Business Interruption FAQ
Q: Have there been any lawsuits filed for business interruption losses from COVID-19 shutdowns?
A: Yes. Despite the fact that many non-essential businesses remain closed, several business interruption claims have already been filed across the country. Texas has seen several lawsuits for lost business profits around the Harris County area. Oklahoma has had several major casinos file lawsuits. California lawsuits are popping up from high-end restaurants and chefs. Chicago area restaurants and theater owners have filed claims. Recently, the State of Missouri has even filed a federal lawsuit against the Communist Government of China for deception and deceit over the Coronavirus outbreak.
Q: What does it mean when there is a “time restriction” on a Civil Authority Order policy provision?
A: It is not uncommon to see policy language written as coverage going into effect a specific amount of time after the government issues the prohibition order. One of the most common ways we see this written is a “72-hour rule.” This provision would mean that coverage takes effect for business losses 72 hours after the Civil Authority Order is enacted by the government entity and the business owner is denied access to the property. This is an important provision to consider as many Civil Authority Orders by the government do not last over 48-72 hours. If that occurred, coverage would not be triggered and business losses would not be recoverable under the policy.
Q: How can an attorney effectively argue a pandemic is not a type of natural disaster intended to be included under business interruption policies?
A: Pandemics are extraordinary catastrophes which can impact nearly every economy in the world so it is impossible to predict or manage risk. COVID-19 can be greatly contrasted with other natural disasters where risk can be assessed and contained, such as during hurricanes, tornadoes or wildfires. During COVID-19, all non-essential businesses in the country were impacted and within the same timeframe. This scenario does not fit within the intended rationale of insurance coverage and risk assessment provisions.
Q: Why is it necessary to examine payroll registers when the profit and loss statements provide payroll costs for a particular month?
A: Typically, the insurance policy addresses the normal operating expenses of the business, which includes payroll to all employees. If business owners release their employees but pay themselves the amount that would have gone to employees, then that excess payment to themselves is not an ordinary expense and should not be compensated as a business income loss.
Q: What if a business did not have a loss of revenue, can it still have a business income loss?
A: Yes, it can. As mentioned earlier, the insurance policy provides coverage for net income or loss that would have been earned had the loss event not occurred. If a business had greater operating expenses to continue the business, in theory it would have reduced net income. The difference between the expected and reduced net income (as a result of higher expenses) is part of the business income loss measurement.
Q: Is it reasonable to indemnify a policy owner for their normal operating expenses?
A: Yes, as long as they can demonstrate those expenses were incurred and paid and are a normal operating cost.
Q: What is the chance there will be a national mask mandate?
A: It is highly unlikely there will be an Executive Order from the Whitehouse mandating masks that would survive a constitutional challenge.
Q: With regard to immunity, have we seen any governments actually enact laws or regulations to protect insureds?
A. Yes, we have seen many. As I briefly mentioned, many governors have issued Executive Orders granting immunity to healthcare providers during the COVID-19 crisis.
Both New York and New Jersey have taken this one step further and have enacted statutes that provide the same.
For example, the New York legislature has enacted the Emergency or Disaster Treatment Protection Act.
- This Act extends immunity to nearly all health care facilities and professionals regardless of whether they are engaged in treating COVID-19 patients so long as they are involved in some manner in response to the COVID-19 outbreak and they act in good faith.
- The new law is intended to promote the public health, safety and welfare of all New York citizens by allowing health care professionals to expand their reach as much as possible.
- The law applies from March 7, 2020, until the end of the state of emergency.
Another example of government action comes from the federal government and provides certain protections to manufacturers and distributors of products necessary for fighting against the spread of the virus.
In order to alleviate concerns related to the expansion of manufacturing and distribution of such products and to expand immunity, the federal government took the following steps:
- Congress recently enacted the Families First Coronavirus Response Act:
- Prior to the passage of this act, the Public Health Service Act provided immunity to manufacturers of FDA-approved masks only.
- While FDA-approved face masks are only a small subset of available respiratory protective devices, masks approved by the National Institute for Occupational Safety and Health (“NIOSH”) make up the vast majority of face masks on the market.
- Accordingly, Congress enacted the Families First Act to expand the immunity previously afforded to manufacturers of FDA-approved masks to manufacturers of NIOSH-approved respiratory protection devices.
