As we approach the one year mark since Ohio’s first COVID-related precautions began in March 2020, one thing that has become abundantly clear, it’s that we’re nowhere near the end of this pandemic. The last few months have brought uncertainty and insecurity to many, which will certainly continue for the foreseeable future. This uncertainty raises a lot of questions for business owners.What happens if an employer can no longer afford to pay rent under the terms of their commercial lease or needs to close the business location altogether? What happens to a business owner if an employee or a customer claims that they were exposed to COVID in their business? The answers? Well, it all depends...

COVID-related lawsuits are just now starting to make their way into courtrooms around the country, so we don’t really have a whole lot of precedent to anticipate how courts may rule on these cases specifically. However, the legal defenses that may be asserted are well-established in the law, and the elements to prevail on those defenses remain the same. What we don’t know is how COVID will play into the factual and legal analysis by the courts when those defenses are properly asserted. What we do know is that courts will continue to utilize their own caselaw as precedent and follow the same process of applying the law to the specific facts of the case as they’ve always done. The facts are different in every case, COVID or otherwise, but the law, and the application of the law to those facts, is constant. And, below, we discuss the elements of some common legal defenses that may be available to your business in the case of a COVID-related lawsuit or lease dispute.

Premises Liability Claims: Allegations of Exposure to COVID 

Let’s say a customer who shopped in your business later tests positive for COVID-19 and files a lawsuit against your business, alleging negligence and seeking to hold you accountable for their infection. 

First of all, to establish a negligence claim, a plaintiff must establish BOTH that the business breached a duty it owed to the plaintiff AND that there is a causal connection between the breach and the plaintiff’s injury (exposure to COVID-19). The plaintiff filing the lawsuit bears the burden of proof, which means that they must develop admissible evidence sufficient to conclude that it is likely that the plaintiff’s exposure to COVID occurred at your business and not elsewhere. It is the plaintiff’s duty to establish each element of the negligence claim by a “preponderance of evidence,” which is legal-speak for, basically, “51%.” When all of the evidence is weighed, there’s at least a slightly better than 50/50 chance that the plaintiff’s injury was caused by the defendant’s breach of its duty to the plaintiff. 

Businesses that have developed, implemented, and enforced policies and procedures to comply with federal, state, and local public health guidelines for cleaning and social distancing will have a much stronger argument that they did not breach a duty owed to the plaintiff. Following all of the guidelines can help to demonstrate that the business fulfilled its duty to keep the premises in a reasonably safe condition. Even imperfectly documented or executed adherence can help call into question the plaintiff’s evidence of causation.

Additionally, causation will likely be extremely difficult to establish in COVID-related cases. Community spread of the virus is rampant, and there’s a lag time between exposure and development of symptoms, which makes it difficult to pinpoint exactly when the exposure occurred. Evidence that the plaintiff has been going to work outside of the home, riding public transportation, congregating with others, making nonessential trips out of the home, or failing to wear a face mask introduces additional potential exposure points. These points make it unlikely the plaintiff to say, with any certainty, that their exposure probably occurred at your business as opposed to another location. 

Businesses may also argue that they shouldn’t be liable as the plaintiff assumed the risk. To establish this defense, the defendant must show that the risk of COVID exposure was inherent in the situation, rather than a risk created by the business’ negligence (your implementation of public health guidance can serve as mitigating evidence to overcome an allegation that your business was negligent). In asserting this defense, the business will have to prove that the risks and danger associated with COVID are well-recognized risks known to the public, and that those risks were impliedly assumed when the customer entered a public business. In other words, the customer consented to the risk of exposure by implication of their actions. It’s important to note that this defense isn’t available to claims of reckless, wanton, gross, or intentional conduct, but if you’re taking all recommended precautions, this defense may be a strong one for claims of negligence related to COVID.

Contract or Lease Claims Related to COVID

Perhaps foot traffic is down. Perhaps you have to close your physical location altogether. Perhaps you can’t make your full rent payment or any payments for that matter. Perhaps you can’t meet a contractual obligation because of COVID and you’re not sure what to do. Step one: Review your contract.

