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A Tale of Two Cities: COVID-19 Business Interruption Coverage in New York and Paris

Posted on: June 5th, 2020

By: Isis Miranda

Two sides of the pond. Two different outcomes.

In New York, Social Life Magazine, Inc. sought immediate relief from the court in a case against its insurer, Sentinel Insurance Company, Limited, for business interruption coverage losses it sustained due to the closure of its business as a result of Governor Andrew Cuomo’s shutdown order in the wake of the coronavirus pandemic. Social Life explained in its application to the court in the Southern District of New York that it had “no money to publish any magazines,” as it was left with only $2,106.94 in its two bank accounts and was therefore “already out of business.” Social Life stated that it sustained over $200,000 in lost income in March and April 2020 and explained that it also had contractual obligations to its advertisers, which had already paid Social Life approximately $240,000 and were “expecting their advertisements this summer.” Social Life stated that it had received only $1,000 under the CARES Act and that it had not yet received any response from the Small Business Administration regarding its loan application. For these reasons, Social Life sought a preliminary injunction ordering Sentinel to pay for its business interruption losses incurred thus far while it continued to prosecute its case against Sentinel.

In Paris, Stephane Manigold, the owner of four Paris restaurants, also sought immediate relief from the Paris Commercial Court in a case against his insurer, AXA, S.A., for business interruption losses stemming from the coronavirus as a result of the French Government’s order limiting restaurants to takeout only. Manigold stated that he had a cash deficit of €201,413, which he expected to increase by €45,903 by the end of May. Like Social Life, Manigold sought immediate payment of his restaurants’ business interruption losses incurred to date.

New York

“What is the damage? There is no damage to your property,” the New York judge said to Social Life’s counsel during the telephonic court hearing on its application on May 14. Focusing on whether Social Life could show it sustained a “direct physical loss or damage” under its policy, the judge cut short Social Life’s argument that the absence of a virus exclusion in the policy indicated there was coverage. “Well, the virus exists everywhere,” Social Life’s counsel responded, to which the judge retorted, “It damages lungs. It doesn’t damage printing presses.”

When Social Life’s counsel attempted to argue that the “loss of use” of the property constituted direct physical loss or damage, the judge did not bite. She explained: “With loss of use, I mean, loss of use from things like mold is different from you not being able to, quote, use your premises because there is a virus that is running amuck in the community.” Social Life’s counsel attempted to equate mold spores and bacteria with a virus, stating: “Mold spores, bacteria, virus, all those are physical items which damage whatever they are on, whatever they land on. And in this case, the virus, when it lands on something and you touch it, you could die from it.” The judge, again, explained: “That damages you. It doesn’t damage the property.”

Moving on to the issue of causation, the judge explained: “That is what has caused the damage is that the governor has said you need to stay home. It is not that there is any particular damage to your specific property . . . You may not even have the virus in your property.” This led to a short colloquy in which the judge asked, “What evidence do you have that your premises are infected with the COVID bug?” Social Life’s counsel responded: “Well, the plaintiff is here. He got COVID. So that’s evidence there.” The judge replied, “Well, it’s not evidence that he got it in his office.”

Sentinel’s counsel argued that the “loss of use” cases Social Life relied upon were not New York cases and, therefore, not applicable. Sentinel’s counsel went on to explain that “even in those other cases,” the “property has to be entirely unusable or uninhabitable” for “loss of use” to constitute physical loss or damage. Because, according to Sentinel’s counsel, the governor’s order explicitly allowed employees to access their property to get mail or do routine business functions, Social Life could not satisfy the “direct physical loss or damage” requirement, even if the judge decided to apply out-of-state law regarding “loss of use.”

In response, Social Life’s counsel argued that the governor’s shutdown order mandated “100 percent” compliance, to which the judge responded by asking a rhetorical question, “You are in your office?” In part because, in the judge’s opinion, “There is nothing about the governor’s order that prohibits a small businessperson or a big business person from going into their office to pick up mail, to water the plants, to do anything like that, including employees that are working,” she found there was no coverage under the policy.

The judge concluded the debate by telling Social Life’s counsel:

I feel bad for your client. I feel bad for every small business that is having difficulties during this period of time. But New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going. You get an A for effort, you get a gold star for creativity, but this is just not what’s covered under these insurance policies.

Although Social Life filed a notice of appeal shortly after the hearing, it subsequently dismissed its complaint and the appeal. It’s unclear whether Social Life simply changed its mind or if the dismissal was the result of a settlement with Sentinel. The End.

Paris

Anais Sauvagnac, Stephane Manigold’s attorney, told reporters on May 22 that the Paris Commercial Court had issued an interim order requiring AXA to reimburse Manigold for his legal fees and pay for two months’ worth of coronavirus-related revenue losses. Manigold’s attorney stated: “This means that all companies with the same clause can appeal to their insurers.”

As widely reported, Manigold was in his office when he learned of the court’s decision. He reportedly high-fived a colleague and his supporters applauded. Manigold told Reuters, “This is a collective victory,” and later cried as he spoke to reporters in front of one of his empty restaurants.

In making its decision, the court considered Manigold’s “seriously overburdened financial situation” in finding that his request for immediate relief was sufficiently “urgent” to warrant an immediate ruling by the court. The court also determined that AXA had failed to present a serious challenge to Manigold’s claim for coverage, noting that the policy did not expressly exclude pandemic risk.

Like Sentinel, AXA argued that coverage was not triggered under the policy since the French Government’s order had not mandated the closure of restaurants but rather allowed them to remain open for takeout service. The court disagreed. It found that Manigold had demonstrated coverage for business interruption losses sustained by his restaurants because they were prohibited from allowing customers to dine in, which was their traditional form of business.

