February 4, 2021
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The COVID-19 pandemic has created evolving uncertainties for insurers providing coverage throughout the U.S. As the pandemic spread throughout the country, insurers faced an influx of first-party claims related to decreased business revenue and mandated business closures.
As of the publication of this article, state and federal courts had issued 165 decisions on motions to dismiss or summary judgment filed in first-party COVID-19 business interruption cases, according to a database maintained by the University of Pennsylvania's Carey Law School. Of those, 135 granted dismissal of policyholders' complaints.
While courts have provided some clarity in first-party claims, the potential outcomes in third-party liability claims related to COVID-19 remain uncertain. In addition, recent legislation meant to curb liability lawsuits may make the handling of these third-party claims more complicated.
Although federal congressional leaders initially attempted to include liability protections in the COVID-19 relief bills passed in 2020, these efforts proved unsuccessful. There is no indication that any upcoming coronavirus relief legislation will include a federal COVID-19 liability shield.
Given the current composition of the legislative and executive branches of the U.S. government, insurers are unlikely to see federal COVID-19 liability protections any time soon. In the interim, as the likelihood of federal action diminished, multiple states enacted, or are actively considering, state-specific liability protections, through legislation or executive order.
While these actions limit COVID-19 liability claims, a review of state actions throughout the country reveals a patchwork of protections that vary by jurisdiction. Ultimately, the absence of a federal COVID-19 liability shield has created ongoing uncertainty for insurance carriers.
Not only are insurance carriers facing COVID-19-related third-party general liability and professional liability claims of unknown scope and scale, but they also must navigate state-specific laws and executive actions that offer varying liability protections. Understanding the protections afforded by state-specific liability shields will help insurers evaluate COVID-19 liability claims.
The absence of a federal COVID-19 liability shield means protections for third-party COVID-19 claims will occur, if at all, at the state level. While insurers may welcome any liability protections, the state-specific approach has created inconsistency across the country.
To begin with, many states have no COVID-19 liability protections, while some states have established COVID-19 protections through legislation, enacting liability shield laws that offer varying protections to businesses, health care facilities, individuals and employees.
Other states have used executive action to provide liability protections to health care providers only. As it relates to the protections themselves, some states have created broad liability shields effectively barring most COVID-19 liability claims, while other states have provided protections to certain businesses within the state or increased the pleading requirements for plaintiffs. Many of these laws also have different effective dates, so some claims may not be barred depending upon when and where the claim occurred.
Other states have enacted broad liability shields, seeking to protect all businesses and organizations from COVID-19 liability claims absent gross negligence or intentional misconduct. Georgia, for example, enacted the COVID-19 Pandemic Business Safety Act, which protects businesses, health care facilities, organizations or their employees from liability claims for the "transmission, infection, exposure, or potential exposure of COVID-19."
Plaintiffs can only overcome these barriers by proving gross negligence, willful and wanton misconduct, reckless infliction of harm, or intentional infliction of harm. In addition to barring conventional negligence claims, the Georgia law also has a rebuttable "assumption of the risk" provision for businesses that post a visible COVID-19 warning, which creates additional protections and added hurdles for plaintiffs pursing liability claims.
Similarly, pending legislation Montana provides broad, sweeping protections for businesses and their employees against civil actions alleging actual or potential exposure to COVID-19. The bill provides protections for acts or omissions of businesses, health care providers, churches and nonprofits, as long as those acts or omissions do not constitute gross negligence, willful or wanton misconduct, or intentional torts.
The proposed law also includes specific protections for health care providers making it very difficult for plaintiffs to bring COVID-19 liability claims against a hospital, health care provider or health care worker in the state. Further, the bill pending in Montana would codify these protections for 10 years, applying to claims brought on or after Jan. 1, 2021 through Jan. 1, 2031.
Like Montana, the Florida Legislature has renewed interest in a COVID-19 liability shield in the absence of federal protections. The Florida bill, however, is much narrower and creates added pleading requirements for plaintiffs. The Florida bill grants businesses, churches and schools immunity against civil liability only if they made a good faith attempt to substantially comply with health standards.
In addition, plaintiffs must submit an affidavit from a physician supporting the plaintiff's allegations when filing a lawsuit. Failure to do so will result in dismissal of the claim. Even if a plaintiff establishes that a business did not make a good faith effort to comply with relevant health guidance, he or she must still prove gross negligence by a clear and convincing standard. The proposed bill in Florida would bar claims retroactively but would not provide protections to already filed COVID-19 liability lawsuits.
The pending legislation in Florida does not apply to health care providers and long-term care facilities, a particularly relevant omission given that over 140,000 U.S. COVID-19 deaths have occurred in long-term care facilities so far. In other words, the proposed Florida law provides protections to many businesses within the state, but does not include protections for some businesses that may experience a large number of COVID-19 liability claims, namely health care and long-term care providers.
Taking a different approach, New Jersey is addressing COVID-19 liability protections in separate bills. Early on, New Jersey passed a liability shield to protect only health care workers and facilities from civil and criminal liability related to the exposure of COVID-19. The stated purpose was to "ensure that there are no impediments to providing medical treatment related to the COVID-19 emergency."
This bill has a narrow application and does not provide protections to most businesses in the state. More recently, the New Jersey Legislature has sought to expand these protections to nonhealth care businesses through the COVID-19-related Business Immunity Act. Like the existing liability shield in New Jersey, there is an exception for willful misconduct, reckless infliction of harm or intentional infliction of harm.
