COVID-19 Related Litigation (Contract, Insurance, Debtor Credit Claims)

As businesses across the country begin to reopen, they face a heightened degree of risk for claims of negligence, personal injury, or wrongful death due to the COVID-19 pandemic. Exposure to COVID-19 has presented a number of new legal challenges for every type of business, mainly premised on allegations that the plaintiff was exposed to the virus due to the defendant’s action or inaction.

The Dilendorf Law Firm has helped many corporate clients defend against COVID-19-related claims, while advising them on the best practices for protecting employees and customers from infection.

Adherence to federal, state, and local guidelines, as well as industry best practices are the best ways to prevent COVID-related legal risks. Companies must also take proactive steps to prevent the spread of the virus, such as educating employees, informing them of confirmed cases of COVID-19 among the workforce, and developing a clear set of COVID-related policies and procedures,

Insurance-related claims

Insurance has played a major role in COVID-19 related litigation, and many business owners have questions about their legal obligations.

Some of the insurance-based considerations where we have advised business clients include:

• Examining liability coverage available under insurance policies, including commercial general liability, workers’ compensation/employer liability, professional liability (E&O), and directors and officer’s liability (D&O) insurance policies.
• Examining whether legislative efforts at the federal or state level will apply and if they would provide protection for COVID-19 exposure
• Determining whether a state workers’ compensation “exclusive remedy” statute applies in a case brought by an employee or an employee’s estate

Contract related claims

The COVID-19 pandemic has resulted in a marked increase in litigation between parties to commercial contracts, the main dispute being whether the pandemic is a valid excuse for lack of performance, or whether it allows for the termination of a contract.

Courts will generally take a narrower view of a qualifying event within force majeure clauses. Some of the applicable protections within a contract might include:

• Common law defenses of impossibility
• Impracticality
• Frustration of purpose

However, unless this type of event, specifically “pandemics”, is enumerated within the provision and is the actual cause of nonperformance, it may not be valid.

In addition, buyers who attempt to terminate agreements might allege that the target company has suffered a “material adverse effect” (MAE) between the signing and the closing of the sale. However, this may be difficult to rely on as a basis for termination unless the contract includes an MAE clause.

Debtor and Creditor claims

Due to COVID-19, debtors have been granted some leniency, but creditors must still protect their rights. Careful consideration and legal review should be given before taking any short-term actions to waive agreed-upon payment or performance obligations, as these could have long-term implications.

It is vitally important for businesses to consult with an attorney to be sure that contractual rights are protected.

The business litigation practice at the Dilendorf Law Firm works closely with corporate clients to modify contracts with debtors. Our goal is to help clients come to a satisfactory agreement that changes the terms or conditions of an existing agreement.