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Like State Efforts, Senate’s Virus Liability Limit’s No Cure-All

July 16, 2020, 9:31 AM

The virus liability shield for businesses that Senate Republicans see as a top priority in the next stimulus bill would give companies an advantage in litigation, but wouldn’t necessarily spare them the time and expense of defending themselves in court.

Depending on how the federal proposal gets written, companies could have to show their business operations didn’t amount to gross negligence during a pandemic in order to get immunity from liability, attorneys told Bloomberg Law. That’s the standard a number of states have set in enacting their own virus liability shields.

“In all of the states [that have enacted liability limits], there is an exception for gross negligence or intentional disregard for safety,” said Ashley Prickett Cuttino, an employment lawyer at Ogletree Deakins in Greenville, S.C., and co-chair of the firm’s Covid-19 litigation practice group.

“This is a defense, but it’s not a bar to the litigation,” she added. “You’re still going to have to go in as a business and defend what your practices were” in response to Covid-19.

Senate Majority Leader Mitch McConnell (R) said liability limits could be considered next week as part of a next round of coronavirus-relief legislation. Specific text of the proposal hasn’t been released, and whether the GOP proposal can get buy-in from the Democratic-majority House remains to be seen.

The issue also has been a top priority for business groups, including the International Franchise Association, which delivered a petition to Congress on the issue with more than 7,000 signatures.

Louisiana, North Carolina, Oklahoma, Utah, and Wyoming have enacted broad liability shields that aim to protect a broad class of businesses from virus-exposure lawsuits. A similar bill in Georgia is awaiting the governor’s signature, and other states are considering shield proposals. Many more states have enacted liability limits specific to health-care providers and/or manufacturers of personal protective equipment such as hospital gowns, gloves, face masks, and hand sanitizer.

It’s debatable, though, how much protection businesses would get from lawsuits alleging that customers or employees contracted the virus at their place of business, either from a federal immunity bill or from state laws.

With or without immunity laws in place, customers who sue will face the high hurdle of proving where they caught the virus, and employees who sue will face the same hurdle plus likely preemption by state laws that steer their claims out of court and into the workers compensation system.

Likewise, businesses that get sued still must prove they satisfied some particular standard to avoid liability, such as proving they weren’t guilty of gross negligence or that they were following government guidance for safe operations.

Federal ‘Gross Negligence’ Standard?

Which standard the U.S. Senate proposal adopts could complicate matters for businesses, as well as for state courts.

If the Senate follows state legislatures in setting “gross negligence” as the bar below which businesses can face liability, then the standard effectively would vary from state to state. The concept of gross negligence varies with each states’ case law and statutes, since it tends to get applied in tort cases that are decided in state courts, said William N. Drabble, an attorney at Gray Reed in Dallas.

“That raises an interesting question of how they’re going to define ‘gross negligence,’” Drabble said.

Another option for Congress that might be preferable for businesses would be to provide a safe harbor, declaring that businesses are immune from liability if they followed a particular set of local, state, or federal guidelines for safely operating during the pandemic, he said. They would still have to prove in court that they followed the guidelines, but it could be a less subjective standard.

“If they can say, ‘we did these four things as the CDC recommended,’ that’s objectifiable evidence,” he said.

GOP leaders also have a decision to make on how their federal proposal will apply to state-level litigation. It’s possible Congress could outright preempt state law and bar all liability related to Covid-19 exposure, Drabble said. He noted it’s a move with some precedent, such as the federal ban on a gun manufacturer’s liability for violence carried out by the gun’s owner.

On the other hand, Congress could set its standard as a ceiling and let states grant liability immunity for lower standards if they choose, he added.

“Really it depends on what Congress wants to do. They have a number of options,” Drabble said.

Still Waiting for Onslaught

Business groups have been warning since March they could be overwhelmed by litigation from customers and employees who develop Covid-19. So far, those cases are a small percentage of all virus-related lawsuits, but attorneys say they’re still expecting case filings to tick up.

“We think that the tort claims will be a lagging category of cases,” Drabble said, noting many of the virus-related cases he’s seen to date are contract disputes.

Of the 3,500 lawsuits in a Covid-19 case tracker compiled by Hunton Andrews Kurth, fewer than 100 are categorized as alleging personal injury, unsafe working conditions, or wrongful death, with 67 of those filed by employees and 15 by consumers, as of July 14. A little more than 100 more cases in the tracker aren’t categorized.

Just over 2,000 of the cases fit into one of three categories—insurance disputes, prison lawsuits, and civil rights disputes such as those fighting shelter-in-place or business-closure orders.

“Corporations have long used crises to demand immunity,” the plaintiffs’ lawyers group American Association for Justice said in a statement distributed Tuesday. “These latest numbers ... show that even now, four months into the pandemic, no wave is materializing.”

Fisher Phillips is compiling a narrower case tracker, focused on employment litigation related to Covid-19. Of the 327 total cases, it lists 26 related to unsafe workplaces and 10 alleging negligence or wrongful death.

The more common cases on the Fisher Phillips list pertain to employment discrimination, remote work or leave conflicts, and retaliation against whistleblowers—types of litigation that aren’t limited by any of the state liability shield laws and aren’t expected to be addressed in the federal proposal.

“I don’t think it’s going to change much at all, to be honest with you,” if Congress passes liability limits related to virus exposure, said Karl Lindegren, an attorney and co-chair of Fisher Phillips’ California litigation practice group. “The bigger issue is figuring out what we need to do to keep people safe. The number one thing we need is clear guidance.”

Still, Lindegren agrees the litigation threat is a serious concern for businesses that he represents. He has started seeing demand letters from plaintiffs’ lawyers, saying an individual visited a certain business, contracted Covid-19, and now wants to see a list of any employees there who have tested positive.

“I have a lot of restaurant clients, and it’s scary, and even for retail businesses,” he said.

He’s advising employers to be proactive about precautions to protect workers and customers, rather than wait for a government mandate or a liability shield.

“Act as if your life depends on it, as if your mother’s life depends on it,” he said. “If you’re ever called to answer in a courtroom, that’s going to count for something.”

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Karl Hardy at khardy@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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