COVID-19 recovery claims: Can insurance avoid the predictable?
The insurance industry can expect a 'tail' of COVID-19 claims as businesses reopen and the economy springs back to life.
Last April, I wrote for PropertyCasualty360.com about the tsunami of claims expected to occur because of COVID-19. In some segments of the economy, the prediction has, regrettably, proved correct; in others, it has been forestalled and perhaps avoided through government largess of over $3 trillion so far.
As businesses reopen and the economy comes off life support, we may anticipate a “tail” of COVID claims, plus a new type of claim that arises from the unequal speed of the recovery. Whether these recovery claims are covered under liability insurance is beyond the scope of this article. As in 2020, we can dodge some of these bullets if we’re ready for them.
Employment practices claims
On June 29, 2020, following Memorial Day’s big surge in coronavirus infections, David Rocklin of the brokerage firm Woodruff Sawyer predicted four main COVID impacts on employment practices liability (EPL) claims: alleged discrimination, retaliation, wage and hour infractions, and violation of then-new Families First Coronavirus Relief Act (FCRA), which was recently extended to March 31, 2021, though only as of the cutoff date for employees who have not exhausted their leave. As with the maze of federal, state and local wage and hour laws, the FCRA’s complexity may give rise to EPL claims, including class actions.
These four claim types do not include unemployment benefits for the 10.1 million Americans who were officially unemployed in mid-February 2021, according to the U.S. Department of Labor, though 18.3 million were actually receiving unemployment payments at about that time, down from over 30 million at the pandemic’s peak.
EPL claims tend to track unemployment statistics. As a result of the Great Recession’s mass layoffs, beginning in 2007 and 2008, U.S. unemployment rose nearly a third while EPL claims jumped 13%. Laid-off workers still need to make ends meet and may turn to thoughts of discrimination to answer the question, “Why me?”
Disputes about returning to the workplace, combined with patchy access to the approved vaccines, pose new opportunities for EPL litigation. San Francisco County, where my empty office is, recently came down from the highest tier of COVID restrictions, purple, to the next-lowest, red. By the time this article is published, the county expects to be in the orange tier, with non-essential businesses allowed to open under certain restrictions.
The level of restrictions in a given county depends on its increasing or decreasing rates of new coronavirus cases, which means that franchise restaurants in one county may be open for inside seating at 50% occupancy, while their counterparts across the county line are still in take-out-only mode. This makes for uneven personnel policies and difficult decisions for managers who might want to recruit laid-off employees from other locations.
If a business insists that its workers all return to the office, can an employee whose religious beliefs prohibit vaccinations be penalized for not coming in? If the employee does come in, potentially exposing other unvaccinated workers to the virus, has the employer provided a safe business premise? If the employee wants to return and is not allowed, has he or she been discriminated against on the basis of religious beliefs?
Executive liability
Corporate directors and officers may face liability in D&O lawsuits, often shareholder class action suits. Kevin LaCroix, a longtime cataloger and trend-detector in the D&O world, reported that as of March 15, 2021, 28 COVID-related D&O class actions had been filed. Some suits allege that the virus spread throughout the company due to lax safety standards; others contend that management over-promised the companies’ chances to reap large profits from coronavirus prevention or care; a third set of cases are based on companies’ losses due to disrupted operations or finances.
As we take cautious steps toward normalcy, corporate officers will be assessing how and when offices will resume operation or whether they will adopt the work-from-home protocol, so many of us have been following for more than a year as acceptable, perhaps even beneficial. If their decisions prove to make matters worse, they may be second-guessed by shareholders or other stakeholders.
Medical professional liability
Though reliable data aren’t yet available, several medical malpractice insurers and defense counsel have noted an uptick in med mal cases due to COVID-19. As statute of limitations deadlines draw nearer, one might expect the case count to rise. One concern voiced in news articles is that hospital personnel have been working under tremendous pressure, which can lead to errors. Another is that the diversion of medical resources and personnel to treat COVID patients may leave patients with other illnesses undiagnosed or untreated.