AXA immediately vowed to appeal the ruling. Several days later, however, AXA announced it was seeking an amicable resolution and planned to meet the bulk of claims from restaurant owners whose contracts contained some ambiguity. According to AXA’s CEO, Thomas Buberl, “These contracts represent less than 10% out of total contracts with restaurants owners and I am confident that we will find a solution. . . We want to compensate a substantial part of these contracts. We want to do it quickly.” In pledging an additional €500 million in aid for small companies, Burberl explained, “The idea is clearly to reinforce those companies that are weakened by this crisis.” AXA has not said whether it has also changed its mind about appealing the ruling. Fin (with a possible sequel to come).

The Missing Characters

The two most important characters in this story – Social Life’s insurance policy and Manigold’s insurance policy – are missing. Unsurprisingly, Manigold reported that his team had received calls from Britain, South Africa, Spain, and the United States asking about the contents of his insurance policy, causing him to conclude: “This decision in Paris has a global resonance.”

Without analyzing the policies’ express terms, we are left to speculate whether the different outcomes – just one week apart – result primarily from differing policy language or differing approaches to judicial application. This may not be a tale of two cities but a tale of two policies.

One thing we know for certain during these uncertain times is that the words of Charles Dickens ring truer than ever:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way. – A Tale of Two Cities

Another certainty is that this is the beginning of a new era. We will continue to report on the myriad business interruption coverage cases citing COVID-19-related losses as they progress through the courts across the globe.

If you have questions or would like more information, please contact Isis Miranda at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

COVID-19 in Jails: A Case Study

Posted on: May 22nd, 2020

By: Wes Jackson

By now we are all familiar with the CDC’s recommendations for limiting the spread of COVID-19: “social distancing,” maintaining a distance of six feet from others as much as possible, avoiding large gatherings, and self-isolation if you exhibit symptoms of the disease or test positive, among others. As challenging as these practices can be for the general public, they pose a unique challenge to jail administrators who are now tasked with limiting the spread of COVID-19 amongst inmates tightly packed into closed places. All the while, jail officials must also maintain order and security in the jail while respecting the constitutional rights of inmates.

How should jails balance these competing interests and, perhaps more importantly, who gets to decide? There are no clear answers to those questions. Interestingly, though, the Eleventh Circuit Court of Appeals recently issued an opinion in Swain v. Junior that provides a helpful analysis.

In Swain, inmates at Miami’s Metro West Detention Center filed for a preliminary injunction and habeas relief against the jail administrator, arguing that the jail was not doing enough to stop the spread of COVID-19 between inmates. While it was uncontested that the jail had already undertaken many measures recommended by the CDC  to address COVID-19 in jail settings (you can read that guidance here), the inmates nevertheless asked the federal district court to issue an injunction requiring the jail to take various precautions. The district court agreed and ordered the jail to implement several specific practices to stop the spread of COVID-19 in the jail, including maintenance of six feet social distancing “to the maximum extent possible;” strict testing and PPE requirements, and new procedures for the provision of medical care, among others.

The jail then went to the Eleventh Circuit Court of Appeals to ask for a stay of the injunction. The Eleventh Circuit, applying the “deliberate indifference to a risk of serious harm” standard, found that the measures the jail had taken were constitutionally adequate and did not require an immediate injunction. Specifically, the Court of Appeals found that “the evidence supports that the defendants are taking the risk of COVID-19 seriously.” The Court also noted that local governments are in the best position to allocate resources in high-demand needed to prevent, test for, and treat COVID-19 amongst various local facilities, and the district court could not assume the role of “super warden” in ordering a particular allocation of those limited resources.

In short, the COVID-19 pandemic poses a novel challenge to jail administrators. At least for now, the Eleventh Circuit has granted one jail some latitude in how it addresses that challenge. The Eleventh Circuit’s decision is consistent with federal courts’ reluctance to micromanage correctional facilities in the absence of widespread constitutional violations.   

If you have any questions about local governments’ response to COVID-19, please contact Wes Jackson at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Finding Shelter from the Storm: SBA Issues New Guidance on Safe Harbors for PPP Borrowers

Posted on: May 20th, 2020

By: Anastasia Osbrink

The safe harbor period for businesses that received the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) loans expired on May 18, 2020 after a 4-day automatic extension. That safe harbor provided that businesses that repaid loans by that date would automatically be deemed to have satisfied the “good faith” requirement of the PPP wherein borrowers certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This safe harbor arose after reports of large businesses, such as Shake Shack and the NBA, receiving loans under the program. Under normal circumstances, a business must provide documentation of making unsuccessful attempts to obtain loans from other sources prior to receiving an SBA loan. However, the PPP required self-certifications of good faith and eligibility without requesting separate documentation. The purpose of this was to quickly get an injection of cash into the economy – particularly to small businesses – so that companies could retain and rehire employees. When it came out that large companies were also receiving these loans, a public outcry ensued and the SBA provided additional guidance allowing for this safe harbor period so that large businesses would be encouraged to repay loans without facing any further investigation, audits, or consequences based on the “good faith” certification. Many of these larger businesses may still satisfy the “good faith” requirement, but making quick repayments creates good optics for these companies and eliminates further audits based on this certification.