- This immunity extends from January 27, 2020 to October 21, 2024.
- Congress also recently enacted the Public Readiness and Emergency Preparedness Act (“PREP Act”) which “empowers the Department of Health and Human Services to issue a declaration that immunizes certain entities and individuals from liabilities that could stem from the use of countermeasures to combat the disease.”
- The Secretary of Health and Human Services declaration grants immunity from liability under state and federal law against “all claims for loss caused by, arising out of, relating to, or resulting from” the manufacture, testing, development, distribution, administration and use of “a covered countermeasure” that is aimed at responding to COVID-19.
- The immunity extends not only to COVID-19 drugs, but to other products and technologies intended to enhance the use or effect of a drug, biological product, or device, or protect against adverse effects from those products.
- The ‘sole exception’ to immunity applies if a covered person engages in ‘willful misconduct.’
Q: If the lawsuit brought against Walmart was based upon the death of an employee, why was it not brought in workers’ compensation court?
A. While an employee who is injured on the job usually must bring his or her claim for damages through the workers’ compensation system, there are exceptions allowing the employee to pursue both a claim for workers’ compensation and a direct claim for damages against the employer.
One of those exceptions is the “intentional wrong” exception. Basically, where the employee is injured as a result of a willful and deliberate act of the employer, he or she may pursue both a claim for workers’ compensation and a direct claim for damages against the employer.
In this case, while it is not explicit on the face of the complaint, it appears the employee’s estate is attempting to avoid the exclusivity bar by alleging that Walmart acted willfully, wantonly and recklessly by failing to implement proper health and safety measures.
Class Actions FAQ
Q. Heard there was a lawsuit filed against an employer for firing employees without notice. What is that?
A. The Worker Adjustment and Retraining Notification (WARN) Act helps ensure advance notice in cases of qualified plant closings and mass layoffs. It requires 60 days’ notice to employees prior to layoffs. Several employees of different companies have filed class action lawsuits for their employer’s failure to comply with the WARN Act during COVID-19 layoffs. One such lawsuit has been filed against Hooters restaurant.
Q. How is eBay responsible for its sellers’ price gouging?
A. Plaintiffs are making the argument that eBay allowed its sellers to price gouge protective equipment such as N95 face masks as well as household disinfectants. Plaintiffs’ theory is that, by eBay’s allowing these markups to occur and taking their fee from the transactions, they were complicit in the actions of the sellers.
Q. Which industry has been hit the hardest by COVID-19 class action lawsuits?
A. While it is too early to tell which industry will ultimately have the biggest monetary fallout from these lawsuits, the American airline industry has seen class action lawsuits filed against five (5) of its top corporations.
Q: What is the Paycheck Protection Program?
A. The PPP is a loan program designed to provide a direct incentive for small businesses, including construction companies and contractors, to keep their workers on the payroll. You can apply for a PPP loan through any existing SBA 7(a) lender or through any participating federally insured depository institution, federally insured credit union, or farm credit system institution. Any business with at least 500 employees qualifies, including 501(c)(3) non-profit organizations, tribal businesses or 501(c)(19) veterans’ organizations, or any business that meets the SBA’s size standard of more than 500 employees. The SBA forgives such loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.
Q: Is construction an essential business during this COVID-19 shutdown?
A. Partly “Yes” and partly “No.” A branch of the Department of Homeland Security called the “Cyber Security and Infrastructure Agency” (CISA) maintains a list of what the U.S. government considers to be “essential” businesses. CISA issued coronavirus guidelines to ensure that employees essential to the operation of critical infrastructure can continue working with as little interruption as possible including emergency and financial services and the chemical and energy sectors. Unfortunately, the construction industry did not make the CISA’s list.
Q: If we can stay open performing building and construction work, what will control our interaction on the worksite in terms of safety as it relates to COVID-19 problems?
A. Your workers should continue to utilize personal protection equipment (PPE) including gloves, eye and face protection, and respiratory protection to protect workers not only from sawdust, chemical exposure, etc., but also from COVID-19. It is anticipated that employers should continue to develop and enforce their existing respiratory protection programs in accordance with the federal standard found at 29 C.F.R. 1910.134.
Q: Why are COVID-19 infection rates so high among construction workers?