Triage is the medical term for categorizing patients into three groups: those who can be helped if treated immediately, those whose treatment can safely be delayed, and those who are beyond treatment. Hospitals nationwide have been forced to make grim triage decisions. Public healthcare authorities have likewise had to allocate limited resources where they are most needed, leaving some people untreated or receiving delayed treatment.
These decisions — whether and when children should receive the vaccine and how to reach homeless populations, for example — can be matters of life or death. In a pandemic that has already killed over 500,000 Americans, even a small percent of wrongful death cases would be a substantial increase in claims. The novel aspects of the new cases would be their volume, the legal protections some states have enacted against such claims, and the difficultly of defining the medical standard of care in a health system challenged nearly to its limit.
Other professional liability
Organizations of accountants, lawyers, insurance agents and brokers, and all the other licensed professions share one thing in common: they’re composed of people — fallible, fragile, frustrated people, just like you and me. Our difficulties working during the pandemic are far less dramatic than an ER nurse’s, but we have all faced twelve months of unplanned-for isolation, cabin fever, Zoom overload, and our own cooking. It hasn’t been pretty.
We’ve probably all had that moment this past year when we’ve wanted to play Peter Finch’s character in the movie “Network.” As he put it, “I want you to get up right now. I want you to go to the window, open it and stick your head out and yell. I want you to yell, ‘I’m mad as hell, and I’m not going to take this anymore.’”
There, I feel better.
We’ve been under stress. Stress distracts us from doing our best work. We may make mistakes. When those E&O suits get to trial in, say, 2025, will juries cut us some slack because we were stressed and working during the pandemic?
Products and promises
It wasn’t long after the COVID-19 shutdown that the internet became saturated with ads by distributors of supposed COVID preventive measures and cures. As early as March 9, 2020, the U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) issued warning letters to seven companies for “selling fraudulent COVID-19 products. These products are unapproved drugs that pose significant risks to patient health and violate federal law.” The products cited in the warning letters were teas, essential oils, tinctures and colloidal silver.
In April 2020, an unapproved at-home test kit for the virus resulted in a settlement with the Los Angeles County District Attorney.
Flash forward one year to March 1, 2021, when the FDA again warned that “some people and companies are trying to profit from this pandemic by selling unproven and illegally marketed products that make false claims, such as being effective against the coronavirus.” On March 5th, the agencies issued a warning to a company marketing an iodine-based hand wipe product “intended to mitigate, prevent, treat, diagnose, or cure COVID-19,” but which had not been approved for such use.
The liability risks attendant to unapproved treatments, in addition to criminal prosecution, are genuinely harmful to people: the buyers who mistakenly believe that they cannot contract the virus or pass it on to others, their loved ones, and the complete strangers to whom they spread the infection.
What to do?
With these and other foreseeable side effects of our gradual recovery from COVID-19, we should again take the initiative and make plans to minimize their impact on our livelihoods and the livelihoods of customers.
- We can more quickly return to the “old normal” by following our tried-and-true best practices. First, for routine matters, make checklists, as many surgeons do, outlining the steps that lead to a successful result. Lists keep people focused on what they’re doing, even when they want to open the window and start yelling.
- Revisit your promises. If you’ve created unrealistic expectations, correct them before they go awry.
- Involve your stakeholders in the tough decisions before deciding, and be transparent in your communications to them. Then make the decision.
- Recognize that reopening an office is more difficult than simply turning the lights back on. After a year in a Twilight Zone universe, your employees need to readjust. Take account of special needs.
- Be kind.
To learn more about COVID-19 claims and other claims-related topics, join us at the America’s Claims Executive Virtual Leadership Forum & Expo on May 4-6, 2021.
Louie Castoria (lcastoria@kdvlaw.com) is a partner in the San Francisco office of Kaufman Dolowich & Voluck LLP, a national law firm, a mediator at CastoriaDisputeResolution.com, and an Adjunct Professor of Law at Golden Gate University. This article does not provide legal advice. The views expressed are the author’s and not necessarily the firm’s or its clients’.
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