Now, in a further effort to conserve resources and protect small business’ payroll capacities, the SBA has announced an additional safe harbor. This second safe harbor provides for an automatic assumption of good faith for any borrower that, along with its affiliates, received under $2 million in PPP loans, regardless of whether that loan was repaid by May 18, 2020. This means that audits for good faith will only be conducted for companies that received over $2 million and did not repay that loan by May 18th. The SBA cited three reasons for this additional safe harbor: 1)  borrowers that received under $2 million are more likely to satisfy the “good faith” requirement because they are less likely to have had access to other loan sources; 2) it will help promote economic stability by helping small businesses retain and rehire employees that otherwise may not have the ability to do so; and 3) it will enable the SBA to conserve resources by only investigating and auditing those companies that received bigger loans, which could yield larger returns if successful. It should be noted, though, that neither of these safe harbors apply to other requirements, such as the eligibility certification, or outright false statements or fraud. However, except where there is evidence of actual fraud, it appears that companies that fall into one of the safe harbors are unlikely to be audited.

It also seems that the SBA is less focused on punishment and more focused on recouping loans that did not satisfy the good faith requirement. That is because the SBA additionally stated that if it does determine a company failed to satisfy the good faith requirement after being audited, the company will not face any further action or fines if it repays the loan in full. This though, again, does not apply to determinations of actual fraud.

As the focus shifts to larger companies and the safe harbor for these larger loans expires, the Securities and Exchange Commission (“SEC”) is ramping up its investigations of public companies that received PPP loans. The SEC is seeking information from several of these public companies in order to ascertain whether they satisfied the PPP requirements. As part of this sweeping probe, the SEC is sending out letters to these public companies entitled “In the Matter of Certain Paycheck Protection Program Loan Recipients,” in which it requests additional information and documentation. This again demonstrates the focus of audits and investigations on large companies that received significant loans rather than on small businesses.

If you have questions or would like more information, please contact Anastasia Osbrink at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

FINRA In-Person Hearings Further Postponed Until July 31

Posted on: May 20th, 2020

By: Kathleen Cusack and Kirsten Patzer

On Friday, May 15, 2020, amidst continued concern over the potential spread of COVID-19, the Financial Industry Regulatory Authority (FINRA) postponed all in-person arbitration and mediation proceedings until July 31, 2020. FINRA initially postponed in-person meetings beginning in March and extended the suspension several times. 

In its most recent announcement, FINRA also offered to waive the postponement fee if parties agree to reschedule in-person hearings currently scheduled between July 31 and September 4, 2020. All other case deadlines continue to apply. 

As an alternative to in-person meetings, videoconferencing or telephonic meetings are permissible if requested by parties or if mandated by arbitrators. This option is reportedly unpopular and infrequently utilized. And when it has been utilized, the outcomes are subject to scrutiny and may lead to awards being overturned.

A recent FINRA award has resulted in Wunderlich Securities, Inc. filing an action in the U.S. District Court for the Southern District of New York asking that the $11.4 million award issued against them in March be vacated after the final hearing was held via Zoom. According to Wunderlich, the panel had been inattentive throughout the entire proceeding, held over the course of 9 sessions, with the final session being the only one not held in person. During the Zoom videoconference, one arbitrator would look at other screens, typing, and eating during testimony, another arbitrator completely blocked her screen, and during closing arguments, one of the panelists completely walked away from his screen. After the final hearing Wunderlich filed a motion requesting that the panel recuse itself. That motion was unanimously denied by the panel.

The original FINRA arbitration was Dominick & Dickerman LLC, Michael John Campbell v. Wunderlich Securities, Inc., available here. The Petition to Vacate for that case, available here.  

If you have questions or would like more information, please contact Kirsten Patzer at [email protected] or Kathleen Cusack at [email protected]

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Massachusetts Joins Jurisdictions Prohibiting Class-Wide Arbitration of Wage Claims Absent Agreement Expressly Permitting Class Actions

Posted on: May 18th, 2020

By: Kevin Kenneally, Janet Barringer and William Gildea

In a further blow to class action claimants and lawyers, a Massachusetts Superior Court Judge recently ruled a car salesman could not arbitrate Wage Act claims on behalf of coworkers absent an express provision in the employment agreement permitting such a class action.   In Grieco Enterprises, Inc. v. McNamara, the employer sought a declaratory judgment ruling that an employee could not arbitrate wage claims on behalf of a putative class of employees even if his employment contract was silent on the issue and did not expressly prohibit or allow for such a class action. This favorable outcome for employers and insurers follows a similar 2019 ruling by the Supreme Court of the United States holding an ambiguous employment agreement cannot be the basis to compel class-wide arbitration.

In the Massachusetts state court arbitration matter, the employee claimed his employer failed to pay him—and others—required overtime and Sunday-hours premium in violation of state wage laws.  He demanded arbitration on behalf of himself and other similarly-situated commission-only salespeople.  In response, the employer filed the declaratory judgment action in Massachusetts state court seeking determination whether a class action in this instance is permissible.  The Massachusetts Superior Court held class action arbitration is not permissible because the parties’ employment agreement did not expressly permit employees to arbitrate class actions.  The Court held the employee may proceed to arbitration solely on an individual basis. 

The decision in McNamara is garnering attention due to the state’s decision last year concerning commission-based salespeople, Sullivan v. Sleepy’s LLC.  In Sleepy’s, the Massachusetts Supreme Judicial Court held commission-paid retail salespeople are entitled to “time-and-a-half” overtime compensation based on the statutory minimum wage — even when their commissions always met or exceeded the state minimum.  Sleepy’s specifically held the overtime and Sunday premium wage statutes applied to commission-paid sales staff.  The McNamara claimant sought to apply this ruling to an entire class of workers rather than having each worker bring an individual claim.  The employment agreement at issue contained a general statement in the agreement it was “in conformity with” Massachusetts Rules of Civil Procedure—which claimant contended includes procedural rules for class actions, thus tacitly subjecting the employer to class arbitration.  The Superior Court rejected the argument and held the parties to the contract did not expressly agree to engage in class action arbitration.  The judge in McNamara held that if she were to permit the application of an unclear provision to authorize class actions, “unrepresented employees could be bound by an arbitration that he or she did not individually consent to participate in.  Such a result is contrary to the legal underpinnings for arbitration, specifically that it is a consensual contractual matter.”

