As shelter-in-place orders start to ease and companies reopen, firms must be ready for a possible wave of lawsuits from clients and workers who might declare to have contracted COVID-19 on their premises. In response, Congress is at the moment contemplating laws to defend firms from legal responsibility supplied that they observe federal and state healthcare tips, which might assist curtail the power of plaintiffs to convey COVID-19 associated lawsuits. Within the meantime, firms ought to rigorously evaluate their insurance coverage insurance policies to see what protection may be out there for such claims.
At present, a lot of the insurance coverage focus regarding COVID-19 has been on enterprise interruption and occasion cancellation protection. Nevertheless, these insurance policies don’t sometimes present protection for losses arising from third-party lawsuits. For many third-party lawsuits, firms must be seeking to their common legal responsibility, skilled legal responsibility or administrators and officers (D&O) insurance coverage. With respect to worker sickness and any associated claims, staff’ compensation, employers’ legal responsibility and employment practices legal responsibility insurance coverage (EPLI) are the extra possible sources of protection.
Basic Legal responsibility Insurance coverage
An organization ought to look first to its common legal responsibility insurance policies to cowl any lawsuits introduced by clients who declare to have contracted COVID-19 and allege that the corporate negligently uncovered them to the virus. Barring any relevant exclusions, common legal responsibility insurance coverage protects companies from a broad vary of third-party legal responsibility dangers, together with lawsuits from clients who are suffering bodily damage on the corporate’s premises or because of the firm’s negligence. These insurance policies often embody an obligation by the insurer to defend the insured in any such lawsuit and would cowl the protection prices in addition to the damages arising from the lawsuit.
Skilled Legal responsibility Insurance coverage
Skilled legal responsibility, often known as errors & omissions insurance coverage, offers protection for professionals in lawsuits the place the plaintiffs allege the defendant breached knowledgeable commonplace of care. For instance, nursing properties are already going through quite a few lawsuits alleging that they negligently did not implement applicable safeguards or apply the suitable commonplace of care to guard their residents from COVID-19. Along with nursing properties, hospitals, healthcare staff and different well being organizations might all face comparable lawsuits from their sufferers for negligently failing to guard them and/or deal with them appropriately for COVID-19. Specialised skilled legal responsibility insurance policies, similar to medical malpractice insurance coverage, might additionally present protection for a majority of these lawsuits.
D&O Insurance coverage
D&O insurance coverage offers a wide selection of protection for third celebration claims made towards particular person administrators and officers, in addition to the corporate itself, for enterprise judgment choices. D&O insurance coverage covers “Loss” as a consequence of “Claims” towards an “Insured” alleging a “Wrongful Act.” Whereas entity protection for public firms is restricted to securities claims (for instance, direct and spinoff claims and sophistication actions alleging violations of securities legal guidelines), personal firms have broad entity protection that might possible be triggered by negligence-based claims involving COVID-19 (for instance, negligence in danger mitigation, preparedness and response to COVID-19). D&O insurance policies might also prolong to authorities investigations and inquiries, relying on the wording of the coverage, which might present protection for SEC investigations and claims below the False Claims Act, which we anticipate to stem from COVID-19.
Whereas D&O insurance policies can have broad protection grants, particularly with regard to insured people and personal firms, exclusions and different limitations of protection should be learn rigorously. With regard to COVID-19, specific consideration should be paid to the wording of the bodily damage exclusion. D&O insurance policies sometimes exclude protection for bodily damage, together with illness, as that is extra sometimes lined by common legal responsibility insurance coverage. Nonetheless, D&O insurance coverage might present protection for sure lawsuits, together with claims of negligence in creating and implementing applicable COVID-19 tips and procedures, though there might not be protection below a D&O coverage for the ensuing bodily damage. Bodily damage exclusions differ primarily based on the coverage kind, however both exclude losses “for” or “arising out of” bodily damage, illness, illness and demise. The latter “arising out of” language could also be problematic for COVID-19 associated losses, as insurers will possible (aggressively) argue that the bodily damage exclusion broadly precludes protection for any COVID-19 associated losses the place somebody has been injured.
