Coronavirus Litigation Overview

2021-05-24 | 7 min read

The COVID-19 crisis is bringing an unprecedented wave of litigation, and the range of legal issues involved is breathtaking. Litigators across the legal spectrum should continue bracing themselves for novel legal challenges, both to government stay-at-home orders and the way businesses have reacted.

Challenges to Stay-at-Home Orders

It is no secret that government-mandated stay-at-home orders, despite their proven efficacy at curbing the spread of COVID-19, were often unpopular. Some states have faced – and continue to face – legal challenges to the validity of their stay-at-home orders.

In Colorado, for example, business owners recently raised a First Amendment challenge in federal court to Governor Jared Polis’s most recent business restrictions, alleging it infringes on their constitutional right to assemble.[1] Similarly, in May, lawmakers and business owners in Pennsylvania raised various legal challenges to Governor Tom Wolf’s stay-at-home order, alleging it exceeded the governor’s constitutional authority and violated the constitutional right to assembly. Though the Pennsylvania Supreme Court upheld the restrictions, a federal judge struck them down, agreeing that they were unconstitutional.[2]

Religious groups have also challenged COVID-19 restrictions. Many governmental entities restricted or limited gatherings at places of worship. Unsurprisingly, the Supreme Court has struck down these restrictions as an unconstitutional infringement on the freedom of religion despite the compelling health and safety reasons to adhere to the regulations.[3]

Many states and municipalities have faced challenges to their responses to Coronavirus-related restrictions. Despite the release of multiple vaccines, COVID-19 cases continue to wreak havoc across the country, and whether the vaccines will be effective against the new, recently identified strain remains unknown. In other words, the era of lockdowns and business restrictions may not be over.

Employment Litigation

It is easily apparent that workers have borne the brunt of the economic impact of COVID-19. The unemployment rate reached its peak in April 2020 at 14.7%, the worst level since the Great Depression, and as of November 2020, it had decreased to 6.7%, still much higher than the average unemployment rate in the United States.[4] The service sector experienced one of the hardest impacts, such as food service and hospitality, as indoor dining and travel have been restricted at some level for almost a whole year. For those who have remained in business, however, adapting to COVID-19 has been difficult, both for the business owners and their employees.

Surprisingly, Lex Machina reports that there was a dip in the number of federal employment filings in 2020 as compared to 2018 and 2019.[5] Between January and September of 2020, 309 federal employment cases were filed that were directly related to the COVID-19 pandemic, most of which were related to retaliation, the Family and Medical Leave Act (FMLA), and the Fair Labor Standards Act (FLSA).[6]

Disability and reasonable accommodations, already a somewhat murky area of employment law, have become even more complicated by the new issues raised by COVID-19. What are employers’ responsibilities to accommodate their employees during COVID-19?

In Bess v. District of Columbia, the plaintiff alleged that her employer, the D.C. Department of Corrections, failed to reasonably accommodate her diabetes, which puts her at an increased risk to suffer symptoms of COVID-19. The plaintiff requested that she not be placed in areas of the prison with a high risk of transmission.[7] Her suit proceeded when she was able to show that she had a disability, her employer knew of her disability, and her employer failed to accommodate her reasonable request not to be placed in medical and quarantine units in the prison.[8] This is a significant case because it provides a clear-cut example of what a court may consider a reasonable accommodation. For many workers, what otherwise may have been reasonable given their disability is no longer reasonable while COVID-19 transmission remains a threat.

Interestingly, traditional harassment and discrimination claims are down, most likely attributable to the fact that many typically in-person businesses have switched to remote work, which may limit the types of encounters that may lead to a Title VII claim.

Small businesses are at the receiving end of 38% of COVID-19 lawsuits, primarily involving medical leave and work-from-home arrangements.[9] Larger companies, on the other hand, are facing claims of negligence and wrongful death.[10] Whether businesses will be liable long-term for their employees contracting COVID-19 is up for debate. One of the most contentious issues debated in the last Coronavirus relief bill involved liability shields for businesses. While many states have long since passed liability shield laws, there was heated debate in the U.S. Senate during the last round of Coronavirus relief negotiations. Employment litigation will continue to evolve, and even as the COVID-19 threat begins to quell in 2021 with the implementation of vaccines, the long-lasting effects of employers’ COVID-19-related policies will likely cause a continued flow of workplace complaints.