Importantly, however, the currently proposed bill does not provide COVID-19 liability protections retroactively for businesses, so there would be a period of time where policyholders could still face third party COVID-19 liability claims.
Although some states have enacted, or are actively considering, legislation to establish COVID-19 liability protections, governors of other states have bypassed the legislature and attempted to provide liability shields through executive actions. For example, the governor of Arizona, Doug Ducey, signed an executive order in April 2020 extending existing good Samaritan protections to health care workers who are giving care to patients during the COVID-19 emergency.
The good Samaritan law in Arizona bars claims for civil or other damages against health care workers responding to an emergency or providing emergency care. Further, these protections are temporary and will not bar COVID-19 liability claims that occur after the executive order expires.
Although it is easy to group similar COVID-19-related state actions together, insurers must be aware of the tangible differences between the laws of each state, as they materially affect how insurers should respond to and evaluate COVID-19 liability claims. Considering the proposed laws in Florida and Montana, for example, real world hypotheticals best demonstrate the practical implications, and the uncertainty facing policyholders, associated with state-specific liability shields.
Consider the following scenario: An insurer provides liability coverage to hospitals throughout the country. Due to the spread of COVID-19, a hospital must operate with reduced staff, leading to a rationing of care, allegedly resulting in a patient contracting COVID-19.
The proposed law in Montana likely bars this claim completely, unless the plaintiff can demonstrate that the hospital was grossly negligent or willfully and wantonly reckless. By contrast, the proposed law in Florida does not apply to hospitals and health care providers, so the plaintiff could make this claim without having to navigate any COVID-19-particular protections, such as increased pleading requirements.
As another example, consider COVID-19 liability lawsuits filed against restaurants in Arizona and Florida on May 1, 2021, related to an exposure to COVID-19 occurring in July 2020.
In Florida, the plaintiff would first need to obtain a physician's affidavit stating, to a reasonable degree of medical certainly, the alleged injury occurred as the result of the insured's act or omission. If the plaintiff meets these preliminary requirements, the proposed law in Florida still requires clear and convincing proof of gross negligence before the defendant could be liable. By contrast, the executive order in Arizona would provide no protections for the restaurant or its insurer.
Guidance for Insurers
The legislation in Florida, Montana and other states is still pending, so the liability protections provided by the final bills may change slightly from any current versions. Having said that, a review of the laws currently in effect and the pending legislation helps to highlight particulars that insurers should be mindful of when reviewing and responding to third-party COVID-19 liability claims.
As an initial matter, insurers should be aware of whether the state in which the claim has been brought has a liability shield. If the state has regulations, laws, or orders, or pending legislation, which provide COVID-19-specific liability protections, insurers should pay close attention to the following:
Date of Incident
There is variability regarding when the state-specific laws provide liability protections. Some states, like Florida and Georgia, likely provide coverage retroactively to the start of the pandemic. Other states, like Montana and New Jersey do not. As such, identifying the correct incident date, and how that interacts with the liability shield in that state, will be an essential preliminary investigative measure for insurers.
The liability shields in each state provide protections to different businesses. Georgia and Montana, for example, provide broad protections to all businesses. By contrast, Florida's proposed law does not apply to health care providers, while currently Arizona and New Jersey only provide protections for health care workers.
When evaluating whether a state-specific liability shield applies to a potential claim, the insurer must first identify the business covered by the policy. The insurer must then confirm that the applicable state law protects the insured business.
Applicable Health Guidance and Regulations
Understanding the regulatory health guidance in effect at the time of an alleged liability incident is essential. Many of the existing liability shields and proposed laws use compliance with applicable regulatory health guidance as the threshold basis for liability protections.
For example, the proposed law in Florida bars liability claims if the policyholder made good faith efforts to substantially comply with state and local regulatory health guidance related to COVID-19. Likewise, the proposed law in Montana requires businesses to assert compliance with applicable health guidance at the time of an incident as an affirmative defense.
Special Claim Requirements
Insurers should be mindful of any unique requirements for claimants created by state-specific liability shields. For example, the pending Florida law requires an affidavit by a physician stating that the defendant's act or omission caused the COVID-19-related injury or damages when filing a lawsuit. Plaintiffs' claims will be dismissed if they fail to provide the mandated support from a medical expert.
The business practices of a policyholder are particularly relevant for third-party COVID-19 liability claims, as the conduct of the policyholder can trigger certain provisions of a state's law.
Georgia, for example, has an assumption of the risk provision that is triggered if a business posts appropriate COVID-19 liability warnings and signage. Similarly, a business in Georgia may jeopardize its protection under that state law if it flouts capacity restrictions or COVID-19-specific operational mandates.
The variability of state-specific COVID-19 liability protections is an added challenge for insurers. Although navigating COVID-19 liability shields throughout the country is certainly challenging, understanding state-specific liability laws will ensure that insurers properly evaluate COVID-19 liability claims.
 COVID-19 Pandemic Business Safety, O.C.G.A. §§ 51-16-1 – 51-16-5.
 S.B. 65, 2021 Leg., 67th Sess. (Mt. 2021).
 H.B. 7, 2021 Leg. (Fla. 2021).
 The COVID Tracking Project; https://covidtracking.com/data/long-term-care.
 S. 2333, 2020 Leg., 219th Sess. (N.J. 2020) (enacted).
 A. 4426, 2021 Leg., 219th Sess.
 Exec. Order No. 2020-27, A.R.S. § 32-1471. The protections are extended by Exec. Order No. 2020-63, A.R.S. §32-1471 through March 31, 2021.