Legal bonanza ahead? Debate centers on COVID-19 lawsuit immunity

By Updated: May 11, 2020 9:06 AM CT | Published: May 11, 2020 4:00 AM CT

Beale Street fried chicken and waffles purveyor Miss Polly’s Soul City Café didn’t reopen when Memphis let restaurants come back at half capacity Monday, May 4.


Beale Street reopening rules keep booze, music indoors


But fear of lawsuits wasn’t on Ty Agee’s radar when the long-time operator made the call to wait until maybe June.

“That’s not anything that’s even crossed my mind,” said Agee.

“It’s cheaper for me to stay shut down than to open at 50% of capacity,” Agee said. “I’m not going to do it yet. I’ve got 17 employees to think about, and it’s not worth it to make them come back.”

“If we opened up, we’d do our best, be diligent with cleaning and sanitation, but that’s really things we should be doing anyway,” Agee said. “As of now, I’m probably looking at the first of June.


When benefits outweigh employment


“I think everyone’s being overly cautious,” he added.

Avalanche coming

COVID-19 is certain to keep lawyers and the American court system busy for years to come.

But attorneys from large and small firms in Memphis said it probably won’t be customer claims against businesses that will dominate the dockets.

An expected avalanche of lawsuits and its chilling effect on business reopenings have prompted congressional Republicans to propose granting companies guaranteed immunity in cases involving COVID-19 infection.

Memphis attorneys believe fear of litigation is overblown as a factor in businesses choosing not to quickly and fully reopen when allowed to do so.

“Just to stay closed out of fear does not really seem like an option for most of these businesses, because they’re still businesses at the same time and they’re there to serve the community and also generate money for the community,” said Danielle Rassoul, an associate with Glankler Brown.

Claiming immunity

Senate Majority Leader Mitch McConnell and pro-business groups such as the U.S. Chamber of Commerce and National Federation of Independent Business have argued that providing businesses with blanket immunity from COVID-19 legal claims is the path to moving America back to normal.

McConnell and other congressional Republicans have threatened not to support more stimulus spending, including aid to cities and states, unless it includes the immunity guarantee.

Critics fear immunity would open the door for businesses and corporations to disregard basic safeguards for public health and safety.

Tort reform limits on big judgments in Tennessee and many other states, along with a cap on workplace-related claims under worker compensation rules, are built-in protections that companies already enjoy, Memphis lawyers said.

“I do think there’s going to be litigation, because a lot of people believe it’s a hoax, a lot of people don’t believe in following guidelines, a lot of people don’t even believe in wearing masks, and they’re really putting everybody else at risk,” said Eugene Laurenzi. “If companies are going to do that, they should be in litigation.”

“The only thing to make people do the right thing, do what they’re supposed to do, follow the rules, is the threat that they’ll be in court if they don’t do right. I know that’s simplistic but it’s true,” said Laurenzi, a partner with Godwin Morris Laurenzi & Bloomfield.

“They all want to reach out and be protected, even if they don’t follow the rules,” he said. “The easiest way to be protected is to have Congress protect them, which I think is absolutely wrong.”

The public’s pulse

Hart Research polled 1,202 American voters in late April and found lopsided opposition to blanket immunity from COVID-19 claims. Hart Research and the American Association for Justice said May 6 that 64% opposed it, ranging from 56% of Republicans to 72% of Democrats.

Association chief executive Linda Lipsen said the Republican proposal misses the point of how hard it would be to meet the burden of proof in such claims under current laws. As to a suggested compromise, tying immunity to adhering to recognized COVID-19 guidelines, it’s a solution in search of a problem.

“If the guidelines are protective enough, they would always be evidence in any kind of case, that the employer or the small business or the big business, for that matter, exercised due care and acted reasonably,” Lipsen said.

“I think that the point, though, when talking about these liability concepts is how hard these cases (are to prove), because an individual would have to prove that they got the virus at work or at a hotel or at a place of business, etc. That’s very hard,” Lipsen said.

States’ rights?

A congressional grant of immunity also would be reaching into an area where states have long had jurisdiction.

Julia Duncan, director of federal programs for the American Association for Justice, said, “Laws related to immunity are, generally speaking, promulgated at the state level. States and localities are making very different decisions about what the needs of their city are ... and they are promulgating rules or temporary orders in order to respond and respond quickly to those situations.”

For example, legislatures in at least seven states have introduced legislation to force insurers to cover business interruption losses due to the COVID-19 pandemic, overriding policy exclusions for “virus” or “pathogen.”

Worker’s compensation and tort liability limits in Tennessee already serve as built-in forms of immunity against larger claims, said Memphis attorney Jeffrey Rosenblum of Rosenblum & Reisman.