A. Construction workers often operate in teams due to the nature of their work. It is hard, if not impossible, for them to stay 6 feet apart while working. During my preparation for today, I noticed that one of the only precaution construction workers can take is to wear a mask. Unfortunately, it does not appear that wearing a mask is a requirement on construction sites across Texas. However, on June 23, 2020, the City of Austin made masks a requirement on all construction sites. Further, sites with more than 10 active works must stagger shifts.
Q: How has COVID-19 affected productivity on construction sites?
A. It appears that COVID-19 has slowed down productivity on construction sites and not just due to the increasing cases of infection on construction sites. Though construction projects have continued across Texas, there are delays due to contractors receiving delayed shipments from their suppliers and, in some cases, having their orders for supplies and materials cancelled. This is an issue that will likely remain for the foreseeable future in Texas where COVID-19 cases are steadily rising.
COVID-19 Impact On Jury Verdicts FAQ
Q. How can we apply these concepts to evaluate real cases? Is it too early given that cases might not go to jury for a year or two?
A. While it is too early to make concrete predictions as to how this crisis will alter the litigation landscape as a whole, we do know the new narratives that are emerging will play a part in determining the ultimate impact. It took the litigation industry many years to fully realize that the litigation landscape had been altered by the 2008 financial crisis. If we react quickly, while applying the lessons of the past, it doesn’t have to take as long this time. The challenge for risk managers, litigators and claims professionals is not to wait to begin modifying their traditional approach to assessing risk, but instead to begin to incorporate the new narratives to better evaluate their existing and future matters. The key is to scan for the same types of stories we are seeing from the current crisis within the fact pattern of their litigation.
Q. What concerns you the most about how this pandemic could impact social inflation?
A. It is quite possible this crisis could radically accelerate the social inflation trends of the last decade. Consider how new immunity laws protecting nursing homes could cause jurors to feel resentment and anger. If they perceive the immunity laws as resulting from deal making by the wealthy and powerful, there could be a significant backlash taking nuclear verdicts to entirely new levels.
Q. You expressed some hope for an end to social inflation’s steady trend toward more runaway juries and larger nuclear verdicts. What do you see that gives you hope?
A. Right now every American is dealing with the question of how to balance the risks of leaving their home with the benefits of socializing, returning to work, and resuming their normal lives. These are risk/reward decisions which are precisely the themes defense counsel often need to procure at trial. We may be entering into a time when the majority of jurors are better able to understand that running a business requires that reasonable people have to decide between the balance of hoped-for rewards against known risks. Having experienced this balancing act for themselves as the quarantine slowly ends, jurors could more readily see themselves standing in a defendant’s shoes.
The bottom line is that jurors see stories in every lawsuit, and they give heroes the benefit of the doubt. They will punish anyone they think is a villain even if there are no claims for punitive damages. The impact on any area of litigation will be a function of which relevant groups wind up being canonized and which become villainized as a result of this pandemic. These new culture-wide narratives are what will ultimately determine how risk is analyzed and lawsuits are evaluated in a post COVID-19 world.
Q. I have been told a viral test shows if I have COVID infection. Why should I do an antibody test?
A. Antibody testing allows for determining immune status as to a recent or more distant past infection with the coronavirus, SARS nCov-2, that causes COVID-19 disease. A positive antibody test does not mean you are immune to COVID-19. More research is needed to fully understand the degree of immunity provided by antibodies. However, a positive result for the presence of coronavirus antibodies likely means you have at least a degree of protection against recurrent COVID-19 infection. Further, a positive antibody status means you could donate plasma to serve as an antibody donor for patients in the middle of an active infection with SARS nCov-2.
Q. If we have an employee who provides history of a cough, what should we do with that employee particularly if discovered during the workday?
A. Any person with a newly-developed cough should be questioned with regard to exposure to other persons with potential COVID-19 infection and present symptoms. This person should be separated from others in the workplace; or if separation is not possible, they should be sent home until further clarification. Consultation with a medical professional should be made to determine the need for further testing.
Q. An employee provided history of a 2 year old at home with diarrhea and fever. When can employee return to work?
A. A 2 year old with fever is at risk of having COVID-19 and can possibly transmit infection to other family members. However, diarrhea is only present in a low number of infections. The employee should follow CDC guidelines and seek a medical professional opinion with regard to returning to work. For a nonessential employee, the best practice is to quarantine for 7 days without symptoms prior to returning to work while wearing a face covering and maintaining social distancing.
