As millions of Americans shelter-in-place due to the COVID-19 pandemic, lawsuits concerning COVID-19 losses have surged in the United States and will probably flood case dockets for years to come. The unprecedented nature of the current crisis and its pervasive effects on all sectors of the economy are evinced by the variety of COVID-19-related lawsuits and the uncertainty in how legal standards will be applied. For example, COVID-19 lawsuits have been filed against cruise lines, nursing homes, insurers, airlines, and government agencies on claims based on negligence, workers compensation, breach of contract and securities fraud. So, who is at risk of litigation?

Generally, organizations that have exposed customers or employees to the COVID-19 may be liable under tort negligence or workers compensation claims. For example, in one of several suits filed against Princess Cruise Lines, the plaintiff passengers alleged that Princess Cruise Lines was grossly negligent for operating their ships after being informed that a previous passenger was infected with the COVID-19. Moreover, in a suit filed in the U.S. Court of Federal Claims (Civil Action No. 20-359 C), plaintiff employees of the U.S. Department of Agriculture, Bureau of Prisons, and Veterans Affairs allege that they were denied hazard pay for exposure to dangerous microorganisms as defined under Federal Regulations.

Another common cause for COVID-19 lawsuits is breach of contract. For example, class action suits alleging breach of contract have been filed against United Airlines, Southwest Airlines, and StubHub for refusing to provide refunds to customers who were contractually entitled to a refund in the event of cancellation. Cases on breach of contract may turn on the existence of force majeure clauses and whether the COVID-19 pandemic triggers a force majeure clause. In Atkinson Gas Co. v. Albrecth, 878 S.W.2d 236, 237 (Tex.App.-Corpus Christi 1994), Justice Gilberto Hinojosa Kennedy of the Texas Court of Appeals stated, the "purpose of force majeure clause is to excuse nonperformance of [contractual] obligations only when caused by circumstances beyond reasonable control of lessee or by event which is unforeseeable at time parties entered into contract." Therefore, in Texas, force majeure clauses may be triggered in contracts formed prior to the outbreak because the COVID-19 is clearly outside the control of the contracting parties and was arguably unforeseeable. However, determining a point in time when cancellations due to the outbreak were foreseeable will be a difficult line drawing exercise.

Insurers should be particularly attentive to COVID-19 cases because many of these initial suits are being filed against insurers for refusing to cover "business interruption losses". For example, on April 8, a business owner in San Antonio filed a suit against State Farm for breach of contract after State Farm refused to cover COVID-19 losses. However, Patrick Danner, writing for the San Antonio Express-News, reported that State Farm alleged the policy excluded losses caused by law and viruses, an exclusion added to many policies after the 2003 SARS epidemic. Similarly, in Oceana Grill v. Lloyd's, London & the State of Louisiana, a case filed in the District Court of Orleans Parish in March, the plaintiff restaurant owner petitioned for declaratory judgement to affirm that losses caused by the COVID-19 are covered under their insurance agreement. Oceana Grill bought an "all risk policy" which covered direct physical causes of loss, unless the loss was specifically excluded or limited in the policy. The policy did not exclude losses caused by viruses or closure by order of Civil Authority, but it is arguable that COVID-19 losses are not a direct physical loss and that Oceana Grill was exempted under the shutdown order. In their petition for declaratory judgement, Oceana grill likened the COVID-19 to lead or gaseous fumes which are considered a direct physical loss and emphasized that the virus can stay on surfaces for up to twenty-eight days. Unfortunately, it is unknown if declaratory judgement was granted due to the pandemic.

According to Shannon M. O'Malley at Zelle, however, insurers should not fret because "the key factual issue is whether the insured property was actually physically altered and/or affected by the virus." O'Malley emphasized that while the language of the particular insurance policy ultimately governs the scope of coverage, direct physical loss or damage entails a demonstrable physical effect. Thus, the fact that property infected with the COVID-19 can be cleaned without any alterations to the property indicates that there was no damage to begin with.

While insurers may have a sound legal theory for excluding COVID-19 losses from business interruption indemnity policies, it is also important to stay abreast of legislative developments. Claire Wilkinson, writing for Business Insurance, reported that Pennsylvania introduced House Bill 2372 which would retroactively include COVID-19 losses under business interruption policies that were in effect before March 6. Several other states such as, New York, Ohio, Massachusetts and New Jersey have also introduced similar bills. Texas has not introduced similar legislation, and the Texas Department of Insurance emphasized that coverages are "usually based on direct physical loss or damage to property" and that the pandemic may not trigger such policies. Despite these legislative developments, it seems unlikely that insurers will have to cover all COVID-19 related losses because doing so would endanger the insurance industry. For example, Andrew G. Simpson, writing for Insurance Journal, reported that COVID-19 business interruption losses for small businesses alone could be between $220 to $383 billion per month which amounts to a quarter to half of the total industry surplus available to pay all property/casualty claims. In other words, forcing insurers to cover all of these claims may put the insurance industry at risk of insolvency which, as seen in the 2008 financial crisis, is not an option.

Brett Cain is a trial lawyer who has tried over 50 jury trials and has resolved hundreds more disputes by mediation since 2006. He is the owner of the Cain Firm, a partner of The Law Center, a national network of top law firms with decades of experience in advocating for those who have suffered from personal injury, asbestos-related diseases, motor vehicle accidents and more. Cain is proud to stand up for those who cannot stand for themselves, and as a result, has recovered millions of dollars for clients after insurance companies initially wouldn't pay.