“There’s already immunity with regard to the exclusive remedy provision of the worker’s compensation statute,” which limits what workers or their families can collect from employers for on the job injury, illness or death, he said.

Tort reform, capping damages at $1 million, provides “a form of immunity, immunity against a huge jury verdict,” Rosenblum added.

Rosenblum didn’t think the immunity proposal would fly.

“I can’t imagine our legislators saying we’re going to go ahead and grant complete immunity. Lobbyists on both sides will be pushing for protection of consumers,” he said.

But national emergencies sometimes result in rules and regulations being temporarily loosened.

The National Federation of Independent Business lines up in favor of legal immunity and other protections for business.

NFIB’s “back to work” checklist for governments includes “legislation that protects small businesses from frivolous pandemic-related lawsuits;” barring workers from receiving unemployment benefits if they’re offered their jobs back; and a request to “not allow COVID-19 to be considered a presumptive occupational illness for workers’ compensation purposes.”

Fear of opening?

Notwithstanding the argument for protecting small business, Memphis attorney Bruce McMullen, shareholder in Baker Donelson and former City of Memphis chief legal officer, sees the immunity push as a smokescreen for big business, particularly insurance companies.

“Most businesses are insured, and it’s not really straight-out-of-the-pocket type of exposure,” McMullen said. “I don’t think that drives whether businesses open. So I think the blanket immunity is something that is not being pushed by your Main Street businesses. It’s probably something that’s pushed more by larger insurers.” 

<strong>Bruce McMullen</strong>

Bruce McMullen

A thoughtful, well-crafted business reopening plan, which incorporates relevant health and safety guidelines from the Centers for Disease Control and Prevention (CDC) and the Occupational Safety & Health Administration (OSHA), should be sufficient to ward off claims by customers and employees, Memphis lawyers said.

Business reopening plans will vary widely depending on the type of business, but every company should create a plan and commit resources to enforce it.

The plan needs to be grounded in facts, such as the latest CDC and OSHA guidelines, to regulate social distancing, sanitation and personal protection, and it should include heavy doses of educational and informational outreach to employees.

Masks and flexibility

Rassoul has been advising companies on reopening plans in recent weeks, with recommendations including requiring employees and strongly encouraging customers to wear face masks, with the company providing the masks to both groups, if feasible.

She recommends companies designate a staff member as a point person for both employee and customer issues relating to COVID-19.

Rassoul said companies need to balance the imperative of staffing adequately with a flexible approach to recalling employees.

Some employers want to know if they can force workers to come back if those workers won’t voluntarily return.

In some instances, employees could continue to collect unemployment and not return to work. Those include underlying health conditions that put them at higher risk if exposed to COVID-19, if they’ve been quarantined, diagnosed with COVID-19 or are taking care of a family member with COVID-19, or if they lack child care.

“That’s the trickiest part in all of this, because the businesses need to be sensitive, but also have legitimate business concerns with actually staying afloat and surviving, and they can’t do that when they don’t have the manpower,” Rassoul said.

Solid foundation

McMullen noted it’s crucial in tort liability claims that a plaintiff prove a company was negligent in not following a basic standard of care.

“The only thing we can look at as the standards is the CDC guidelines and the OSHA guidelines. So we’re advising our clients to look at the CDC and the OSHA guidelines, which are changing daily,” McMullen said.

“Now, you know and I know you can’t stop somebody from suing or asking for anything. But if you have protocols set up, based on the CDC and the OSHA guidelines, you can’t just put them up on paper, you have got to take the effort to enforce those protocols,” McMullen said.

“I don’t think the litigation/tort from an outside person is slowing the opening of a lot of businesses,” he said. “I think what’s slowing them is bringing in employees and kind of assuring they don’t contract or they’re not bringing COVID-19 in. That’s part of it. The other part of it is, while you do social distancing, especially restaurants, businesses can’t make it with 50% of clientele,” McMullen said.

Litigation bonanza?

Setting aside the issues raised by the immunity proposal, the Memphis lawyers acknowledge COVID-19 is fertile ground for their profession.

“The majority of that is really going to be seen between insurance companies and the businesses, between the businesses and landlords and government entities and creditors,” Rassoul said.

Nursing home deaths and elder law, bankruptcies, breach of contract, consumer actions and failure to warn actions are among the more common types of lawsuits expected.

Consumer actions could be class actions to recoup money paid for services, such as gym memberships, that weren’t provided because of COVID-19.

Rosenblum said his firm has begun research on nursing home deaths, looking at why some facilities had outbreaks and multiple deaths while others were virtually untouched.

