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COVID-19 and Third Party Liability Claims in the Retail and Hospitality Industry

By Brian S. Kane, Esquire and Gerard Hornby

One of the biggest risks posed to the retail and hospitality industry by the COVID-19 crisis is the potential for third-party lawsuits from invitees (guests, customers, and patrons) arising out of a business’s handling of the virus.  Retail and hospitality businesses should prepare for claims brought by guests or patrons alleging that it was negligent in its response to COVID-19.  Potential claims include failure to properly clean or maintain its premises to prevent the presence of the virus at the business, that the business knew an employee was infected with COVID-19 and didn’t take requisite precautions such as properly notifying its patrons; or that a business wrongfully quarantined an employee or tenant; or that it disclosed private information, resulting in physical injury, emotional distress, loss of use of property or personal injury.

Healthcare facilities and some retail and hospitality businesses may face bodily injury claims alleging improper decontamination of the premises, improper disposal of medical or sanitation waste, and failure to isolate infected patients or employees, and subsequently allowing the virus to spread.  Again, causation will be difficult to pinpoint, particularly with more isolated infections.  But if a business fails to follow the relevant health guidelines, and if a localized cluster develops, the threat of liability is stronger.

These third-party claims will typically be brought by customers, clients, independent contractors, tenants, invitees, and other non-employees.  Proving causation and avoiding conjecture as to where and how they contracted COVID-19 may pose a challenge for plaintiffs.  If a plaintiff does not allege they contracted COVID-19 and instead merely alleges that they sustained emotional distress without physical manifestations from the possibility of catching the virus, the majority of jurisdictions hold that does not qualify as “bodily injury” under a typical Commercial General Liability policy.

These claims are already appearing.  For example, multiple lawsuits have been brought against Princess Cruises Lines from passengers on the Grand Princess cruise liner that was docked off the coast of California for several days because its passengers and crew had been exposed to COVID-19.  The passengers claim that Princess Cruise Lines acted with gross negligence by failing to take precautions to prevent an outbreak on one of its ships, after two passengers on the previous sailing disembarked with symptoms.

The Princess Cruises lawsuit indicates what the future holds for businesses.  Retail and hospitality businesses will see an increase in lawsuits relating to their response to the pandemic, and allegations that these businesses were somehow negligent in their response.  As state governors slowly lift restrictions, businesses may face potential liability if customers contract COVID-19 while on business premises.

No one can say with any certainty how liability issues arising from the current pandemic will be resolved.  Allegations of negligence in a company’s response to COVID-19 will produce some creative legal theories for both plaintiffs and defendants.  For example, defendants may claim the defense of ferae naturae, a common law defense limiting the liability for injuries caused by “animals of a wild nature or disposition.”  In 2016, the Texas Supreme Court applied the doctrine in  Union Pacific Railroad v. Nami to reverse a $725,000 verdict in favor of a railroad worker who contracted the West Nile virus at a worksite.  The court held that the doctrine applied to the mosquito carriers of the virus.  This doctrine exempts the owner or possessor of land from anticipating the presence of, or guarding an invitee against, harm from animals ferae naturae.  It has particular application to zoonotic diseases like the West Nile virus, where transmission is from animal to human.  If the doctrine is not extended to viruses where transmission is spread from person-to-person, as in the case of COVID-19, a type of “act of God” argument will likely be made in an effort to analogize and limit human liability for the natural consequences.

Plaintiffs in other infectious disease cases have been most successful where the defendant’s negligence directly contributed to the disease’s spread.  For example, strict liability claims arising out of foodborne diseases like E. coli or salmonella bacteria are typically more successful when it can be shown that the defendants had knowledge of the risk of spreading an infectious disease and failed to follow standard practices to prevent it.  Or, similarly, an outbreak of Legionnaires’ disease can be traced back to systematic maintenance failure at a single facility, and so, a typical premises liability analysis applies.  Alternatively, plaintiffs may rely upon failure-to-warn theories.  Plaintiffs may argue that a defendant has an obligation to warn outsiders of an infectious disease, such as coccidioidomycosis, when endemic to that area.

Regarding COVID-19, absent some form of legal immunity from liability extended to businesses similar to that extended to medical officials, these cases may proceed on a negligence theory against business defendants.  Social distancing, quarantining ill employees, sanitation, and enforcing the six-foot distancing between individuals are now part of a general standard of care across industries.  Failure to follow these public health practices could lead to liability.

COVID-19 presents unique problems in determining how and when companies were negligent, and how and when plaintiffs became infected.  If a company implements social distancing and sanitized equipment after the pandemic was announced, it will be much harder for a plaintiff to overcome summary judgement.

What’s more, causation may be difficult for some plaintiffs to prove.  How can plaintiffs determine that they contracted the virus at a certain location?  Investigations by the Centers for Disease Control and Prevention, Food and Drug Administration or state and county health departments can identify a single source of a foodborne pathogen, for instance, and then trace it through a supply chain.  This is difficult to do with COVID-19—which can be picked up at a gas pump or on a door handle.  Accurately tracking person-to-person transmissions of COVID-19 is much harder than foodborne or zoonotic infections.  Food supply chains are heavily regulated, while zoonotic investigations focus on the locations of carriers like mosquitoes and the conditions that increase their spread.

Litigation around norovirus, which causes acute gastroenteritis, is typically the result of a discrete population being infected by a shared source, such as restaurant patrons or cruise ship passengers.  Because standard sanitary practices can prevent norovirus, a cluster of cases from one local source suggests a failure to follow safety guidelines.  But, a single individual with gastroenteritis and no knowledge of a localized cluster is less likely to bring suit.

Similarly, a small group of customers who walk into a retail store and later develop COVID-19 may not present an epidemiologically strong lawsuit, absent evidence of a single source of infection.  But litigation becomes more likely when a larger number of people at a confined location—such as a cruise ship, hotel, or nursing home—become infected with COVID-19.

It is now customary to see businesses in the retail and hospitality industry implement comprehensive measures aimed at preventing the transmission of COVID-19, such as social distancing, limits on the number of people in stores, and mandatory face masks.  What was once considered intrusive may become the new standard of care.  A business’s failure to meet that standard and follow the relevant guidelines implemented by health authorities could provide the basis for litigation.

As of right now, the nature of COVID-19 itself limits the potential for lawsuits.  What’s more, as the disease progresses and becomes more difficult to trace, pinpointing causation becomes even harder.  Nevertheless, good public health practices in the retail and hospitality industry is the best protection against the risk of both infectious diseases and litigation.