General counsel would benefit from preparing for a potential wave of COVID-related lawsuits now that the California Supreme Court has allowed to go to trial a case in which an employee blames her employer for the death of her husband who she argues contracted the disease when she brought it home from work. 

“I think we’re going to see a wave of personal injury and wrongful death lawsuits stemming from COVID,” Clausen Miller Partner Melinda Kollross said in an interview. 

Plaintiffs will argue these employment-related cases fall outside workers’ compensation rules because they involve family members and not employees who worked on-site during the lockdown, Kollross said. 

In the California case, the first one to reach an appellate court, the state’s top court said in mid-April it won’t review a novel ruling, allowing discovery to go forward to determine whether See’s Candies, the big confectioner, can be held liable for the COVID-related death of the spouse of one of its employees.

“That’s a pretty big deal,” Kollross said of the ruling. “How things will go beyond California, I don’t know; states write workers' comp laws differently, so you can’t generalize. But even if it’s just in California, that’s a significant ruling.”

High hurdle

At a practical level, the California case and any others to follow face a steep hurdle if only because of the difficulty of proving the employee was infected with the virus while at work. 

“With COVID, people are potentially exposed all over the place – other family members, outside at the grocery store,” said Kollross, who runs Clausen Miller’s Appellate Practice Group. “So, there are going to be huge issues with breach and with causation.”

It’s different with something like asbestos, where the source of the disease-causing agent is traceable.

“If your spouse breathed it in, you can say the only place he was exposed to asbestos was in the workplace,” she said. “That’s been a common one historically.” COVID is different because exposure could have occurred anywhere.

To the extent cases arise involving the employees themselves contracting COVID and either dying or requiring hospitalization, impacted families have a path for relief through workers’ compensation. 

But even in these cases, Kollross said, plaintiff counsel could pursue a judicial remedy if they believe they can argue the employer acted with willful misconduct.  

“I could see arguments being made by plaintiffs that, if you stayed open for business and you made your people work within six feet of someone else, maybe that’s not intentional harm but it’s reckless or willful,” she said. “That sometimes gets you outside of workers’ comp.”

Business interruption

If a surge in personal injury or wrongful death cases does in fact hit the country, it will be a second wave to stem from COVID. The first involved companies’ efforts to get carriers to pay business interruption insurance as a result of the government-directed lockdowns.

These cases, which hit the courts beginning in 2020, have not fared well and are not likely to fare well by the time they work their way through the judicial process. That’s because business interruption coverage, which is typically part of companies’ property casualty insurance, usually requires loss of business due to property damage and not simply an interruption in a company’s income stream caused by something other than direct physical loss or damage to property. 

“These principles about having to have a physical loss or damage before you can ever get business interruption, and what physical means, have been litigated and there is precedent for what that actually means,” Kollross said. The COVID-19 virus, the pandemic and related government shutdown orders don't qualify as direct physical loss or damage under existing precedent.   

The state supreme courts in Iowa and Massachusetts handed insured companies some of their biggest losses to date when they ruled in mid-April in favor of insurance companies by acknowledging the language in the policies is clear and that contract terms can’t be re-written to side-step the physical damage requirement.

“If an insurance policy and its exclusions are clear, the court ‘will not “write a new contract of insurance”' for the parties,” the Iowa court said, citing previous rulings.   

Plaintiffs, which have mainly been companies operating restaurants or retail stores, have argued that government-mandated lockdowns forced them to close their doors or reduce hours, interrupting their business. 

“We pay so much insurance, we think it should be able to kick in,” Jean-Georges Vongerichten, owner of several New York City restaurants, has said.   

But courts that have remaining cases on the docket – some are pending in Illinois, New Hampshire and Wisconsin – are unlikely to rule differently than the high courts in Iowa and Massachusetts already have. 

“The business interruption is the tail, not the dog,” said Kollross. “The dog is the loss or damage to the physical property. When COVID came in, no one was asking for new chairs or saying my facility needs physical restoration or replacement or repair, because nothing has happened to it.”

The one situation in which something like a virus could potentially be covered under a policy is if the virus or other pathogen, like E Coli or Salmonella, contaminates food, and the food, considered personal property of the business, must be disposed of.

“You can have a virus or bacteria that render food inedible and must be destroyed or thrown out, so you might have direct physical loss or damage in that case,” she said. 

But many business interruption policies include virus exceptions, so even in these cases, coverage would be denied if the exemption is included.

Personal injury, wrongful death wave

For companies whose business model permitted them to keep employees working on-site through all or part of COVID lockdowns, especially if they’re large and employ a lot of staff on-site, the threat of wrongful death or personal injury cases is something they should be aware of, Kollross said. 

“I know there were some issues in the general press about employees complaining they were made to come in for work, like at McDonald’s,” she said. “Employees complained, ‘They’re not separating us enough.’”

For a company like McDonald’s, because of its size, the threat of a class-action lawsuit is something that would have to be taken seriously. 

A class-action wouldn’t apply to a smaller company but it could be hit with a one-off case.

“Even if it's a claim that is defensible, there are going to be expense considerations,” she said. “The defense response will have to be more considerable if you have cases involving death. If somebody just caught COVID and they were off work for three days and they have no lasting injury, that likely isn’t such a big exposure. But if you’re in a case with hospitalization and death, or even just lengthy hospitalization, that’s going to present a more serious concern.”

Statutes of limitations differ by state, but as these periods start to near in each state, general counsel can expect to see lawsuits arise. 

“Attorneys tend to work backward from deadlines, so you most often see these cases filed as deadlines approach for statute of limitation, so it’s something to have on the radar,” Kollross said.