In 2019, the U.S. Supreme Court decided Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 587 US __, 203 L. Ed. 2d 636  (2019), which was seen as a setback to workers’ ability to join or aggregate the individual claims of other workers who had agreed in their employment contracts to an arbitration forum.  Lamps Plus held in claims subject to the Federal Arbitration Act (“FAA”) an ambiguous agreement cannot be the necessary contractually-agreed basis to force an employer to submit to class-wide arbitration.  The high court agreed with the employer there simply was no foundational agreement to arbitrate the class action and the lower court acted contrary to the primary purpose of the FAA.  Lamps Plus held a lower court may not compel arbitration on a class-wide basis when an agreement is “silent” on the availability of such arbitration and “that private agreements to arbitrate are enforced according to their terms.”  

Employers who incorporate arbitration provisions in their employment agreements for individual basis only will benefit by the uniform application of law in both state and federal courts.  Employers in Massachusetts have certainty absent a specific provision – or even in the face of a vague arbitration provision – class-wide arbitration will not be available to employees whether the claims are based on federal or state law.

If you have questions or would like more information, please contact Kevin Kenneally at [email protected], Janet Barringer at [email protected] or William Gildea at [email protected].

Potential New Reporting Requirements for Long-Term Care Facilities in the Commonwealth in Response to COVID-19

Posted on: May 14th, 2020

By: Janet Barringer, William Gildea and Kevin Kenneally

In the wake of alarming reports from other states that nursing homes were forced to accept known COVID-19 positive residents, a policy which may have caused the spike in healthy nursing home residents becoming infected, Massachusetts has proposed sweeping legislation to protect senior citizens and to require daily reporting from Long-Term Care residences to ensure patient and resident safety. The Commonwealth of Massachusetts State Legislature has proposed legislation that will impact reporting requirements for long-term care facilities, including assisted-living facilities and state correctional facilities in response to the COVID-19 pandemic.

If enacted, Massachusetts Senate Bill S.2695 would significantly impact day-to-day operations at long-term care facilities.  Facilities will have to consider how to change their respective operations to meet reporting requirements.  

The proposed legislation will demand close monitoring of COVID-19 cases of residents and employees in Long-Term care facilities and increase reporting requirements.  Massachusetts Senate Bill S.2695 proposes the Department of Public Health collect daily data sets from local Boards of Health, including but not limited to:

  • the total number of people tested for COVID-19 within the previous 24 hours;
  • the total number of people who have tested positive for COVID-19 within the previous 24 hours;
  • the total number of people who have died due to a probable or confirmed case of COVID-19 or from complications related to COVID-19, as reported in the previous 24 hours through the department’s receipt of vital records;
  • the aggregate number of people who have died due to a probable or confirmed case of COVID-19 or from complications related to COVID-19 since the governor’s March 10, 2020 declaration of a case of COVID-19, including, but not limited to:
    • gender;
    • race;
    • ethnicity;
    • primary city or town of residence;
    • age;
    • disability.

The proposed legislation calls for the Department of Public Health to publish daily reports of the data collected.  The daily reports would be compiled by geographic location, including by county and municipality, and assisted living residences licensed by the executive office of elder affairs and long-term care facilities licensed by the department of public health, including the number of COVID-19 positive cases andmortalities among residents, as well as the aggregate number of COVID-19 positive cases and mortalities among staff at each residence or facility. 

Assisted-living facilities licensed by the Executive Office of Elder Affairs and long-term care facilities licensed by the Department of Public Health will be required to notify residents and their representatives within twelve (12) hours if there is a confirmed case of or death due to COVID-19 in a resident or staff member and/or if three (3) or more residents/staff have a new onset of respiratory symptoms within the previous seventy-two (72) hours.  The proposed legislation also calls for a task force to study and make policy recommendations that address health disparities for underserved or underrepresented populations during the COVID-19 pandemic.  The proposed legislation would no longer be in effect after the governor certifies there has been no positive COVID-19 test in the Commonwealth.

If you have any questions or would like more information, please contact Kevin Kenneally at [email protected], Janet Barringer at [email protected] or William Gildea at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include tort claims in a post COVID-19 world, real estate issues amid the pandemic and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Boston Implements New COVID-19 Safety Procedures for Construction Sites

Posted on: May 13th, 2020

By: Catherine Bednar

On May 5, 2020, the City of Boston activated new COVID-19 safety procedures for active construction sites, which are currently limited to projects meeting the City’s definition of emergency or essential work. The City also targeted dates for expanding the categories of permitted construction activity in the City to more closely match the State’s definition of essential construction services; currently, the City has imposed significantly greater restrictions on construction activity.[1]

The City’s Order sets forth the following timetable:

• May 5, 2020 – Essential construction projects with approved COVID-19 Safety Affidavits and COVID-19 Safety Plans will be authorized to prepare the site with project-specific COVID-19 safety measures.

• May 18, 2020 – The City will allow essential construction work on sites that meet the following criteria: (1) Projects are permitted, in compliance and have filed a COVID-19 Safety plan and a signed affidavit; (2) Project sites are sufficiently prepared to adhere to all criteria of their safety plan; and (3) the work is for hospitals, public schools, residential buildings [1-3 units], road and utility work, or other outdoor/open air-work such as steel erection, roofing and constructing foundations.

