Two Years Into COVID, Trends Are Emerging on Litigation

By Kathleen Lynn

Two Years Into COVID, Trends Are Emerging on Litigation

1.20.2022

By Kathleen Lynn

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Vaccine mandates, insurance claims, unpaid rents, workplace contagion – COVID-19’s fallout has been felt throughout the business world. And after nearly two years of legal battles, trends are emerging in how COVID-related commercial cases are being argued and decided, a panel of lawyers said Wednesday during the New York State Bar Association’s Annual Meeting.

The panelists discussed COVID litigation in New York State that involved real estate, insurance, employment, and securities.

When disputes have arisen over COVID-related insurance claims, courts have tended to side with insurance companies, said Benjamin I. Bassoff of Foley & Lardner in New York. He said judges have generally decided that first-party property insurance policies covering physical losses do not cover loss of use of properties (such as restaurants and hotels) to comply with state executive orders and restrictions in response to COVID-19.

And in specialty insurance, such as travel insurance policies, plaintiffs have tried to argue that a government closure mandate or “stay-at-home” order amounts to a “quarantine” (which is sometimes included in such policies as a covered event). But, Bassoff said, courts have generally rejected that argument on the ground that “an order aimed generally at the public for the purpose of limiting the spread of disease is not you, a person, being quarantined within the [meaning] of the policy.”

COVID has led to securities litigation involving companies that had outbreaks in their facilities, such as Tyson Foods, and companies whose profits were affected, said James J. Beha II of Morrison & Foerster in New York, who usually represents defendants in securities litigation.

For example, a lawsuit against an operator of private prisons alleged that the company didn’t properly disclose the costs of complying with COVID safety measures, or the risk of losing government contracts if it didn’t. A motion to dismiss that case was denied.

On the other hand, a case against  Norwegian Cruise Lines, alleging that it lied in January 2020 — two months before the pandemic was declared a public health emergency in the United States in March 2020 — about the impact of COVID, was dismissed.

“The big question in these cases is whether the company is doing its best to make predictions, or whether they are misrepresenting present, known risks to their business,” Beha said. He quoted Yogi Berra: “It’s tough to make predictions, particularly about the future.”

Commercial real estate was hit hard when stay-at-home orders kept workers out of offices and shoppers out of stores. Many tenants stopped paying their rent because of the pandemic. However, New York courts held that notwithstanding the damage that the tenants may have suffered, their leases should be enforced as written, according to Luise A. Barrack of Rosenberg & Estis in New York.

Now that COVID has been a reality for close to two years, tenants and landlords are both seeking to add clauses to new leases protecting their interests if the pandemic disrupts business again. “It’s very much on people’s minds,” Barrack said. “This was something that was unanticipated which now we can anticipate.”

Judge Margaret A. Chan of the Commercial Division of New York State Supreme Court, New York County, discussed a case in which a family had booked the Edison Ballroom in New York City for their daughter’s April 2020 bat mitzvah. When the state shut down large gatherings, the venue returned only part of the deposit. Judge Chan awarded the full deposit amount to the family, because the contract had provided for a refund if the event couldn’t take place because of “acts of a governmental authority.”

In employment law, “the hot topic of the moment” is the Supreme Court’s decision to stay a Biden administration OSHA mandate that large employers require vaccines, according to Riane F. Lafferty of Bond Schoeneck & King in Buffalo.

But other vaccine mandates have largely been upheld, including state and federal mandates affecting health care workers, she said.

And employers in New York can require vaccines on their own, Lafferty said. She is seeing an increase in employees seeking religious exemptions from vaccines. As for employees who are infected with COVID at work, they are generally limited to workers’ compensation benefits, Lafferty said.

With more employees working from home, she said she is working with clients to set up policies to monitor performance remotely.

The panel was moderated by Stephen P. Younger of Foley Hoag in New York.

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