Directors and Officers FAQ
Q. Is there a distinction between breaching fiduciary duties vs. breaching the government’s executive order?
A. Depending on the state and insurance policy language, there may be coverage and liability for one and not the other.
Q. Is Husk exposing his D&O’s to liability for breaching their fiduciary duties?
A. Potentially yes. If they are complicit to the actions, then they are jointly and severely liable for harm caused. In addition to fiduciary duties, there is exposure for knowingly violating the law.
Q. Can an employer force temperature checks at the workplace?
A. Yes. Under XXXX during events like a pandemic, an employer can enforce temperature checks and may even be subject to lawsuits if they do not. Safe advice is DO IT.
Q: What if an employee remains fearful of contracting the virus and refuses to come back to work?
A. Once businesses are allowed to return to work, employers are not required to accommodate employees unless an employee requires a reasonable accommodation under the ADA or is one who is vulnerable (such as the elderly or those with underlying health conditions).
Q: Can an employer decide which employees are allowed back to work and which are not?
A. If an employee is showing symptoms, employers have the right to send that employee home. However, if an employer tries to pick and choose employees allowed back to work based on age or who is “less vulnerable,” it will be subject to legal ramifications.
Q: What if an employee is called back to work but schools and childcare facilities are still closed?
A. The employee can request unpaid leave if they have already used up paid leave and expanded leave provisions under the Families First Legislation. However, the employer is not obligated to hold the employee’s position if they choose to take unpaid leave.
Q: Is an employee entitled to hazard pay if their job puts them at risk of exposure to the coronavirus?
A. Not under current law. Employers may offer hazard pay for people in high-risk jobs, but they are not obligated to do so.
Q: Can an employer require its employees to get a COVID-19 vaccine if one is developed?
A. The EEOC states that, during a pandemic, employers can require vaccinations. An employee may be entitled to an exemption if the vaccine would interfere with a medical condition or violate that person’s religious beliefs.
Q: Is an employee required to report coronavirus symptoms to their employers?
A. Yes. If an employer asks an employee if he/she is symptomatic, they can require the employee to report their condition as a matter of workplace-safety matter – but only under pandemic conditions. Such reported information should be protected as “confidential” under the ADA.
Q: If an employee contracts COVID-19 because of their job, could they be eligible for Workers’ Comp?
A. (See Workers’ Comp FAQs) The workers’ comp system is run on a state-by-state basis; but generally speaking, it is nearly impossible to determine where someone contracted an illness such as infectious disease. In some states, there have been orders and bills granting essential businesses/employees eligibility for workers’ comp.
Q: Can an employee sue their employer if they believe they contracted COVID-19 at work?
A. (See Workers’ Comp FAQs) While workers’ compensation protects employers from other legal claims pertaining to work-related injuries or illnesses, if an employee believes the company was negligent – for example, by not providing personal protective equipment – then there are situations and states where courts might be open to such claims.
Q: Are independent contractors who contract COVID-19 eligible for workers’ comp?
A. (See Workers’ Comp FAQs) Generally, no. COVID-19 presents the additional challenge of proving they were infected while at work. If they think they contracted the infection while on the job, they can probably sue the company they were working for. However, these are difficult cases to win under normal circumstances.
Q: Can employees who refuse to come back to work receive unemployment benefits?
A. Probably not, if the business received aid from the Payment Protection Program (“PPP”).
In April, the Labor Department issued public guidance on the relationship between PPP and unemployment: “Barring unusual circumstances, a request that a furloughed employee return to his or her job very likely constitutes an offer of suitable employment that the employee must accept.” On Tuesday, May 19, 2020, Treasury Secretary Steven Mnuchin reported that workers who refuse to go back to work could lose their unemployment benefits under the Small Business Aid Program. “If [employers] offer back a worker and they don’t take that job,” Mnuchin said, “you will be required to notify the local unemployment insurance agency because that person will no longer be eligible for unemployment.”
“How-To” Re-Open FAQ
Q. Can I be sued for making employees tell me their private health information or for warning other employees they were exposed to the sick co-worker?