• May 26, 2020 – All essential construction projects may re-commence construction activities in adherence to their safety plans.

The City has adopted this incremental approach in order to provide additional time “necessary to allow complex, large-scale development an opportunity to educate their workforce, safely remobilize and implement their site-specific Safety Plan.” All Projects must comply with the City’s COVID-19 Safety Policy for Construction, issued on April 27, 2020, which requires the implementation of best practices, including pre-shift safety measures (e.g. employees travel to work separately), job site hygiene practices (e.g. hand sanitization stations), social distancing techniques (e.g. holding safety meetings outdoors); and appropriate use of Personal Protective Equipment (PPE).

[1] Massachusetts Sees Tensions Between Municipal Construction Bans and Governor’s “Essential Services” Order (April 1, 2020).

[2] https://www.boston.gov/news/temporary-guidance-construction-city-boston

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include liability considerations for jails and prisons, tort claims in a post COVID-19 world, real estate issues amid the pandemic and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Can I Take Your Order Please? OSHA Releases COVID-19 Guidance for Restaurants Offering Takeout or Curbside Pickup

Posted on: May 8th, 2020

By: Travis Cashbaugh

The COVID-19 pandemic has impacted all industries across the country, perhaps none greater than the restaurant, food and beverage industry. Faced with widespread closures, many retailers in the food and beverage industry modified their business models for the new post-crisis world to include in-store takeout and curbside pickup. Each method of delivery offers convenient, quality, fresh products for the consumer. More importantly, both offer minimal-touch pick-up options consistent with the “socially-distanced” goals of COVID-19 prevention for all involved—customers and employees.

To maintain the safety of such services on both customers and employees in the restaurant, food and beverage industries, the Occupational Safety and Health Administration (OSHA) has issued guidance for restaurants and beverage vendors offering takeout or curbside pickup. Through its May 1, 2020 safety alert publication, OSHA identified the following tips to help reduce the risk of exposure to the coronavirus:

  • Encourage workers to stay home if they are sick.
  • Avoid direct hand-off, when possible.
  • Display a door or sidewalk sign with the services available (e.g., take-out, curbside), instructions for pickup, and hours of operation.
  • Reserve parking spaces near the front door for curbside pickup only.
  • Train workers in proper hygiene practices and the use of workplace controls.
  • Allow workers to wear masks over their nose and mouth to prevent spread of the virus.
  • Provide a place to wash hands and alcohol-based hand rubs containing at least 60% alcohol.
  • Routinely clean and disinfect surfaces and equipment with Environmental Protection Agency approved cleaning chemicals or that have label claims against the coronavirus.
  • Practice sensible social distancing by maintaining six feet between co-workers and customers. Mark six-foot distances with floor tape in pickup lines, encourage customers to pay ahead of time by phone or online, temporarily move workstations to create more distance, and install plexiglass partitions, if feasible.
  • Encourage workers to report any safety and health concerns.

In addition to remaining alert for further guidance from OSHA, employers in the restaurant, food, and beverage industries should be aware of specific guidance from state and local governments, as states across the county begin preparations to reopen. In Georgia for example, Governor Brian Kemp recently issued an Executive Order that provides new and extensive guidance for businesses across Georgia, including restaurants. FMG provided a detailed overview of that Executive Order and its impact on businesses, here.

With new habits and behaviors forming, those in the food and beverage industry that fail to pivot will likely find themselves struggling to compete. Employers that are planning on reopening—or continuing to operate, perhaps modifying their business model to include takeout or curbside pickup—should immediately begin assessing the health and safety protocols they have in place now and what additional steps they need to take consistent with OSHA’s guidance and state and local requirements.  Further, we recommend that employers consult with their counsel to evaluate any industry or location-specific measures that should be taken to reduce any concerns by customers or employees of contracting COVID-19 when on the employer’s establishment. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include real estate issues, business interruption losses, and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

CARES in California: New Unemployment Benefits Available Under Federal Law

Posted on: May 8th, 2020

By: Anastasia Osbrink

With over 3.5 million unemployment claims in California since mid-March, the state is facing an historic level of payments that need to be made. In fact, the state has paid out approximately $4.5 billion, which is entirely unprecedented. Every state will be stretched thin, but at least for four months, unemployed Californians will see a significant increase in their unemployment payments thanks to the new federal Coronavirus Aid, Relief, and Economic Security Act, or the “CARES” Act. Section 2104 of the CARES Act provides that those who qualify for unemployment benefits in participating states, which now includes California, will receive their normal weekly benefit amount, plus an additional $600 per week. This additional $600 is a federal supplement, known as Pandemic Emergency Unemployment Compensation (“PEUC”). In California, the average weekly unemployment benefit is $340. As a result of the PEUC, the average unemployment benefit check in California will increase to $940. The maximum benefit in California of $450 per week will also increase to $1050. These payments will be made through the Employment Development Department’s (“EDD”) debit cards as usual.

These benefits are not retroactive, and in California, they began on Sunday, April 12, 2020. The usual one-week waiting period for benefits is eliminated under section 2105 of the CARES Act. The additional $600 is only available while the individual would normally be eligible for benefits in that state. In California, this means benefits are available for 26 weeks. However, the additional $600 will cease on July 31, 2020 pursuant to the CARES Act and after that, the employee will receive their normal unemployment payment for the remainder of the 26-week period. Once the 26-week period is over, individuals will receive their normal benefit amount (though not the additional $600 after July 31, 2020) for a 13-week period pursuant to section 2107 of the CARES Act. That benefit and the waiver of the one-week waiting period will expire on December 31, 2020.

