The effects of COVID-19 have reverberated through pretty much every single industry and the law is no exception. Ever since things “got real” in March, I’ve been reading the legal news and looking out for webinars. However, this past month was the first time I’ve seen a COVID clause comes across my desk in the course of business.
In short, my client was being asked to release the other party from any and all liability relating to COVID-19 and to indemnify them from and against all third party claims.
My first thought was that while it’s pretty unreasonable, it may be OK if those claims were covered by my client’s insurance policy. Unfortunately, their broker promptly confirmed that to the contrary, claims relating to pandemic and disease were specifically excluded from their policy. So unless you had the foresight of the Wimbledon team (and bravo to them!), you are probably not going to be able to fall back on your insurance coverage.
My second thought was that while it’s pretty unreasonable, it may be OK if this is all largely theoretical; are people really going to start suing each other for catching COVID?
Well folks, this is America (slight detour: if you haven’t watched Childish Gambino's video of the same name, you need to do so now. It has nothing to do with COVID but it’s a revelation.) so the answer is yes, they really are. Hunton Andrews Kurth has developed a COVID litigation tracker that states that as of September 2nd, 4,655 COVID related complaints have been filed! 1,086 are insurance related, 280 involve contract disputes and 70 involve miscellaneous torts. With all that in mind, this doesn’t really seem to be a theoretical issue.
There has been talk of federal legislation that would grant statutory limitations of liability to certain businesses (this ABA article provides a nice summary) but until that happens I think we are going to continue to see parties trying to contractually shift liability for COVID-related third party claims onto the weaker party in the transaction.
This is unfortunate because the weaker party is probably less equipped to deal with those third party claims. At the same time, they probably need the deal more and are going to be forced to accept that risk (or the cost of increased insurance coverage to mitigate the risk) as the cost of doing business. That cost is then passed to consumers, who are being asked to sign waivers and releases for what would normally be fairly innocuous activities like receiving a haircut (this Consumer Reports piece is a good lay-person’s overview of the situation).
With that in mind, I wish that Congress could get their act together and pass some sort of “COVID safe harbor” for companies that adhere to best practices in preventing the spread of COVID. Until then, we will have to see how all of the COVID litigation actually plays out.
Aside from the issue of third party claims for COVID-related injuries, there is the issue of whether COVID can be used as a force majeure like event that excuses a party’s performance under a contract. This is being litigated in various venues. My general belief is that this should be addressed in the contract if there’s even a remote chance that COVID-19 could affect performance by either party. My view is that the financial and emotional costs of litigation are almost never preferable to having a clear answer, even if it’s not the answer you wanted.