A. During the pandemic, the CDC and EEOC authorize employers to ask employees personal medical questions which will identify if they have COVID-19 symptoms. HIPAA still requires this information be kept confidential, but the employer should notify co-workers they were possibly exposed to COVID-19 without relaying any identifiers of the infected employee.
Q. How is a corporation realistically supposed to keep the facilities sterilized and maintained so frequently and also keep up with every employee’s symptoms?
A. Many large or busy employers are hiring outside medical and legal companies to assist them in their workforce re-entry plan of action. Employers should designate a specific administrator responsible for COVID-19 job related issues and enforcement.
Q. What are my chances of being sued if an employee contracts COVID-19 at work?
A. It is impossible to say who will file a lawsuit, but employers have a strong defense against negligence the more they follow OSHA and CDC recommendations and take proper precautions to prevent the spread of the virus.
Q. What do we do if we have a confirmed case of COVID in the workplace?
- Identify when the individual was on site
- Identify what locations were visited/worked in while on site
- Identify any other employees, visitors, contractors, etc. that the individual interacted with at a distance of 6′ or less while on site
- Review previous shifts with the individual for additional potential exposure events
- Document the key points of the discussion
Q. What additional measures need to be taken with a confirmed case?
A. Cleaning and disinfecting
Q. How do we conduct employee/ visitor screening?
- Temperature Monitoring
- Antibody Monitoring
Long-Term/Home Health Care FAQ
Q: What should Home Health Care Agencies do to further protect themselves from COVID-19 suits?
A. At a minimum:
- Ensure home health aides always wear gloves and masks when attending to clients’ ADL needs.
- Prepare a short statement tailored to each client’s needs as to what actions the Agency and its staff perform and do not perform in terms of “nursing care,” have client’s sign it, and place it in client’s file.
Q: Do you see immunity being granted further to LTC facilities across the country and will that protect LTC facilities from COVID-19 suits?
A: Yes, although it is doubtful to be nationwide, we think the trend of states granting immunity for LTC facilities from COVID-19 suits will continue.
No, suits inevitably filed against LTC facilities will skirt the COVID-19 issue with Plaintiffs claiming the residents’ overall condition declined due to poor care provided by overworked staff, i.e., residents’ hygiene, turning and repositioning residents, assisting residents with meals all suffered because the residents’ acuity levels went up, but staffing levels did not.
Q: How are LTC facilities supposed to defend against claims that residents’ mental/psychosocial needs were not being met by the facility due to limitations imposed on outside visitors?
A: Besides being able to claim the facility was following CMS directives, CMS is offering LTC facilities up to $3000/facility, funded by Civil Money Penalties collected, to purchase tablets/laptops capable of allowing residents to have video conferences with their family and friends. This is a good idea whether or not CMS provides funds for same.
Q: What if a resident wishes to leave the facility due to a COVID-19 outbreak?
A: It is unlawful for any LTC facility to detain a resident who is of sound mind from leaving a facility AMA. They should be discouraged from doing so, but you cannot require them to remain in the facility.
Workers’ Compensation FAQ
Q. If one of my insured’s employees contracts COVID-19, am I bound to cover the claim?
A. No. You are currently not required to cover this claim as there are defenses protecting the carrier. Breaking it down, Oklahoma requires that:
- There must be a causal connection between the occupation or employment and the occupational disease which shall be established by a preponderance of the evidence (i.e., “more likely than not” standard).
- No compensation shall be paid unless the disease was contracted in the course and scope of employment.
- No compensation for any ordinary disease of life to which the general public is exposed.
- No liability for occupational disease unless it is due to the nature of employment and was actually contracted in the course and scope of employment.
(Several state representatives have publicly asked state-supported insurance companies to create the “presumption” that, if First Responders contract COVID-19, it is due to their employment. However, no response has been received yet as to whether these entities will do so.)
Q. How will the Oklahoma Workers’ Compensation Commission handle COVID-19 Claims?
A. We anticipate the Oklahoma Workers’ Compensation Commission will handle COVID-19 claims the same as they have any other disease-based claims, i.e., most recently MRSA and SARS. This means that each case will be intensely fact-specific unless a presumption of causation is passed by Oklahoma lawmakers and added to Title 85A. For instance, health care workers will have a far easier time proving causation from work as opposed to a food service worker at a fast food establishment or an even a farther removed construction worker.