McMullen said, “It’s going to be a lot of litigation around their screening of their employees coming in and out because of what happened with nursing homes. It’s the employees that come in and out that probably brought it in to the nursing home. Once it’s in there, it spreads like wildfire.”

Unlike consumer-business lawsuits, where the source of exposure could be in question, barring clusters of claims, lawsuits are more likely to gain traction against operators of facilities with captive populations, such as jails and nursing homes.

“The real fertile ground is nursing homes, because if I’ve been confined in a nursing home, there’s no doubt where I caught it. That hurdle is over,” McMullen said.

Workplace exposure

Laurenzi believes there will be a lot of litigation over claims of workplace exposure to the virus, even though the claims are governed by workers’ compensation statutes.

State government should declare COVID-19 as a presumptive cause of workplace injury in essential employment sectors, particularly health care, but also truckers, grocery store employees and distribution workers, Laurenzi said.

“If you have COVID-19 and you’re in one of those service industries, there’s a strong presumption that you got COVID-19 while on the job,” Laurenzi said. “Maybe it would have to be clear and convincing proof that the company would have to show you did not get COVID-19 at work.”

Laurenzi’s idea runs counter to the worker’s compensation plank in NFIB’s back-to-work platform.

“Here’s what (employers) are not going to admit: They’ll fight you,” Laurenzi said. “You hear all this stuff, ‘We’ll protect our workers.’ But when it comes down to time for the insurance carriers to pay the claims, they’ll deny them.

<strong>Eugene Laurenzi</strong>

Eugene Laurenzi

“I can’t imagine any workmen’s comp judge denying a claim for a hospital worker, but when it moves down the line to truckers and Kroger workers, and FedEx workers out in the hub, I don’t know that there’s going to be that much sympathy,” Laurenzi said.

While health care workers should at some point have a presumption of exposure to COVID-19, claims would fall within the limits of workers’ compensation.

“What I imagine, at some point, with health care workers, it’ll be considered a presumption that they got it, maybe a rebuttable presumption, but it probably will be. But that is kind of new and fluid, and it has to be proved,” McMullen said.

Said Rosenblum: “Employees wanting to sue their employers for not having safe work environments, those are right now governed by workers compensation statutes. Those are hard cases to win, and they’re not very lucrative in terms of statutory fees on lawyers.”

Creative lawyering

Rosenblum said lawyers will be creative, but he also sees juries being very lenient with businesses that are doing their best, that are taking the right precautions, such as health care providers.

“In 2019, if you had a doctor that committed malpractice and you moved forward with that claim, there may be a different view than in 2021 or 2020, with the jury looking at a doctor who is just doing his best, putting his life at risk taking care of patients who are ill with coronavirus. That may be one ancillary effect of this,” Rosenblum said.

“I do think jurors in your garden variety car wreck cases are going to be set up with, ‘Why are you bringing me in and putting me in a (jury) room with 10 or 12 people, in federal court it’s eight, why are you making me be in a small conference room with 12 people? I don’t want to be here.’ That sort of thing,” Rosenblum said.

Auditing the stimulus

Finally, compliance with evolving rules and regulations on government aid programs, such as the Paycheck Protection Program’s forgivable loans, could lead to litigation under the heading of false claim actions.

The Treasury Department, for example, has put recipients on notice they could be audited to make sure they meet standards for loan forgiveness.

“Anytime you do a massive operation like the federal government is doing in order to aid people, there’s going to be a certain number of companies that exploit, and when it’s done that quickly, it hasn’t had the test of time to see what protocols and regulations should be in place,” McMullen said.

“There’s going to be an uptick in false claims that people made claims, got reimbursement and violated the guidelines,” McMullen said. “It’s a fluid process for the government. The best way to say it is, there’s no good guys, no bad guys, it’s just the situation we’re in.”

At least for now, it’s unclear how strict or lenient the government will be.

“If they’re going to take a hard-line stance or if they’re going to be lenient, will really determine the outcome of litigation and the number of lawsuits,” Rassoul said. “And I would suspect that they’re going to be more lenient with the smaller businesses and medium-sized businesses.”

For businesses that received Paycheck Protection Program loans and want to minimize risk, “the best advice to them is, it’s at a 1% interest rate. So if you have to pay it back, at least it’s at a very low interest rate. Every business is going to have to make decisions based on their best business interest and just being aware of the potential risks, and how this might be interpreted down the road,” Rassoul said.

Topics

COVID-19 COVID-19 legal claims guaranteed immunity tort reform workmen's comp workplace safety Sen.Mitch McConnell
Wayne Risher

Wayne Risher

Business news reporter, 43-year veteran of print journalism, 35-year resident of Memphis, University of Georgia alumnus and proud father and spouse of University of Memphis graduates.


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