March 8, 2021

Unprecedented: COVID-19 Litigation Insights,
Volume 2, Issue 5
Welcome to the fifth issue of the 2021 edition of Unprecedented. After our last issue published, the United States marked a grim milestone: 500,000 people dead from COVID-19, with about one in three Americans knowing someone within that group. At the same time, the pace of vaccinations is reaching nearly three million people per day, and the CDC is now advising that fully vaccinated individuals can gather indoors in small groups. Some states, notably Texas, have taken an even more aggressive approach, announcing that they will be fully reopening. In this way, a sense of normality is beginning to return even as we wrestle with COVID-19’s staggering impact. That impact is still to be determined in the litigation context, with cases continuing to be filed on issues ranging from whether employers can mandate vaccinations to whether insurance carriers are obligated to cover losses from the COVID-19 pandemic. Join us to read further on these and other issues.

Joseph V. Schaeffer, Editor of Unprecedented

"Isaac Legareta, an officer at the Doña Ana County Detention Center, filed a lawsuit against County Manager Fernando Macias and officials at the detention center for threatening to fire him over choosing not to be vaccinated."

Why this is important: A lawsuit filed in federal court in New Mexico challenges whether a county can require employees (here, first responders) to be vaccinated against COVID-19. Although guidance issued by the Equal Employment Opportunity Commission implies that employers can mandate that employees receive the COVID-19 vaccine under certain circumstances, this lawsuit raises questions about whether the fact that the vaccine is only currently approved for use pursuant to the Food and Drug Administration’s emergency use authorization process means employers cannot yet require that employees get vaccinated. Because questions remain about whether employers can require employees to receive a COVID-19 vaccine at this time, employers may be better off using permissible encouragement mechanisms in accordance with EEOC guidance, as opposed to a vaccination requirement. --- Sarah E. Kowalkowski
"Five small landlords sue AG Leitia James over hardship declaration requirement."

Why this is important: Eviction moratoria have been a flashpoint in the discussion over how governments should respond to the COVID-19 pandemic. On the one side are tenant advocates, who argue that moratoria are necessary to prevent an eviction crisis as COVID-19 has precipitated widespread job losses and income reductions. On the other side are landlords, who argue that moratoria unfairly force them to subsidize social policy and enable some tenants to take advantage. So far both sides have been able to claim victory in the courts, but a new lawsuit by a group of small New York landlords bears watching. Part of the interest comes from the undeniable impact that moratoria has had on the plaintiff landlords. One of the plaintiffs, for instance, alleges that she is owed more than $70,000 in back rent for just one property. But what really makes this lawsuit interesting is the lawyers leading it. The plaintiffs have retained Randy Mastro of Gibson, Dunn & Crutcher, who famously represented Chevron in its successful efforts to halt enforcement of a fraudulently procured multi-billion dollar judgment from Ecuador. That indicates that the plaintiffs have significant financial backing behind them and will spare no resources to win, making this a case to watch. --- Joseph V. Schaeffer
"Class-action lawsuits were filed in Nevada against 10 major auto insurance companies, contending that the companies charged excessive insurance premiums during the pandemic by failing to account for a drop in driving and crashes."

Why this is important: During the last year, several insurance companies have refunded or lowered premiums due to the pandemic and drivers driving less. This class action lawsuit alleges that these refunds and reductions in premiums had minimal effect on the overall premium charged. Therefore, the premiums charged are excessive according to the plaintiffs. The insurance companies named in the lawsuit are State Farm, USAA, Geico, Acuity, Liberty Mutual, Farmers, Progressive, Travelers, Nationwide, and Allstate. Some of the insurers have commented on the allegations. USAA indicated that it has returned dividends to its policyholders totaling $1.07 billion. Nationwide is taking a wait and see attitude in that it is monitoring the future costs of accidents before making a decision regarding the amount of premiums. The plaintiffs' attorney is contending that the premiums should be cut by 50 to 60 percent. This is important because it will probably mean a refund to some policyholders, but should not have an overreaching or long-term impact on the insurance industry because the rates are established by the Insurance Commissioners of each state. --- Laura E. Hayes
"But here, after analyzing the relevant precedents, the court concludes that the federal government’s Article I power to regulate interstate commerce and enact laws necessary and proper to that end does not include the power to impose the challenged eviction moratorium."

Why this is important: On February 25, 2021, the United States District Court in the Eastern District of Texas held that the nationwide moratorium on evictions ordered by the Centers for Disease Control and Prevention, a component of the U.S. Department of Health and Human Services, exceeds the government's constitutional authority and is therefore unconstitutional. In general, the Temporary Halt in Residential Evictions makes it a crime for a landlord or property owner to evict a "covered person" from a residence. The District Court found that the scope of the eviction moratorium includes remedies protecting property rights, an area of traditional state concern, and held that the order falls outside the federal government's Article I power to regulate interstate commerce and enact laws necessary and proper. This "win" for property owners may not, however, have a large effect on landlord or property owner's rights. More specifically, the CDC's nationwide moratorium on evictions only applied in any state or locale that does not offer the same or greater protections than does the order. Landlords and property owners should first be informed with state and local eviction laws before proceeding with residential evictions. --- Victoria L. Creta
"A Baltimore strip club has filed a lawsuit against the mayor and city council, saying a ban enacted on adult entertainment during the COVID-19 pandemic infringes on the club’s right to free speech."

