to the potential for medical malpractice claims, outside the nursing home context, plaintiffs’ lawyers have filed a slow, but steady, number lawsuits against healthcare providers. They may be discouraged from filing speculative claims by Executive Orders issued by governors and legislation that, in most states, provides for liability only in cases of gross negligence or reckless misconduct.

Not surprisingly, the states with the most COVID-19 litigation are California, New York, and Florida.

ON THE HORIZON

Even as COVID-19 diagnoses fall and, hopefully, the pandemic subsides, the threat of liability is far from over. The clock for filing lawsuits – set by state statutes of limitations – has only started to tick. As employees return to their workplaces, students are back in classrooms, and large-scale events resume, the potential for exposure to the virus (and lawsuits) grows. Reports of overwhelmed hospitals and COVID-19 outbreaks continue. Meanwhile, some COVID-19 state liability protections will sunset if not extended.

COVID-19 related employment litigation is accelerating. As more employees return to their workplaces, lawsuits will emerge from disputes over vaccination mandates and demands for exceptions, work-from-home requests, safety concerns, and mask and other policies. In fact, legislators in some states have introduced bills creating new private actions against employers that require their employees to be vaccinated. Many employers, however, are required to mandate employee vaccinations under federal law and risk hefty fines if they do not comply. Employers also expose themselves to tort claims, particularly when employees work in high-risk environments, unless they adopt adequate safety measures. But if these bills are enacted, employers will be subject to statutory, compensatory, and punitive damages, and payment of attorneys’ fees if they follow federal law or believe vaccinations are needed to protect the safety of their workers and others. This type of sued-if-you-do, sued-if-you-don’t legislation places employers in an untenable position. These bills also undermine state workers’ compensation systems and conflict with the federal PREP Act, which provides immunity to those who administer vaccination programs, including private employers.

Litigation is just beginning over the scope of these liability protections. In October, the Third Circuit undercut the PREP Act when it ruled in Maglioli v. Alliance HC Holdings LLC that plaintiffs could pursue negligence claims in state court, despite the PREP Act providing “an exclusive Federal cause of action” in cases of willful misconduct and the law’s establishment of a fund to compensate others who claim a countermeasure-related injury.

Will certain courts become hotspots for COVID-19 litigation because they develop a reputation for departing from settled principles of law and accepting invitations to expand liability? Will courts properly apply the higher standards and defenses to COVID-related liability enacted by state legislatures? Will state legislatures subject employers to new lawsuits based on their vaccination policies? Time will tell.

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