Can Your Business File a Lawsuit Over Lost Profits and Disruptions Caused by Coronavirus (COVID-19)?
President Donald Trump declared a national emergency over the coronavirus outbreak, as the deadly virus continues causing extensive damage to the U.S. economy. The rapidly spreading virus (COVID-19), which was declared a pandemic by the World Health Organization, has disrupted supply chains, shut down businesses, sent financial markets sliding, and forced quarantines.
Global and American businesses are now facing a new danger: business litigation over coronavirus. For example, hospitals, nursing homes, hotels, restaurants, and other facilities and establishments may face lawsuits over their failure to take adequate steps to protect patients, visitors, and patrons.
Shareholders, meanwhile, may sue if businesses fail to take reasonable steps to address the virus outbreak and its potential impact on the business. As COVID-19 has disrupted supply chains, American companies are beginning to pay more attention to their insurance policies and contracts with business partners.
The most prominent recent coronavirus-related lawsuit is the one filed against Uber and Lyft that alleges that the rideshare companies are “endangering the public.”
A ‘Force Majeure’ Clause is Part of the Problem
The consequences of business disruptions caused by the coronavirus (COVID-19) are going to be “very significant in a way we haven’t seen before,” according to Fortune citing Joe Balice, a Los Angeles litigator who represents clients in the textile and apparel industry.
For example, as manufacturers were negatively affected by factory shutdowns, they may file a lawsuit over missed deadlines. Many businesses would also turn to their insurance carriers to make up their lost profits.
But that’s where things get complicated. Insurance companies across the U.S. will likely counter any claims by arguing that coronavirus-related disruptions are not covered by their policies. This might result in disputes over whether force majeure clauses apply to the COVID-19 outbreak.
Note: A force majeure clause frees a contract’s parties from some or all of their obligation in the event of an “act of God,” such as flooding, hurricane, or another.
Businesses are beginning to review their policies to see if they are insured against the coronavirus outbreak. However, most of them will find out that their policy does not apply to the COVID-19 disruptions, which may trigger litigation.
Typically, business disruption insurance claims are based on physical damage, such as flooding or fire, rather than closures ordered to control the spread of a virus.
Uber and Lyft Facing Lawsuits Over Coronavirus
Uber and Lyft found themselves in the middle of the commercial litigation crisis over the coronavirus outbreak. According to the Mercury News, the ride-hailing giants are facing lawsuits over allegations that the companies are endangering the public.
Lawsuits filed against Uber and Lyft allege that the rideshare companies are endangering the public in California by not following state law that requires employers to provide paid sick leave to their employees.
Rideshare drivers “risk exposing hundreds of riders who enter their car on a weekly basis to this deadly disease” as they continue working during the outbreak. A few days earlier, Uber insisted that its drivers would be eligible for sick pay if they were:
- Diagnosed with coronavirus (COVID-19);
- Placed into quarantine;
- Asked to self-isolate; or
- Their 14-day removal from the app was ordered by a public health agency.
Lyft also said that it would “provide funds” to its rideshare drivers who were diagnosed with the virus or quarantined by a public health organization.
Can your business file a lawsuit for lost profits caused by the coronavirus? Can another business sue your company over disruptions caused by COVID-19? Can you seek compensation from your insurance company via a business disruption insurance claim? Let our West Palm Beach commercial litigation attorneys answer your questions. Contact Pike & Lustig, LLP, to evaluate your options by calling at 561-291-8298.