Business-Liability Protections Face Steep Political and Legal Obstacles

Chairman Lindsey Graham, R-S.C., arrives for the Senate Judiciary Committee hearing on “Examining Liability During the COVID-19 Pandemic” in Washington on May 12. (Caroline Brehman/CQ Roll Call/Pool via AP)

MANHATTAN (CN) — When the Senate debates the next stimulus package, it is almost certainly going to include a key provision for Republicans: liability protections for businesses affected by Covid-19.

However, the main sticking point requested by businesses — crafting legal safe harbors that protect companies from torts except in the case of gross negligence — may not be legally possible.

Senate Majority Leader Mitch McConnell told Fox News in a Thursday interview that “that will have to be part of any [stimulus] package,” and earlier legislation proposed by Representative Michael Turner, R-Ohio, would shield employers from “any injury that resulted from an employee contracting Covid-19,” though it also would pay unemployment benefits to any employee who felt unsafe at work.

The idea of Covid-19 liability shields originates from various trade groups and the U.S. Chamber of Commerce, which proposed safe harbors except in cases involving “gross negligence or willful misconduct.” Earlier this week, 21 state attorneys general also called for similar protections.

“It doesn’t matter if you’re a Fortune 500 company or a coffee shop in Georgia,” Harold Kim, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an interview. “The reality is, we’ve never, I’ve never seen a pandemic like this.”

The U.S. Chamber has alternately called for Covid-19 safe harbors for businesses that don’t commit “gross negligence,” “recklessness,” or “willful misconduct.”

However, advocacy groups say corporate immunity is a decades-long attempt to neuter tort law, while legal experts say carve-outs for “gross negligence” are meaningless.

“I’ve thought from the beginning of these proposals that the insertion of gross negligence shows either a deep misunderstanding of the current state of tort law, or a cynical substitution of a non-existing category to benefit businesses,” said Heidi Li Feldman, a tort law professor at Georgetown University. “Or both.”

During a hearing before the Senate Judiciary Committee on Tuesday, one of Feldman’s colleagues at Georgetown, law professor David Vladek, testified that federal legislation that displaces state liability statutes “is not only unprecedented, it is likely also unconstitutional.”

Vladek added during his testimony that juries and judges decide whether a tort is negligent or grossly negligent at the end of a case, not at the outset.

“Any tort claim can constitute gross negligence depending on wrongdoer’s state of mind,” he testified.

Many courts have eliminated the category of gross negligence as a distinct category, Feldman said, adding that business groups hope Congress will draft a “vague standard” that will cover a wide swath of business practices.

“They know that by using the term gross negligence will create a climate of uncertainty, and they like that uncertainty,” Feldman said. “This is just a stepping stone for immunization for all tort liability all the time.”

Business trade groups say this isn’t so, and also argue universal get-back-to-work guidelines won’t work for disparate industries.

“We do not think one-size-fits-all guidelines make sense for small business,” Karen Harned, executive director for the National Federation of Independent Businesses, wrote in an email. “Everyone needs a plan for keeping the workplace, employees, and customers safe. But plans will vary dramatically depending on the type and size of business. A small auto-repair shop is likely going to have a very different Covid-19 prevention plan than a restaurant that seats 100.”

Kim said that the idea behind such safe harbors is to kill baseless litigation in the crib.

“The name of the game here is to get past the motion to dismiss,” Kim said, noting many tort lawyers aim to merely scare companies into settling lawsuits quickly. “The amount of discovery and litigation costs, you have to pay for attorneys and the amount of time that’s taken just to defend the case for the business is where damage is done.”

“There are a lot of flimsy theories of liability that come out there,” Kim said.

Business lobbyists are leaning on the “gross negligence” carve-outs to push the liability shields at the state level, too. In New Hampshire, the Business & Industry Association has proposed Covid-19 safe harbors for businesses except in the “clear and convincing” cases of gross negligence, willful misconduct, intentional criminal misconduct or the intentional infliction of harm.

“The standard is so amorphous and so difficult to comply with that we risk just an onslaught of claims,” said attorney James Harris from Sheehan Phinney, who is helping draft a bill for when the Legislature reconvenes in June.

However, Harris agreed that gross negligence is a muddy legal concept.

“Our state Supreme Court says it sees no difference between negligence and gross negligence,” said Harris. “The term is used in criminal statutes even without a definition.”

Another problem is that companies have few federal standards to rely on to determine if they are acting responsibly or with gross negligence. The Occupational Safety and Health Administration has issued a handful of suggestions for specific industries, but not widespread guidance.

And the Trump administration scrapped guidelines for reopening by the Centers for Disease Control and Prevention only to reissue a watered-down version later.

“Unfortunately, the administration has failed to issue any such guidelines,” said American Association for Justice CEO Linda Lipsen in a statement. “Corporate immunity is an obstacle to economic recovery because some businesses will act irresponsibly if they know they can’t be held accountable.”

Government guidelines may take too long in any case, trade groups say, and have changed too frequently.

“For those protections to somehow wait for the regulatory process to move forward, which could take months or years, would not necessarily align with the immediate need to get these protections so the economy can get up and running,” Kim said.

Kim noted precedent for such safe harbors, citing bipartisan legislation protecting businesses before Y2K, as well as the Support Anti-Terrorism by Fostering Effective Technologies Act. Dubbed the SAFETY Act, this little-known law shields companies from lawsuits resulting from terrorism if they received security certification from the Department of Homeland Security.

Such a comparison is a bridge too far for some.

“An ongoing pandemic for which the federal government has still not provided clear and enforceable guidelines, and an act of terror, have very little in common,” AAJ spokesman Peter Knudson wrote in an email. “Immunity for Covid-19 injuries only creates a race to the bottom.”

Feldman agrees, noting the SAFETY Act covered only certain businesses and in some cases just capped insurance liability.

“The SAFETY Act is far more narrowly drawn than anything proposed by Senator McConnell or the business community regarding immunity from Covid-19-related liability,” she said. “The SAFETY Act does not give anybody blanket immunity from liability for negligence.”

Both sides of the issue have come out swinging on Covid-19 liability reform. Last week, both the Chamber and AAJ put out dueling polls within days of each other, the former showing Americans overwhelmingly supported restricting business liability while the latter showed most Americans saying such an idea was a bad one.

Trade groups are worried that lawyers are prepping an avalanche of torts against businesses. An NFIB survey found 70% of small businesses had concerns about Covid-19 lawsuits, while only 6% were unconcerned.

Concerns about a flood of litigious patients could be misplaced. So far, most Covid-19-related lawsuits have been between businesses or against the cruise industry. One notable exception, a federal negligence complaint by workers against Missouri-based meatpacking plant Smithfield Foods, was dismissed earlier this month.

Some companies reportedly have considered liability waivers for both employees and consumers. Las Vegas restaurant Nacho Daddy briefly had employees sign a two-page liability waiver, and the American Hotel & Lodging Association has a template waiver for its hotel guests posted online.

However, waivers are unlikely to be standard for most businesses any time soon.

“Tort law generally frowns on waivers,” Feldman said, noting that most waivers must be accompanied by supporting videos or documentation. “I can’t imagine any restaurant is vividly showing consumers pictures of others getting Covid-19 and then asking them to sign a waiver,” she said.

On that point, Harris agrees. “Frankly, if I went into a restaurant and they handed me a menu in one hand and a waiver in the other, I don’t think I would eat at that restaurant,” he said.

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