Q. What are some facts the Commission would consider when determining whether COVID-19 is attributable to work a claimant performs?
A. Again, it is fact-specific. If the claimant is able to avoid the characterization defense of COVID-19 not being covered based upon its “general public” provision, they would still be required to have a full trial on causation. A person who rarely works around the public yet contracts the disease would have a difficult time proving they contracted it at work. The Commission Judge would need to be able evaluate:
- Claimant’s exposure to the public
- Nature of the claimant’s work
- Whether a “specific incident” was recalled and provable involving a person who was positive and symptomatic or later became positive with COVID-19 coupled with personal interaction with claimant
- Whether claimant handled instruments or other tangible items which came into contact with a person who was positive and symptomatic or later became positive with COVID-19
Q. If my state has a rebuttable presumption of compensability, am I mandated to cover a claim that arises?
A. No. The general rules are controlled by the state’s workers’ compensation system and/or its Department of Labor. Depending on the state, when an employee is diagnosed with a disease or injury, the employee will usually be required to prove the disease or injury “arose out of” and “was contracted” in the course of “employment to receive benefits.” However, if a statutory presumption of compensability exists and the employee meets certain requirements, then the injury is “presumed to have arisen out of and in the course of employment” – usually contingent on the occupation. In most of the nine states which have passed presumptions, an employer still has the right to deny coverage and the matter can go to trial with the requirement that the employer has to prove “it is more likely than not” that the injury/disease did NOT arise out of nor was it contracted within the scope of employment. Therefore, even though the rebuttable presumption is present, it does not automatically entitle a claimant to benefits.
Q. If my state has passed a “presumption of work-related condition” for workers’ compensation and COVID-19, will my premium rates increase?
A. As mentioned in the Workers’ Compensation section of our website, Pinnacol Assurance, Colorado’s largest workers’ comp insurer, stated that some carriers have projected a 27% increase in workers’ compensation insurance premiums for employers if the presumption applies to the state’s full list of essential workers. When reviewing the general costs associated with COVID-19, actuarial estimates of coronavirus claims have “been all over the map.” Some states’ carriers have proposed some relief in this regard. Specifically, WCIRB, California’s largest provider of actuarial-based information and research including advisory-pure premium rates, indicated it had proposed rule changes for claims arising directly out of COVID-19 diagnoses with an accident date on or after December 1, 2019, to be excluded from the experience rate calculations of individual employers. The reasoning is that an occurrence or non-occurrence of COVID-19 workers’ comp claims are unlikely to be a “strong predictor” of an employer’s future workers’ compensation claim costs. Therefore, each carrier will have to deal with experience modifiers for workers’ compensation premiums in different ways. The best way is to closely follow your carrier to determine if there are any specific rules regarding COVID-19 claims. Some carriers are giving their insureds breaks on time for paying premiums as discussed in the next question below. One valuable resource is the National Council on Compensation Insurance (“NCCI”) which gathers data to analyze industry trends. The NCCI website is extremely helpful for reviewing information on claims generally and COVID specifically.
Q. With my business temporarily closed due to COVID-19 issues, I am having trouble paying my workers’ compensation insurance premium. Are there benefits or tolling provisions that can apply to my business based on lack of income?
A. This depends upon your carrier. For instance, in Oklahoma, CompSource Mutual, indicates on its website that it will give some employers a break on timeliness of premium payments. Below are examples of steps being implemented according to its website:
- Reinstatement option for lapsed policies
If a policy has lapsed, it can be reinstated within 14 days if the policyholder is willing to attest that no claims or on-the-job injuries have occurred in that time.
- Lengthened renewal grace period
Our renewal grace period has been extended from 10 days to 30 days.
- Option to reduce premium for businesses still paying non-working employees
Some businesses are able to pay employees even though they’re not working. To show our appreciation for this generosity, we will exclude those wages from payroll calculations which will help lower the premium due. Some paperwork will be necessary, so please contact our Underwriters for guidance.
As you can see, there are some benefits depending on your policy and carrier. I would strongly suggest consulting your carrier or broker if you are a business owner finding yourself in the midst of workers’ comp payment problems. Do not let this pass you by.