These benefits are obviously welcome aid for unemployed Californians. However, there are many issues the State continues to face. First, the CARES Act provides benefits for the first time to contract and furloughed workers and those in the gig economy. This means a whole new category of claims to process. That, coupled with business closures and layoffs, has resulted in a huge increase in claims. The extent of delays for individuals seeking benefits remains to be seen. Many applicants are unable to reach the EDD by phone because the EDD’s phone lines are open just four hours per day. Now that millions are trying to access the EDD, many are calling on the State to expand those hours. However, those administrative costs are paid for by employers through a federal tax, and federal funding was significantly reduced over the past several years due to the boom economy. As a result, EDD staffing was cut in half in California. Thus, half the amount of EDD staff is now struggling to process millions of claims. Federal law requires 90% of claims to be processed within 21 days. California came close to that in February and has appeared to largely keep up with it in March and April thanks to a more streamlined temporary process that has been implemented. This includes waiving some verification requirements until after payments are issued, no longer requiring claimants to recertify their claims every two weeks, and processing more claims through an automated system. However, significant delays have been reported for employees who were misclassified as independent contractors by employers and did not have their wages reported to the EDD, which is doing a wage audit. Many of these claimants have reported waiting six weeks or more before receiving benefits.

Additionally, it appears likely that it will be a long time before life returns to normal (though it will certainly be a new “normal” and not the normal we used to know), and the economy will take even longer to recover. This means months, and likely years of high unemployment in the State. How that unemployment will be paid for in the long run will be a significant challenge. In an effort to address this challenge, California became the first state in the country to take out a federal loan. As of April 30th, California has borrowed $348 million from the federal government and has been approved to borrow up to $10 billion. This is not the first time the state has taken out such a loan. California borrowed $10.7 billion from the federal government during the Great Recession that it just finished paying back in 2018, including hundreds of millions of dollars in interest. As of now, this appears to be California’s best option to stay afloat during what has become the highest period of unemployment since the Great Depression. Regardless, we can appreciate the reprieve and aid offered by the CARES Act.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include real estate issues, business interruption losses, and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Seldom Defeated on the Field, U.S. Women’s National Soccer Team Suffers Tough Setback in Equal Pay Lawsuit

Posted on: May 5th, 2020

By: Jeffrey A. Hord

The iconic U.S. Women’s National Soccer Team (USWNT) is rarely handed a defeat on the soccer pitch, having won four FIFA Women’s World Cup titles and four Olympic gold medals in the past 30 years. However, last Friday, a federal district court judge dismissed the USWNT’s claims under the Equal Pay Act (EPA) in its ongoing lawsuit against the United States Soccer Federation (USSF).  

In its lawsuit, the USWNT alleged different types of discriminatory treatment, but the core of the lawsuit is that they were paid less than the U.S. Men’s National Soccer Team for performing similar work.  Asserting that the treatment violated the EPA (and Title VII), the USWNT sought more than $66 million in damages…or, the amount the men would have earned if the Men’s National Team had achieved the exact level of success the USWNT has attained in recent years.

In its motion for summary judgment, USSF argued that the players’ claims should be dismissed because both the Men’s National Team and the Women’s National Team had negotiated their own pay and working conditions in a series of collective bargaining agreements (CBA) which reflected the two groups’ different preferences.  For example, the USWNT’s CBA emphasized guarantees for the players in the form of fixed salaries, whereas the men’s CBA created a compensation structure much more heavily based on incentives. 

In granting USSF’s motion, Judge R. Gary Klausner effectively ruled that the USWNT voluntarily chose their own payment structure when negotiating the CBA and, while it may have turned out to be less lucrative, they are bound by the terms of the CBA. Judge Klausner also dismissed that portion of the USWNT’s Title VII claim which cited “turf disparity” as an example of allegedly unequal working conditions.  The Court found that, based on the USWNT’s evidence, there was no way a jury could conclude USSF had “intentionally discriminated against the USWNT” by subjecting them to substandard turf surfaces more frequently than the Men’s National Team. 

The only claims to survive Friday’s ruling were the players’ claims about unequal treatment with respect to travel conditions (specifically, charter flights and hotels) and support services (specifically, medical and training support).  Unless the case resolves, the case will now proceed to trial on those issues.

While it remains to be seen whether Judge Klausner’s Order will survive appeal, this ruling nonetheless reinforces a well-settled legal principle: courts will not allow a party to a contract – even Olympic heroes and World Cup champions – to escape the terms of a contract knowingly agreed upon.


[1] Under the EPA, female plaintiffs have the burden of showing they performed substantially equal work as their male counterparts, under similar working conditions, and that the male workers were paid more.

[2] A spokesperson for the USWNT has already confirmed the players’ intention to file an appeal to the Ninth Circuit.

An Era of Un-Road-Tested Drivers: What Parents and Their Insurers Need to Consider In Light of Georgia’s Changes to the Licensing Process During COVID-19

Posted on: May 5th, 2020

By: Wayne Melnick and Janeen Smith

Georgia’s on-the-road driving test joins the ever-growing list of changes to life as we know it as a result of COVID-19.   A new generation of drivers will be hitting the roads in Georgia soon, and they will not have taken any practical on-the-road test to get their licenses.  On April 23, 2020, Governor Brian Kemp waived the requirement for on-the-road tests until the Public Health State of Emergency is terminated citing social distancing requirements as the rationale for the waiver.  According to news sources, the road-test waiver will also alleviate a backlog of up to 30,000 applicants waiting to upgrade their learner’s permits to provisional driver licenses.     

