The last time we looked at litigation arising from the COVID-19 pandemic, it appeared that businesses and their insurers faced a grave risk of being buried by COVID-related lawsuits. So far, however, the worst fears within the business community have not materialized.

COVID-19 is no longer viewed as a crippling threat to business operations. According to the Allianz Risk Barometer 2022 (PDF) survey of business risk professionals, the COVID-19 pandemic ranked fourth — behind cyber-intrusions, business interruption, and natural catastrophes — in their list of global developments that posed the greatest risk to business operations. A similar survey conducted in 2020 ranked the COVID-19 pandemic as the second-leading source of business risk.

COVID-19 is also receding as a source of litigation risk.

By the middle of 2020, COVID-19 had already led to more litigation than any other single event in U.S. history, with nearly 5,000 lawsuits reportedly filed on a wide array of legal claims. Today, one leading COVID-19 litigation tracker reports that more than 13,500 lawsuits have been filed raising COVID-related claims. The leading sources of COVID-related claims, according to the Andrews Kurth COVID-19 Complaint Tracker, are:

• Labor and employment (3,387)
• Civil rights (2,001)
• Insurance disputes (1,980)
• Real property/landlord-tenant (926)
• Contract disputes (974)
• Habeas corpus/prisoner claims (838)
• Consumer cases (827)

The total amount of litigation created by the COVID-19 pandemic is, while substantial, not quite the deluge that some had feared. Part of the reason is undoubtedly due to successes fighting the virus and a return to semi-normal life across the country. Some legal experts believe that litigation is being held in check by state laws that limit the ability of COVID-19 victims to file lawsuits against employers, businesses, and healthcare providers. Still others believe that — at least in the area of personal injury lawsuits — workers’ compensation statutes have been successful in keeping wrongful death and other serious injury lawsuits out of court.

Two Cases to Watch

So far, insurance companies have been successful in turning back two types of COVID-related cases that might have led to significant exposure to damage claims. The first is in the area of business interruption coverage, where insureds across the country suffered large financial losses as a result of government shutdown orders and social distancing mandates that made normal operations impossible.

The second source of potential large exposure to damage claims is from serious illness or death as a result of COVID-19 contracted in the workplace.

Although businesses have been largely successful in turning back both types of legal claims so far, there are two high-profile cases — one in California and the other in Ohio — that could lead to increased liability for businesses and their insurers.

The first case involves a theory of liability informally called “take-home COVID” that arises when an employee contracts COVID in the workplace and subsequently spreads the illness to family members or other third parties. In this situation, the employee’s legal remedy is limited to insurance benefits available under the state workmen’s compensation law.

In See’s Candies, Inc. et al. v. Superior Court of Los Angeles County, No. B312241 (Calif. Ct. App., 2d Dist, Dec. 21, 2021), a California appellate court held that California’s workmen’s compensation statute did not bar a wrongful death claim that arose when a retail store employee contracted COVID in the workplace and transmitted it to her 72-year-old husband who later died of the disease. 

The See’s Candies case has attracted keen interest from the business community. The Chamber of Commerce of the United States of America, the California Chamber of Commerce, the California Workers’ Compensation Institute, the Restaurant Law Center, the California Restaurant Association, the National Association of Manufacturers, and the National Retail Federation filed an amicus brief supporting the employer. These business groups argued that courts will be “overwhelmed by civil litigation brought by non-employee spouses and other family members” if workers’ compensation statutes are interpreted to pose no bar to such claims.

Even though the appellate court ultimately rejected this argument, it pointed out that it wasn’t passing judgment on any aspect of the wrongful death claim: The plaintiff still must prove that the employer owed a duty of care to the employee’s family member, that its workplace safety processes were unsafe, and that the employee’s husband did in fact contract COVID from the employee.

The See’s Candy case has been appealed to the California Supreme Court.

Another state court case that bears watching is Neuro-Comm. Svcs. Inc. v. The Cincinnati Ins. Co., No. 2021-0130 (Ohio Sup. Ct.). In that case, the Ohio Supreme Court has been asked to decide whether exposure to COVID-19 is a physical loss or damage to insured property sufficient to trigger coverage under a business interruption insurance policy. This is an issue that has been litigated frequently across the country since 2020, with nearly all cases favoring the insurance carriers. 

The University of Pennsylvania Carey Law School’s COVID Coverage Litigation Tracker estimates that insureds who filed lawsuits over denied business interruption coverage lost 93% of federal court cases.

The precise question before the Ohio Supreme Court is:

Does the general presence in the community, or on surfaces at a premises, of the novel coronavirus known as SARSCoV-2, constitute direct physical loss or damage to property; or does the presence on a premises of a person infected with COVID-19 constitute direct physical loss or damage to property at that premises?

Oral arguments in Neuro-Comm. Svcs. Inc. v. The Cincinnati Ins. Co. are scheduled for Feb. 8.

The stakes are high in the business interruption cases. If the courts find that insurance companies are liable for compensating businesses for billions in COVID-related losses — a risk that likely was never anticipated when the policies were priced and sold — Congress may very well be asked to step in and provide a remedy for the insurance industry and its customers.