Insurance coverage for employment claims arising from COVID-19
Some employers may face employment practices claims relating to how they have handled aspects of the employment relationship.
Employment claims arising out of the outbreak of COVID-19 may be covered by workers’ compensation insurance, employers’ liability coverage (typically contained in the workers’ compensation insurance policy), or employment practices liability insurance. It all depends on the allegations.
Some employees will seek the protection of the workers’ compensation system, while others will attempt to evade the bar on tort claims typically contained in workers’ compensation statutes. Of course, there is workers’ compensation insurance for workers’ compensation claims. For those employees who seek to avoid the workers’ compensation statutory bar, and sue their employers directly for bodily injury, the employers’ liability section of the workers’ compensation insurance policy applies.
Finally, some employers may face employment practices claims relating to how they have handled layoffs, office closures, requests for disability accommodations, sick pay and vacation time, or other aspects of the employment relationship. Employment practices liability insurance will often cover such lawsuits.
Workers’ compensation coverage
Workers’ compensation laws vary from state to state, providing coverage for injuries or diseases that arise out of and in the course of a person’s employment. Some states have expanded workers’ compensation eligibility for COVID-19 claims, especially for first responders and health care workers.
The Occupational Safety and Health Administration (OSHA) issued Enforcement Guidance for Recording Cases of Coronavirus Disease 2019 (COVID-19), on April 10, 2020, in which it reiterated that COVID-19 is a recordable “occupational disease” if the employee contracted the disease in the scope of employment and the disease resulted from the conditions of employment. An occupational disease will typically be considered work-related if an event or exposure in the work environment either caused or contributed to the resulting condition, and for OSHA’s purposes at least, work-relatedness is generally presumed for injuries and illnesses resulting from events or exposures occurring in the work environment.
Employees who work in the health care industry or in an environment that greatly increases the chances of exposure to the virus, based on the nature of the work, will have the strongest case for workers’ compensation benefits. Although the current situation is unprecedented, perhaps the most relevant cases are those considering whether diseases like hepatitis and tuberculosis are work-related.
In addition to health care workers and first responders, the outbreak is providing unique risks to other workers deemed “essential” to the ongoing functioning of society — such as meatpackers, grocery store workers, and liquor store clerks. Workers’ compensation courts will need to decide whether COVID-19 is an occupational disease in all sorts of contexts, and common law courts will need to decide whether the workers’ compensation bar on tort suits applies. There is not much guidance in the case law from other pandemics, so this is an area to watch.
Employers’ liability coverage, employment practices liability insurance
Written as “Part 2” of workers’ compensation insurance, employers’ liability coverage provides protection in situations where an employee has the right to bring a tort action, where the employee or injury is not subject to workers’ compensation as an exclusive remedy. For instance, an employee’s claim alleging unsafe working conditions concerning COVID-19 would likely be covered by an employers’ liability policy.
Employment practices liability insurance provides coverage for suits concerning employment practices, such as discrimination, harassment, retaliation, wrongful termination, and workplace torts. Some examples may be complaints by health care workers under the Americans with Disabilities Act for a hospital’s refusal to provide reasonable accommodations, retaliation based on employees’ complaints of unsafe working conditions, and complaints of discrimination regarding an employer’s implementation of special workplace policies, such as documenting workers’ temperatures.
Employment practices liability insurance policies are “claims-made” policies, so carriers may attempt to add exclusions at renewal before claims arising from the outbreak are asserted. Particularly vigilant policyholders may want to consider giving the carrier notice that the COVID-19 pandemic constitutes circumstances likely to result in claims. Regardless, it is important to provide carriers with prompt notice of any employee demands or claims, even before they rise to the level of a lawsuit.
There are various sources of insurance coverage when an employee brings a claim related to COVID-19. Each type of insurance performs a different and important function in mitigating the risks faced by employers as a result of the pandemic.
Timothy P. Law and Esther Y. Kim practice insurance recovery litigation in the Philadelphia office of Reed Smith, LLP, representing corporations, universities, and non-profits in disputes with their insurance companies. The views expressed here are the authors’ own.
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