Securities Litigation

Companies are also facing unique securities-related litigation. After the stock market dipped drastically in March, there have been numerous actions, both private and public, challenging companies’ public statements regarding COVID-19, specifically concerning their preparedness and the financial impact of the pandemic on business operations.[11] Corporations were expected to communicate with shareholders about anticipated risks associated with COVID-19, but many companies are now facing lawsuits alleging that they concealed risks, either by making misrepresentations or significant omissions.

For example, shareholders of Norwegian Cruise Lines sued the company for providing customers with materially false statements about COVID-19 to “entice customers to purchase cruises, thus endangering the lives of both their customers and crew members.”[12]

Pharmaceutical and healthcare companies have also faced complaints, both by shareholders and governmental agencies, regarding the treatment and services the companies have held themselves out to offer.[13] For example, several pharmaceutical companies made false statements about the development of a COVID-19 vaccine.[14]

Finally, there have been derivative lawsuits related to the breach of fiduciary duties by corporate officers who failed to oversee or monitor corporate functions.[15]

The corporate regulatory environment surrounding COVID-19 has been virtually nonexistent as the federal government failed to implement a national strategy, but certainly false or misleading statements to shareholders and customers alike may continue to serve as the basis for securities litigation.

Medical Malpractice

Healthcare workers are under immense strain. For many hospital and assisted living facility workers, going to work every day has been a matter of life and death. Many providers lacked sufficient personal protective equipment while hospital beds increasingly reached capacity. Many COVID-19-related deaths were the unavoidable consequence of the novelty of the disease, the unpreparedness of the government and health care system to accommodate those infected, and the failure of the public to adhere to safety protocols.

The unique nature of COVID-19 means that traditional medical malpractice is rarely going to be the best solution for families seeking compensation for their losses. Not only do certain state statutes limit liability for healthcare workers during COVID-19, but judges and juries will likely be hard-pressed to be convinced that the injury or death of a COVID-19 patient was substantially caused by the negligence of the health care provider, rather than the extenuating circumstances involved in a pandemic. What would generally be considered an unreasonable breach of a standard of care before COVID-19 may no longer seem unreasonable; if a hospital did not have enough open ICU beds, it is unlikely the fault of the hospital or any individual worker. Plaintiff’s attorneys should be cautious about advertising medical malpractice related to COVID-19, as the bar is likely going to be much higher than usual.

Other Significant Areas of COVID-19 Litigation

COVID-19 has touched every aspect of American life, and thus every area of law. One group hit particularly hard by COVID-19 outbreaks has been the prison population. There has been significant media attention on the plight of prisoners, living in close quarters and often unhygienic conditions. For instance, Oregon inmates have sued the government over COVID-19 conditions. A federal judge recently held that the prisoners were within their rights to sue the state directly over the COVID-19 conditions, which is extremely legally significant because it may have more widespread national implications.[16]

Insurers are also feeling the legal impact of COVID-19. Business interruption insurance has been a hot topic, as many businesses have wondered when they could cash in on their policy to cover business expenses while they shut down for the better part of a year. There have been over 1,000 business interruption cases filed, many of which are still pending. Though the case will vary from policy to policy, many courts are ruling in favor of the insurers.[17] The consensus is that business interruption insurance specifically excludes losses not related to a direct physical loss to property. Many of the policies even have an explicit exclusion for viruses and pathogens, which courts are inclined to construe literally.[18]

The impacts of COVID-19 are far from over. Many individuals and businesses have lost a lot over the last year; in addition to losing their jobs and business revenue, many people have lost loved ones and worried about how they would support their families going forward. For many people, the traditional path to recover for these losses may include pursuing litigation, and without a comprehensive legislative strategy, new legal issues are expected to continue to crop up well into 2021 and beyond.