Texas Lawyer Article: The Effects of COVID-19 on Texan Lawyers and Insurers

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…

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 linesnursing homesinsurersairlines, 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 AirlinesSouthwest 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.

More at https://www.law.com/texaslawyer/2020/04/17/the-effects-of-covid-19-on-texan-lawyers-and-insurers/