Why this is important: This marks the second edition in a row that Unprecedented has covered a lawsuit brought by an adult entertainment establishment over government-imposed restrictions to curb the COVID-19 pandemic. But, it should not come as a surprise that adult entertainment establishments would have both reason and desire to sue. Cities have long attempted to use regulation to restrict their operation, and adult entertainment establishments have frequently fought back by challenging those regulations as infringements on their First Amendment rights. So it is here. Baltimore’s Penthouse Club has sued the city, alleging that its shutdown of adult entertainment establishments violates its First Amendment rights. Though progress on vaccination is driving reopening plans, which in turn might moot this and similar cases, it will be worth watching if adult entertainment establishments can make new First Amendment law in this area, too. --- Joseph V. Schaeffer
"More than 300 employees were affected at the Villa’s airport operations, according to Scotto, from layoffs to reduced hours."

Why this is important: Several businesses have sued their insurance companies attempting to recoup their losses due to the pandemic. Villa Enterprises, which operates concessions at Orlando International Airport, is the latest business to file such a suit against its insurer, Charter Oak Fire Insurance Company, a member company of Travelers Insurance. As with other businesses, Villa is claiming that its losses stem from physical damage and thus, should be covered under the property damage coverage in its "all risk" policy. However, the majority of jurisdictions dealing with this issue have found that COVID-19 does not constitute tangible alteration of physical property so the business interruption coverage is not triggered. While there have been some rulings finding coverage, such rulings have been rare. It remains to be seen whether the federal court in Orlando will follow the majority of the courts in the United States or find that Villa's losses are covered under the policy. This is important because it could provide a pathway for others on either side to further their positions on the issue of business interruption coverage. --- Laura E. Hayes
"The COVID-19 Liability Protection Act, LB139, would provide general safe harbor and premises liability protections on potential COVID-19 lawsuits for a range of individuals and organizations open to the public, provided that they follow public health guidance."

Why this is important: Senator Tom Briese of Nebraska introduced the COVID-19 Liability Protection Act, which, if passed, would help protect businesses from lawsuits as a result of the COVID-19 pandemic. The Act provides a general safe harbor and premises liability protections for COVID-19 lawsuits against organizations open to the public as long as they followed public health guidance. The Act would: (1) bar lawsuits unless someone was hospitalized or died from COVID-19; (2) prohibit lawsuits against entities that were following federal and state laws or public health orders and guidance; (3) prohibit lawsuits unless an entity had acted with gross negligence or willful misconduct rather than ordinary negligence; and (4) raise the standard of proof, making it harder for people bringing lawsuits to prove that they had been hurt because of gross negligence or willful misconduct. Many states have passed or are trying to pass legislation such as this that protects businesses from COVID-19 lawsuits. Businesses have already been hit hard by the COVID-19 pandemic and laws such as this will provide some protection as businesses try to recover from the losses. --- Kayla I. Russell
"The student claims the online learning options offered by the University of Texas are inferior to the 'in-person, hands-on' education she and others paid for."

Why this is important: The lawsuits against colleges and universities for tuition reimbursements keep on coming. This time the target is the University of Texas at Austin, but the factual allegations are similar to those from the lawsuits filed during the first stage of the pandemic: the student plaintiff alleges that she, and others similarly situated, paid tuition based on the promise of in-person instruction, but instead received an inferior online education as the University of Texas adapted to the pandemic. These cases have had mixed results so far, but they raise fascinating questions about how far students can rely on marketing materials about on-campus experiences and what is really being purchased with tuition payments. This one is worth watching to see how those answers develop if only because the size of the University of Texas at Austin increases the significance of the case’s outcome. --- Joseph V. Schaeffer
"While there was no reason given, BI noted that the verdict suggested that the court found that neither the presence of the virus nor the government shutdown orders constituted physical loss for purposes of coverage."

Why this is important: As insurance companies battle the onslaught of claims and lawsuits seeking business interruption coverage for losses due to the pandemic, they are emboldened by Lloyd's win in the first lawsuit of this kind to be tried. A New Orleans-based restaurant sued Lloyd's alleging that its business losses were covered under its insurance policy because it sustained physical damage due to COVID-19. The suit was in the minority in alleging that the coronavirus was present on premises, and the policy at issue lacked a virus exclusion. The judge ruled against the insured and found that coverage did not exist. While no reason was given, the verdict suggests that neither the presence of the virus nor the government shutdown orders constituted physical loss for purposes of coverage.

The Bloomberg Intelligence ("BI") report stated the number of court rulings dismissing lawsuits for business interruption coverage lawsuits far exceeds the number of cases finding coverage. According to BI, the percentage of cases being dismissed is about 80 percent. This trend is likely to continue. However, BI warned that the above defense is not completely airtight, since there are a few decisions that have held that a shutdown order constitutes as physical loss, and thus must be covered by insurers.
“The few cases that survived mostly did so because the coronavirus allegedly was on the premises and there was no virus exclusion. An Ohio federal court and a North Carolina state court are the first to require coverage, holding that shutdown orders constitute a physical loss. Reversals on appeal are possible,” the report noted.

This is important because it is clear that insurance companies are primarily winning this coverage fight and are likely to continue to win this coverage issue. Therefore, it could stem the number of lawsuits being filed against insurers and reduce litigation costs for insurance companies. Whether coverage exists is dependent upon the language of the policy and the jurisdiction. Currently, Ohio, North Carolina, Washington, and potentially New Jersey are the outlying states finding coverage in these lawsuits. --- Laura E. Hayes
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