Top Developments in COVID-19 Litigation

March 8, 2021

Jason A. Levine, Gillian H. Clow, and Giles Judd, Alston & Bird LLP

OVERVIEW

The top developments in COVID-19 litigation this past week were: the dismissal of a workplace exposure suit filed by the infected employee’s spouse; the partial survival of refund class actions against Columbia University and Pace University; and a $100 million business interruption coverage suit filed by In-N-Out Burgers.

1. California Court Dismisses Wife’s Claim Against Husband’s Employer for Allegedly Causing Her to Contract COVID-19

Overview: California’s Northern District dismissed a suit against Victory Woodworks, Inc. with leave to amend.

Background: Plaintiff alleged that her husband contracted COVID-19 at work, and passed it on to her.  She sought compensation from the company for her claimed injury.  The causes of action included negligence, premises liability, loss of consortium, and public nuisance. 

Decision: The court found that because the wife’s alleged injury depends completely on her husband allegedly contracting COVID-19 at work, her suit is largely barred by the state’s workers’ compensation law, which provides the only available remedy.  For this reason, the court dismissed the claims for negligence, negligence per se, premises liability, and loss of consortium.  The court also dismissed the public nuisance claim for lack of standing.  Leave to amend was granted, however, so Plaintiff has an opportunity to try to formulate a claim that can survive the court’s framework.

Our Take: While framed as preempted by the California workers’ compensation laws, the court’s treatment of this lawsuit suggests that possible employer liability for COVID-19 ends with the employee, and does not extend to anyone the employee may have come into contact with after exposure.  This could be an important limiting principle for workplace liability as the pandemic continues.  We will follow this case to see if amendment is attempted and, if so, whether an amended complaint can survive dismissal.

2. New York Court Trims College Tuition Refund Lawsuits

Overview: New York’s Southern District narrowed a pair of proposed class actions pending against Pace University and Columbia University for tuition refunds stemming from COVID-19-related school closures.  The court found that students could only bring claims based on specific contractual promises their colleges allegedly broke.

Background: Plaintiffs allege that at the outset of the COVID-19 pandemic in early 2020, their  colleges transitioned to an exclusively online environment, closed certain campus facilities, canceled campus activities, and encouraged students who lived on campus to move elsewhere, but failed to provide any reimbursement for tuition and fees. 

Decision: Under governing New York law, the court held that if the students can point to specific contractual breaches, their claims survive dismissal. 

The court held that Columbia students had not stated a breach of contract claim based on the move to online instruction because they had not pointed to any specific promise made to them by the school about providing exclusively in-person instruction, and references to the “on-campus experience” in university marketing materials were insufficient to support such a claim.  A similar instruction format claim against Pace, however, survived dismissal because the university allegedly promised on its website that on-campus courses would be “taught with only traditional in-person, on-campus class meetings.”

The court further ruled that the Columbia and Pace students had stated a claim that their universities breached a contract to provide access to certain campus facilities and activities in exchange for mandatory student fees.

Finally, the court dismissed the students’ unjust enrichment claims because they were based on the same factual allegations as the breach of contract claims.  The court also dismissed the claims for conversion and violations of the New York General Business Law, finding that the students failed to state facts to support such claims.

Our Take: Courts across the country have largely dismissed claims for tuition refunds as a result of COVID-19 induced closures, largely out of reluctance to second-guess the academic institutions when it comes to academic matters.  This decision is largely in keeping with that trend, but it does present a path to victory for students who can identify specific promises for in-person services or facilities that the schools failed to fulfill.

3. In-N-Out Burgers Seeks $100 Million in COVID-19 Business Interruption Coverage

Overview:  Fast-food giant In-N-Out Burgers filed a complaint in the Central District of California against insurer Zurich American Insurance Company for its denial of coverage under an “all-risk” policy, following business interruptions due to the coronavirus pandemic.

Allegations:  In-N-Out asserts that Zurich breached its contract by denying coverage when the policy in question was an “all-risk” policy, which covered “[a]ll risks of direct physical loss of or damage from any cause unless excluded.”  In-N-Out contends that the policy expressly extended to some forms of contamination, including radiation, ammonia, virus, pathogen or pathogenic organism, and disease-causing illness or agent.  It further alleges that, under the terms of the policy, business interruption or “Time Element” losses of up to $250 million are covered for each policy period.  In-N-Out claims that it has suffered damages of at least $100 million due to forced closures and decontamination costs arising from the pandemic. 

A related suit, filed by In-N-Out against Zurich, is ongoing in the Central District of California.  In that suit, Zurich argues that neither the presence of the COVID-19 virus nor the stay-at-home orders constitute a “direct physical loss of or damage” to property.

Our Take: Recent court decisions appear to support Zurich’s defense, but it remains to be seen how a court will interpret “all-risk” policies with specific inclusions such as those allegedly contained in the In-N-Out policy.  Language referring to viruses and pathogens may make a material difference to the outcome.

Jason Levine is a commercial and antitrust litigation partner in the Washington, D.C. office of Alston & Bird LLP.  Gillian Clow and Giles Judd are litigation associates at the firm.