Driving applicants are not getting a free pass as they will still be required to to satisfy all other statutory requirements for obtaining a license, i.e., a passing grade on the written test on driving safety and law, a certificate of completion of a 30-hour driver’s education course (for 16-year-olds); and, 40 hours of supervised driving time (for 17-year-olds).  Applicants can take advantage of Georgia’s waiver of the on-the-road test until June 12, 2020 when the twice-renewed state of emergency expires.

Georgia’s waiver of the on-the-road driving test has received widespread media attention.  It has been heavily criticized to the extent the waiver relies on parents executing Driving Experience Affidavits certifying their children have enough experience to obtain a license.  To some extent, Georgia’s licensing process has always involved a degree of trust.  Whether Georgia’s group of drivers who skipped the on-the-road test are any less safe than their tested counterparts remains to be seen.  After all, sources show roughly 80% of applicants pass the over-the-road test during their first attempt. 

That being said, cutting out an independent third-party’s assessment of a young driver’s readiness for the road could nevertheless have serious liability implications for parents and their insurers.  Arguably, the waiver of an on-the-road test heightens the importance of a parent’s execution of the Driving Experience Affidavit as it is currently the only assessment of a young driver’s actual abilities.  It does not take much imagination to conceive of the liability ramifications for parents. 

Consider negligent entrustment, a liability theory predicated on a vehicle owner’s “actual knowledge” that the individual entrusted with the vehicle is either incompetent or habitually reckless.  A claim of negligent entrustment is always a fact-intensive inquiry.  But, Georgia parents with minors licensed during this period of loosened licensing requirements will likely face heightened scrutiny for their children’s accidents.   

How can parents minimize their exposure during these unprecedented times? And how can insurers help minimize their risk by alerting their insureds with soon-to-be-licensed teens? All things considered; the answer is much the same way as they would before.  Our recommendations are:

  • Lead by example and always practice safe driving habits;
  • Instill the importance of being observant.  Studies show 50% of driver-error crashes are caused by a lack of scanning surroundings, being distracted, or failing to reduce speed in response to other drivers on the road;
  • There is no substitute for practice.  The law requires your child to have 40 hours of practice, but you ultimately make the decision as to whether your child may need more practice;
  • Does your child think he or she is ready for a driver’s license?

Ultimately, there is no way to make your young driver (or yourself) liability proof.  However, there are many ways to minimize risk.  Georgia’s ditching of its on-the-road test could simply be a waiver of a technicality; or it could provide to be a breeding ground for creative liability arguments.  Our intent is to continue monitoring developments on this front and to keep you appraised of ways to minimize risk. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include real estate issues, business interruption losses, and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Insurers Brace For “Huge” Volume of Business Interruption Suits

Posted on: May 4th, 2020

By: Kevin Kenneally, Michael Giunta & Janet Barringer

“The amount of litigation that is going to be generated…is gonna be huge.”Warren Buffett

At the annual meeting of Berkshire Hathaway in Omaha, Nebraska this past weekend, company chairman Warren Buffett said the insurance industry is preparing for a large volume of costly Business Interruption and related suits by insureds, reported the Wall Street Journal on Monday, May 4, 2020.   Berkshire Hathaway has substantial holdings in insurance companies and is an industry leader.  Buffett discussed many corporate policies do not cover Business Interruption, but because of legislative efforts to expand coverage for claims related to COVID-19, Buffett predicted that “the amount of litigation is going to be generated…is gonna be huge”, according to the newspaper.

Officials in several states, including Massachusetts and New Jersey, have proposed legislation to cover losses arising from Business Interruption related to COVID-19.  In Massachusetts, the proposed legislation would also allow insurers to apply for reimbursement for the costs through the Division of Insurance and allow the Division of Insurance to reimburse licensed insurers selling Business Interruption coverage.  While many businesses already purchased Business Interruption insurance prior to the pandemic, such coverage does not cover communicable diseases such as COVID-19.  Prior to this current pandemic, to obtain coverage for Business Interruption losses, businesses must show direct physical loss to property to prevail on a Business Interruption claim.  The proposed legislation in Massachusetts would require insurance to pay the claims for business interruption directly or indirectly resulting from COVID-19, while creating a means for the state government to reimburse insurers and recover those state funds after the health pandemic ends.

Litigation already has been initiated in federal courts in California, among other states, seeking declaratory judgment that insurance coverage for Business Interruption losses applies in the current public health crisis and alleging bad faith against the insurance carriers for denial of the claims, despite the definitions in the form policies. 

If you have any questions or would like more information, please contact Kevin Kenneally [email protected], Michael Giunta [email protected] or Janet Barringer [email protected]

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include real estate issues, business interruption losses, and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Massachusetts Enacts Legislation Authorizing Virtual Notarization During COVID-19 State of Emergency

Posted on: April 30th, 2020

By: Jennifer Markowski

On April 27, 2020, Governor Baker signed into law An Act Providing for Virtual Notarization to Address Challenges Related to COVID-19 (the “Virtual Notarization Act” or the “Act”). In doing so, Massachusetts joins a number of other states, including Rhode Island, Pennsylvania, Connecticut, New Jersey, New York, New Hampshire and Georgia (among others), in adopting temporary measures to permit virtual notarization during the COVID-19 pandemic. The Massachusetts Virtual Notarization Act shall remain in effect until three (3) business days after Governor Baker’s March 10, 2020 declaration of state of emergency terminates and permits a duly authorized notary public to virtually notarize signatures during this time. According to the Act, notaries shall adhere to the following protocols when performing an acknowledgment, affirmation, or other notarial act using real-time video conferencing:

