Prepare for a wave of COVID-19-related insurance lawsuits in the US

Prepare for a wave of COVID-19-related insurance lawsuits in the US | Insurance Business

Prepare for a wave of COVID-19-related insurance lawsuits in the US

While the economic and societal fallout of the coronavirus crisis has yet to be fully determined, legal and insurance experts have warned businesses to prepare for an incoming wave of insurance lawsuits.

According to Omar Ali-Shamaa (pictured), lawyer at Wolfe Pincavage in Miami, the pandemic and accompanying restrictions have lasted longer than expected, forcing many businesses to lay off their employees. This is causing an increase in employment lawsuits, especially age-related discrimination claims.

“Under the Age Discrimination in Employment Act (ADEA), employees who are 40 years or older are protected from age discrimination,” Ali-Shamaa said. “As such, employers who chose to retain a younger employee over an older employee based on health concerns may violate the ADEA, even if the employer’s decision was well-intentioned and made for the purpose of protecting the older employee due to a higher risk of severe illness from COVID-19.”

He added that wage and overtime employment claims are also on the rise, and will continue increasing as employers institute pay cuts. In some instances, perhaps inadvertently, employers may convert exempt employees to non-exempt and eligible for overtime.

While the Coronavirus Aid, Relief, and Economic Security (CARES) Act has alleviated some pressure on businesses and employment claims in the US, Ali-Shamaa predicts that employers will see an increase in employment claims due to the expiration of the supplemental federal unemployment benefits.

“The situation is likely to worsen with the Senate and House adjourned until September 08 and 15, respectively,” he said. “Until a decision is made, millions of unemployed Americans will not receive any federal unemployment benefits for at least six weeks. While a CARES Act II with extended unemployment benefits will alleviate the situation, employment practice claims are nonetheless expected to continue rise.”

This, according to Ali-Shamaa, has greatly impacted many industries, especially the hospitality sector. Due to restrictions on the number of customers restaurants can accommodate, revenues are greatly reduced and more employees are laid off. This is causing a surge in employment claims, particularly related to whistleblower claims.

“Driven by fear and uncertainty, and in some cases retaliation for being laid off, there has been an increase in complaints by employees regarding workplace safety, exposure to COVID-19, and adherence to local and state public health orders and/or OSHA directives regarding social distancing,” he said. “Whistleblower claims regarding violations of the Families First Coronavirus Response Act’s paid-leave requirements are also likely to increase as restrictions and unemployment continue to impact the hospitality industry.”

According to Luis Gazitua (pictured), principal of JAG Insurance Group, 2020 has been the ultimate test of agility, as businesses across all industries pivot their previous business strategies to adapt to the current climate. Employers are now navigating a ‘new normal” and must re-examine their insurance policies to ensure their businesses are adequately covered under local guidelines.

In order to minimize the risk of lawsuits, Gazitua advised business owners to make sure they are not being unintentionally discriminatory when bringing back employees after a shutdown.

“For example, if you choose to bring back a younger employee and do not retain an older employee at the same time, it may open you up to discrimination litigation,” he said.

Risk managers must also communicate all operational changes to their carrier as these adjustments may require specific endorsements.

“For example, despite obtaining permission from a neighbouring business to expand outdoor seating, operators must document this change with their carrier, as it can alter the premium,” Gazitua said. “Without this, operators are subjected to grey areas and it is unclear as to which business is responsible for potential claims.”

With business interruption cases already being dissected in the courts, Gazitua believes the next wave of litigation will be regarding employment practices liability insurance.

“Thus, it is imperative to understand and implement the best policy for your business and connect with your agent to review your current plan,” he said. “To mitigate risk, employers must cover all their bases, document everything, and communicate effectively with their agent.

“Also, it’s paramount to follows current CDC guidelines and any guidelines from your local municipality. This will avoid any missteps that could prove costly if a customer or employee were to contract COVID-19 while at your establishment.  It is more important than ever to play by the book to mitigate any potential liability. Eliminate all assumptions.”