Nonetheless, D&O insurance coverage stays precious with respect to shareholder class motion lawsuits alleging that an organization did not disclose materials dangers offered by COVID-19 of their securities filings. For instance, shareholders have already filed a securities class motion towards Norwegian Cruise Line, alleging that the corporate misled buyers with respect to the impression of COVID-19 on its enterprise. Additionally, a pharmaceutical firm is going through a spinoff lawsuit regarding alleged deceptive statements made by senior executives concerning the corporate’s growth of a vaccine. D&O insurance coverage is a possible supply of protection for these lawsuits.
Staff’ Compensation Insurance coverage
Along with lawsuits introduced by clients, many firms are already going through potential lawsuits from their workers. Corporations similar to a big retailer and meat packing firms are going through wrongful demise lawsuits from workers who allegedly contracted COVID-19 on the office. Usually, workers who are suffering such accidents could be restricted to staff’ compensation advantages as states have established staff’ compensation insurance coverage because the “unique treatment” for work-related accidents and bar workers from suing their employers instantly for such accidents, with sure exceptions. In the meanwhile, it’s unclear if staff’ compensation would supply protection for workers in all situations as for a lot of instances an worker would want to show a direct connection between the office and their sickness, which might usually be troublesome to show.
Employers’ Legal responsibility Insurance coverage
Beneath most state legal guidelines, staff’ compensation will be the solely supply of restoration for workers who contract COVID-19, limiting the employer’s potential legal responsibility. Nevertheless, many states have some restricted exceptions to this “unique treatment” rule, together with, e.g., lawsuits for intentional accidents, gross negligence in deadly accidents and fraudulent concealment. Corporations usually have employers’ legal responsibility insurance coverage to supply protection for worker accidents that’s in extra of what’s lined by staff’ compensation, together with the protection prices for any worker lawsuits. In these circumstances, firms ought to look to their employers’ legal responsibility coverage for added safety.
EPLI Insurance coverage
As well as, as workers return to work, employers might face numerous claims from workers, together with, e.g., retaliation for taking depart or asking for an affordable lodging to make money working from home, age and incapacity discrimination for refusing to accommodate workers who’re extra in danger for critical problems from COVID-19, discrimination or harassment allegations by Asian American workers, and discrimination or hostile-work setting claims primarily based on COVID-19 analysis. These claims could also be lined by EPLI, which offers protection for protection prices and damages arising from numerous employment-related wrongful acts.
Like D&O insurance coverage, EPLI insurance coverage insurance policies usually excludes protection for bodily damage. As such, below an EPLI coverage, the corporate wouldn’t have protection for accidents suffered by workers as a direct results of contracting the virus. Different frequent EPLI exclusions which are doubtlessly related to COVID-19 associated claims embody Wage & Hour claims, WARN Act claims, and OSHA & FMLA claims.
Basic Legal responsibility Insurance coverage
Basic legal responsibility insurance coverage additionally would possibly present protection for worker lawsuits introduced towards third events, the place the third celebration seems to the employer for contribution or indemnification. For example, below New York’s staff’ compensation regulation, third events might sue employers for contribution associated to an worker who suffered a “grave damage” similar to demise, everlasting lack of use or amputation of a physique half, blindness and deafness. Thus, below New York regulation if an worker contracted COVID-19 and sued the owner of their employer for failing to adequately clear and sterilize the premises, the owner would be capable of sue the employer for contribution or indemnification if the worker suffered a “grave damage.” Basic legal responsibility insurance policies sometimes include employer legal responsibility exclusions that exclude worker bodily damage lawsuits, however common legal responsibility insurance coverage might present protection for these third-party lawsuits for contribution or indemnification.
It stays to be seen the sort and sort of lawsuits firms can be going through as workers return to work. We are going to proceed writing about these matters in a multi-part sequence, as we monitor totally different declare developments below every kind of insurance coverage protection.