Many, if not most, contracts contain a “force majeure” clause. This provision may excuse performance under a contract for allowed circumstances, which may include circumstances deemed beyond the control of the parties that makes performance under the contract inadvisable, commercially impracticable, illegal, or impossible. It’s important to note from that start that contracts are “strict liability,” meaning that parties to a contract are expected to perform under the terms of the contract, even if it becomes difficult to do so, and the party breaching a contract is strictly liable for damages, even if the breach isn’t their fault. Force majeure provisions may excuse a party from performing under the contract without being liable for damages, but those provisions are going to be construed narrowly in a lot of jurisdictions as performance under the contract is heavily favored. The language used in drafting this provision will be determinative, yet a lot of that language is open to interpretation. Consider the phrase “acts of God.” What constitutes an “act of God” for purposes of force majeure? 

Determining the applicability of a force majeure clause is very fact-specific. For instance, parties seeking excuse from performance as a result of a change in economic circumstances, increased expenses, fear of travel, or threats of a similar kind are typically not granted relief from nonperformance. Even in the wake of 9/11, New York courts routinely held parties liable to the terms of their contracts where failure to perform was due to one or more of these reasons, even though the change in economic circumstances, increased expenses, or fear of travel were caused by, or correlated with, the events of 9/11.

The language of the force majeure clause will be analyzed to determine what constitutes a force majeure event to trigger the clause and then figure out what effects that event has on the party’s ability to execute their contractual obligations. The qualifying events for force majeure are interpreted in light of the other listed qualifying events. A clause that only accounts for “acts of God” is likely only to cover events that are nonhuman and occur without any human intervention, whereas a clause that accounts for “acts of God” as well as hurricanes, tornadoes, “acts of war,” and “acts of government” may allow for a broader interpretation. Moving forward, we are likely to see “pandemic” enumerated in force majeure clauses, as “terrorism” became commonly integrated after 9/11. But in the application of the COVID crisis, specifically, to contracts and leases drafted before now, the jury’s still out (pun totally intended) on how these terms will be interpreted. Clauses that account for “acts of government” may bode well as tied to stay-at-home orders and business closures earlier this year, depending on the effects of that “event” on the performance of your contractual obligations. “Acts of God,” maybe. Probably? I think this one is going to depend on the other specifically named triggering events written into your clause. 

The facts and circumstances of your performance obligations and the effects that the triggering event has, if considered a triggering event based on your contract language, on your ability to perform is really going to determine whether the force majeure clause alleviates you of your performance obligations and damages for breach. Additionally, some leases expressly state that nothing shall relieve the tenant of its obligations to pay rent, thereby allocating all of the risk of paying rent to the tenant, regardless of circumstances. Tenants should also review their lease for the inclusion of a co-tenancy provision; tenants may have a basis for reduced rent or lease termination based on provisions that provide tenants with protection if surrounding stores aren’t open or operating, as commercially leased space may be valued based on anticipated or promised foot traffic. 

If there is no force majeure clause in the contract or lease, tenants also have some non-contractual defenses available. The doctrine of “frustration of purpose” argues that performance under the contract remains possible, but the purpose for which the tenant entered into the lease is substantially frustrated, therefore the tenant should be wholly discharged from their lease obligations. In the case of a commercial lease, the ability to open and operate a business is a principle purpose of the lease, and if government-mandated closures or health and safety regulations have substantially impaired or negated the tenant’s very ability to conduct business in the leased space, the tenant may be permitted to terminate the lease. On the other hand, if the tenant is only limited in the use of the space by COVID regulations, such as moving from in-person dining to take out only, the landlord is likely to defeat a frustration of purpose defense. 

Other defenses such as “impossibility” may temporarily suspend a tenant’s duty to perform while the impracticability or frustration exists by not discharging their obligations fully. One of the few COVID-related decisions we have to review at this time comes out of New York, where the court held that COVID-19 was not sufficient to establish impossibility of performance where the defendant argued that their performance obligations to make payments under the terms of a settlement agreement should be excused because their inability to pay was a result of Governor Cuomo’s COVID-related Executive Order to shut down businesses. The court reaffirmed a long-standing principle that financial difficulties or economic hardship alone are not sufficient reasons to excuse a party from their contractual obligations, even as applied to financial difficulties arising out of the COVID pandemic.  

This will certainly be an area we keep an eye on!