Top 5 Developments in COVID-19 Litigation

February 1, 2021

Jason A. Levine, Ryan Martin-Patterson, and Stephen Tagert, Alston & Bird LLP

OVERVIEW

The top 5 developments in COVID-19 litigation this past week were a new class action lawsuit against Amazon, the dismissal of two suits seeking business interruption insurance coverage, lawsuits challenging California and New York’s new limits on in-person dining, settlement of a class action against Nike regarding in-store masking accommodations for deaf customers, and President Biden’s Executive Order impacting worker health and safety during the pandemic.

1. Customers Sue Amazon for Suspending Amazon Prime Service

Overview: Plaintiffs filed a proposed class action in Florida state court against Amazon for its alleged suspension of free deliveries for certain products ordered through Amazon Prime.

Complaint: Plaintiffs, all Florida residents, claim that Amazon failed to comply with the terms listed on its website for benefits under the Amazon Prime membership program.  According to Plaintiffs, Amazon suspended certain shipping services for many items at the outset of the pandemic, increasing shipping costs and time for Amazon Prime members, but did not provide refunds or credits for the Amazon Prime services.  Plaintiffs assert violations of Florida’s Deceptive and Unfair Trade Practices Act, and they also claim breach of contract, negligent misrepresentation, and unjust enrichment.  The complaint proposes two sub-classes: one consisting of Florida residents, and the other comprising residents of other States.

Our Take: We will continue to monitor developments, as decisions in this case could be relevant to other companies that made adaptations to their service offerings in light of the pandemic. 

2. Courts Dismiss Suits Seeking “All-Risk” Insurance Coverage for COVID Losses

Overview: Two lawsuits by businesses – a Georgia law firm and an Illinois hotel – against their “all-risk” insurers were dismissed this week, with both judges ruling that the pandemic has not resulted in the type of physical harm covered by the policies. 

Background: The two businesses were affected by the pandemic in different ways.  The Georgia law firm claimed that it was no longer able to meet with its clients in person, affecting its ability to represent them and increasing the cost of doing so.  The Illinois hotel claimed significant loss of business after Illinois Governor J.B. Pritzker’s COVID-related shutdown orders in March 2020.  Both plaintiffs sued their insurance carriers, alleging that the business losses were covered by their “all-risk” insurance policies, which cover “risks of direct physical loss,” “physical loss or accidental physical damage,” or “physical intrusion[s] into the property.”

Decisions: In both cases, the insurers filed and won motions to dismiss.  In Georgia, the court found that the unambiguous policy only protected the plaintiff law firm from physical intrusions or damage, which did not include COVID-19.  Loss of business from shutdown orders, whether the shutdown involved local courts or the firm’s offices, was insufficient to trigger coverage under the policy because it did not involve physical damage.

The ruling in Illinois followed very similar lines of reasoning.  The court held that the plaintiff hotel’s policy covered only “direct physical loss or damage to the covered property,” and concluded that viral or bacterial contamination is not covered.

Our Take: Both results are within the mainstream of decisions in pandemic-related insurance cases.  Despite a variety of arguments to the contrary, the majority of courts have held that COVID-19 does not present the specific type of physical impact sufficient to trigger typical “all-risk” business insurance coverage.

3. Wineries and Restaurants Sue California and New York Over In-Person Dining Restrictions

Overview: In California and New York, groups of winery and restaurant owners sued the Governors of their respective States over new or re-imposed restrictions on in-person dining.

Complaints: In California, Governor Newsom issued new orders related to COVID-19 in December 2020.  These orders grouped all counties in California into five “regions,” which were tracked by ICU capacity.  When ICU capacity exceeded a certain limit, the December orders triggered additional COVID-related restrictions, including absolute bans on in-person dining and wine tasting at vineyards.  Plaintiffs, a group of 50 wineries, suppliers, and related business, allege that the December orders are arbitrary because the State has offered no evidence relating the shutdown of restaurants and tasting rooms to ICU capacity generally, nor has the State offered evidence that “regional” ICU capacity is related to in-person dining and wine tasting in individual counties where the ICU capacity might be lower than the “regional” average.  Plaintiffs allege the December orders violate the Due Process, Equal Protection, and Takings clauses of the California Constitution because they are arbitrary and unsupported by evidence.

In New York, Governor Cuomo issued Executive Order 202.74 on November 12, 2020.  The Executive Order imposed new restrictions aimed at slowing the rate of spread of COVID-19, including a total suspension of in-person dining between 10 pm and 5 am.  Plaintiffs, mainly restaurants, sued to challenge the Executive Order on the grounds that it is arbitrary and capricious, violates the Equal Protection clause of the New York Constitution, and violates prior executive orders that are still in effect – and which Plaintiffs also seek to invalidate.

Our Take: Both California and New York have been hit hard by COVID-19, and business owners have suffered financially under the corresponding lockdowns.  The responses of both Governors to the ongoing crisis has shifted in recent months, to the detriment of certain businesses, including restaurants and other in-person dining and drinking establishments.  Regardless of the outcome of these lawsuits, the challenge of defending them, coupled with renewed public outcry over the closures, may impact the Governors’ impetus to impose similar restrictions during future surges of the virus.  The outcome of these suits may also have an outsized influence on courts elsewhere, given the size of California and New York.

4. Nike Agrees to Provide Transparent Masks and Other Accommodations for Deaf Customers in Stores

Overview: Nike settled a proposed class action over its alleged failure to accommodate deaf customers during the COVID-19 pandemic.

Allegations: Cali Bunn, a college student who is deaf, filed a proposed class action in California against Nike because it required only opaque face masks for employees instead of transparent ones.  Bunn claimed that this violated Title III of the Americans with Disabilities Act and California law.

Settlement: The settlement provides that Nike will provide its California workers with transparent masks, have pens and paper easily available for customers to communicate in writing, train employees about communicating with deaf customers, and post notices to advise customers of ways they can ask for assistance.

Our Take: To avoid litigation, employers need to ensure that they continue to update their policies and procedures to comply with state and federal civil rights laws as the COVID-19 pandemic continues.  The precedent set by Nike’s settlement could result in further litigation against retail stores on behalf of deaf customers.

5. President Biden Issues Executive Order on Protecting Worker Health and Safety

Overview: On January 21, President Biden issued an Executive Order to protect workers’ health and safety during the COVID-19 pandemic.

Executive Order: The Executive Order instructed the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) to: (1) issue revised guidance to employers on workplace safety during the COVID-19 pandemic; (2) consider whether emergency temporary standards, such as with respect to masks in the workplace, are necessary; (3) review OSHA’s enforcement efforts related to COVID-19 and identify any changes that could better protect workers and ensure equity in enforcement; (4) launch a national program to combat violations that affect the largest number of workers or are contrary to anti-retaliation principles; and (5) coordinate a multilingual outreach campaign to inform workers of their rights.

The Executive Order also instructs various agencies to explore mechanisms to protect workers not covered under section 18 of the Occupational Safety and Health Act, to help them remain healthy and safe.  The Secretary of Labor was instructed to consider whether any emergency temporary standards are necessary for coal, metal, and non-metal mines.

Our Take: President Biden may increase enforcement efforts against businesses that do not follow applicable federal law, and OSHA may coordinate more with state and local governments to enforce their local laws regarding worker health and safety.

Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP.  Ryan Martin-Patterson and Stephen Tagert are litigation associates at the firm.