Liability Issues for Businesses in the Time of COVID-19
Wednesdays with Woodward webinar
August 5, 2020
Yafit Cohn, VP, Group General Counsel and Chief Sustainability Officer at Travelers, and Harold Kim, President of the U.S. Chamber Institute for Legal Reform, joined the Wednesdays with Woodward series to explore liability issues that businesses face due to COVID-19.
Cohn discussed COVID-19 liability suits within the broader tort environment of the U.S. litigation system. She described tort litigation as essential to holding parties responsible for “negligent, reckless, intentionally harmful behavior,” but advised that the system is out of balance, inefficient and costly for everyone. The U.S. Chamber Institute for Legal Reform estimates that as of 2016, the U.S. tort system costs $429 billion, or an average of $3,300 per household, per year. Cohn outlined five trends contributing to the rising costs of the U.S. tort system:
- TREND 1: Increasing attorney advertising investment and representation costs. Since 2008, the amount of money that law firms have spent on advertising has more than doubled (over $1.2 billion in 2019); accordingly, the number of disputes handled by lawyers and the number of tort suits filed have increased. Notably, Cohn shared that in certain types of cases, attorney involvement generally decreases the amount of money plaintiffs take home and prolongs the litigation process.
- TREND 2: Forum shopping. Manipulating weak or nonexistent rules governing where cases may be filed, plaintiffs’ attorneys may shop for favorable forums in order to file their cases in courts likely to deliver favorable outcomes.
- TREND 3: Third-party litigation funding. A third-party may invest in litigation in exchange for an expected return, typically a stake in any settlement or award. U.S. law firms quadrupled their use of litigation funding between 2013 and 2016. The investor can see returns as high as 70% to 90%, providing incentive to continue this practice.
- TREND 4: Plaintiffs’ recovery of medical damages they did not incur. Plaintiffs’ recovery of “phantom damages” — the disparity between a plaintiff’s medical bills and the total amount paid in full and final settlement of those bills — drives up the cost of our system.
- TREND 5: Jury attitudes and outsize verdicts. Evolving attitudes have jeopardized the impartiality of the U.S. court system and are reflected in the increasing number of “nuclear verdicts”: awards that are higher than would be expected given the evidence and injuries in a case.
Harold Kim then outlined proposed federal legislation to help address liability issues for businesses. He explained that 32 states have enacted legislation, signed proclamations or issued executive orders to address liability issues; however, Kim believes a federal solution is necessary. He explained that a preemption provision within the federal bill would allow it to act as a floor for liability protections, but that state protections would prevail if a state were to enact stronger protections. Kim called for a rational policy solution and noted that any legislation to address liability issues must be:
- TIMELY: In order to encourage business owners as they seek to reopen, legislation should be in place before businesses see a flood of litigation against them. Kim noted that this legislation is likely to be included as part of a broader economic stimulus plan that would incorporate other items, including the extension of unemployment insurance and funding to state and local jurisdictions.
- TEMPORARY: Kim emphasized that the legislation introduced is not intended to establish permanent, long-term liability reforms but rather to provide a temporary solution to address the specific concerns of the business community during this crisis. Senate Bill 4317 was introduced to cover a five-year window from December 2019 to December 2024.
- TARGETED: Any federal legislation should address the major areas of liability risks, enumerated below:
- Exposure claims
- Medical claims
- Product liability
- Employment laws
Generally, Cohn advised that businesses should consider the following four steps as they seek to create the safest environment for employees and customers:
- Identify and understand your risks
- Implement relevant controls
- Train and educate your employees
- Monitor plan’s effectiveness and adjust as needed
Visit the Travelers website Navigating Your Business Through COVID-19 for more resources.