Liability Immunity Laws for Businesses May Impact Insurance Industry

5 Min Read By: Thomas F. Morante, Yani R. Contreras

Insurance litigation with respect to COVID-19 claims inevitably will be impacted by state and possible federal legislative initiatives currently being proposed. Businesses and insurers should particularly monitor legislative efforts at the state level designed to address civil liability claims derived from COVID-19 as businesses assess reopening scenarios and insurers assess the attendant potential litigation risks.

Various states, including North Carolina, Oklahoma, Utah, Wyoming, Louisiana and Kansas, have already adopted state legislation providing businesses with some type of limited civil liability immunity if customers and employees contract COVID-19 at their premises. In some of these states, the laws cover acts or omissions arising after the date of the emergency order, while in other states, the laws are effective from and after the date of adoption. For example, Iowa’s legislature has approved a measure supported by the Iowa Insurance Institute and NAMIC that provides retroactive immunity from COVID-19 lawsuits.

Under the legislation adopted in these states, businesses in compliance with state and federal guidance, such as that issued by the Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, and/or the state’s Department of Health, would be afforded  liability shield protection for potential claims of persons alleging that they contracted COVID-19 on the businesses’ premises. However, immunity typically would not be available if the business acted in a manner deemed to constitute gross negligence, recklessness, or the intentional infliction of harm.

There are few differences in the legislation enacted by these states. In North Carolina, civil immunity is afforded to an emergency response entity or an “essential business” (as listed in the North Carolina Stay at Home Order; as amended, including industries such as health care, critical infrastructure, law enforcement, grocery, hardware stores, pharmacy, banking, eateries for takeout, and lawyers). North Carolina law provides this immunity for acts or omissions taking place on or after March 27, 2020, and until such time as North Carolina’s emergency declaration is rescinded or expires. In Oklahoma, Utah, and Wyoming, the immunity is not limited to essential businesses and appears to be provided to every type of business.

This legislative liability immunity would not necessarily prevent potential plaintiffs from asserting their COVID-19 claims against a business, but it would work as a defense against such claims. To preserve this defense, businesses would need to document the policies they adopted and are maintaining with respect COVID-19, and likewise they would need to record any event in which procedures were not followed, along with the corrective action taken to remedy the breach, in order to combat potential civil claims.

Wyoming faced challenges in adopting its immunity legislation, which was not approved as a standalone bill, but as an amendment to another bill discussed in the Wyoming House and the Senate. The amended law, which applies only during declared public health emergencies, provides immunity to businesses that act in ”good faith” and follow state health orders at the time of the alleged exposure to the coronavirus.

In Kansas, Bill HB 2016 was approved by the House and the Senate on June 4, 2020 and signed by the Governor on June 9, 2020. The legislation gives any person conducting business in Kansas immunity from liability in a civil action for a COVID-19 claim if such person was acting pursuant to, and in substantial compliance with, public health directives applicable to the activity giving rise to the cause of action when the cause of action accrued. The protection will expire on January 26, 2021.

In addition to these state initiatives, the business community is pushing Congress to adopt legislation that would provide legal protection in the face of concerns that businesses could face an avalanche of lawsuits as they begin to reopen. In response, Senator Majority Leader Mitch McConnell is promoting a proposal which he envisions will be introduced soon, intended to expand liability protections for businesses. Such protections would provide liability safe harbors for businesses that comply in good faith with governmental guidance.

This liability protection would not be offered to those businesses that are grossly negligent or that act with intentional or willful disregard for safety. It is possible that this legislation could act as the minimum standard for liability protections that could facilitate uniformity among those states adopting similar legislation, beyond which states could always enact more strict immunity protection.

Senator McConnell has indicated that he intends to include this proposal in any further relief or stimulus proposals, including potentially the proposed Heroes Act discussed below. The proposal would give employers latitude to abide by the guidelines of the Centers for Disease Control and Prevention or the guidelines of other federal, state, or local governmental entities. The proposal would be retroactive to 2019 and would provide protection against lawsuits through 2024.

House Democrats recently introduced a new stimulus relief package known as the Heroes Act, which will likely exceed $2.2 trillion in stimulus funding, and is expected to include new state and local aid, more direct payments to Americans, and an increase in food assistance. The Heroes Act does not include liability immunity for businesses. Senator McConnell has countered that any new stimulus package would need to include liability immunity, such as the proposal he is advancing.

Several organizations and associations, including the National Association of Mutual Insurance Companies, the National Association of Professional Insurance Agents, the American Property Casualty Insurance Association, and the Independent Insurance Agents & Brokers of America, sent a letter to Congress on May 27, 2020, asking Congress to enact liability relief legislation affording immunity to businesses as a consequence of COVID-19 claims from employees and customers.

The legislative grant of immunity to a business from civil suit due to COVID-19 would undoubtedly impact the insurance industry, particularly those carriers issuing comprehensive general liability coverage (GCL). It is beyond the scope of this article to address the interplay of legislation providing immunity from liability and workers’ compensation insurance, and that certainly merits consideration.

GCL policies would cover “bodily” injury caused to third parties on the insured (i.e., business) premises. A claim made by customer or third-party or conceivably by an employee, alleging COVID-19 harm caused by an insured that failed to exercise reasonable care in implementing and enforcing policies with respect to potential exposure to the novel coronavirus, could be covered by a GCL policy, absent a specific exclusion. To the extent that immunity is granted to businesses for any harm caused by coronavirus, there arguably would be fewer claims made against those businesses under CGL policies. This, in turn, could translate into fewer claims to be paid, and thus may afford a benefit to CGL insurers. How this evolves in the future is uncertain but bears watching.


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