  • Both the notary and the signer must be physically located within Massachusetts and the signer must swear under the pains and penalties of perjury as to his or her location.
  • The notary must observe the signing of the document.
  • The signer must verbally assent to the recording of the video conference.
  • The signer must disclose any other person present in the room and make that person viewable to the notary.
  • The signer must provide the notary with satisfactory evidence of identity per M.G.L. ch. 222, § 1. If the notary is reviewing government-issued identification, the signer must visually display the front and back of the identification to the notary and then send a copy of the identification (front and back) to the notary, which will be maintained securely and confidentially for ten (10) years.
  • The notary must indicate in the notarial certificate that the document was notarized remotely under the Act and indicate the county in which the notary was located at the time the notarial act was completed.
  • After the video conference, the signer must deliver the original executed documents to the notary.
  • The notary must make an audio and video recording of the notarial act and maintain the recordings for ten (10) years.

In addition to the preceding list of requirements, there are two additional steps to be taken for any documents executed in the course of a real estate transaction. If the signer is not personally known to the notary, during the initial video conference the signer must display a second form of identification containing the signer’s name. Another government-issued identification, credit card, social security card, tax or utility bill dated within 60 days of the video conference are acceptable forms of identification.  Additionally, upon receipt of the executed document(s), the notary and signer must engage in a second video conference during which the signer verifies to the notary that the document received by the notary is the same document executed during the first video conference. The signer must again disclose any other person present in the room and make him or her viewable to the notary.

The notary must also execute an affidavit that provides that he or she has:

  • Received a copy the signer’s identification and visually observed it during the video conference with the principal, if applicable;
  • Obtained the signer’s verbal assent to record the video conference;
  • Taken the signer’s affirmation that he or she was physically present within Massachusetts; and
  • Been informed of and noted on the affidavit any person present in the room and included a statement of the relationship of any person to the signer.

The notary shall retain the affidavit for ten (10) years.

The Act does not alter or amend the requirement in Massachusetts that the closing of a transaction involving a mortgage or other conveyance of title to real estate may only be conducted by an attorney duly admitted to practice law in the Commonwealth.

If a notary chooses to notarize documents under the Virtual Notarization Act, it is advisable to confirm with the client that a virtually notarized document is acceptable.  Additionally, it is also advisable to confirm that any applicable errors and omissions policy will cover professional acts involving a virtual notarization.

If you have any questions or would like more information, please contact Jennifer Markowski at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include re-opening the workplace, protecting business interests, shelter in place orders and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

The Eight-Corners Rule is Deep in the Heart of Texas

Posted on: April 28th, 2020

By Kristin Inguslrud

Under the “eight-corners rule,” an insurer’s duty to defend is determined by comparing the allegations in the complaint with the terms and conditions of an insurance policy. Application of the eight-corners rule takes the allegations of the claim at face value, without regard to the truth or falsity of the allegations, and it necessarily excludes consideration of extrinsic evidence.

On March 20, 2020, the Texas Supreme Court published an opinion rejecting an attempt to create an exception to the eight-corners rule in Richards v. State Farm Lloyds, 63 Tex. Sup. J. 614, 2020 Tex. LEXIS 236 (Tex. 2020).  Richards concerned an insurer’s duty to defend an automobile collision suit. The U.S. District Court for the Northern District of Texas trial court granted summary judgment in favor of the insurer, which had denied coverage based on extrinsic evidence regarding the place of the collision and residency of the injured party. 

The district court held that the eight-corners rule did not apply because the subject policy did not include a provision agreeing to defend “groundless, false or fraudulent” claims.  On appeal, the U.S. Court of Appeals for the Fifth Circuit certified the question to the Texas Supreme Court.

The Texas Supreme Court reversed the district court’s ruling. The court declined to find this exception in the eight-corners rule and rejected the assertion that the eight-corners rule is predicated on the inclusion of a groundless-claims clause. The court noted that the duty to defend has never turned on the presence or absence of a groundless-claims clause.  The court stated that parties are free to contract out of the eight-corners rule but that the policy language here failed to do so.

The holding in Richards was limited to the question of whether the absence of a groundless-claims clause affects application of the eight-corners rule. 

In one of the earliest Texas opinions to consider a proposed exception to the eight-corners rule, International Serv. Ins. Co. v. Boll, 392 S.W.2d 158, 160 (Tex. Civ. App.–Houston 1965, writ ref’d n.r.e.), the court evaluated an auto insurer’s duty to defend an auto accident suit brought against the insured, who was the father of the driver. The underlying suit did not identify the driver by name, but extrinsic evidence established that the driver was the insured’s son, in which case the claim would not be covered. The court admitted the extrinsic evidence concerning the driver’s identity and found no duty to defend. The extrinsic evidence did not contradict any allegation of the underlying facts. 

In Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 531 (5th Cir. 2004), the Fifth Circuit (applying Texas law) ventured an Erie guess and speculated that the Texas Supreme Court, if it were to recognize an exception to the eight-corners rule, would do so only if both these conditions are met: (1) it is initially impossible to discern whether coverage is potentially implicated, and (2) the extrinsic evidence goes solely to a fundamental issue of coverage which does not concern the truth or falsity of any facts alleged in the underlying case.

In 2006, the Texas Supreme Court acknowledged the Northfield opinion but issued a narrow ruling in GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305 (Tex. 2006), disallowing extrinsic evidence intended to controvert factual allegations in the underlying complaint. The GuideOne opinion examined the liability insurer’s duty to defend a church where a church member filed a sexual misconduct lawsuit against the church and a youth minister. The insurer sought to admit extrinsic evidence regarding the youth minister’s dates of employment as they did not align with the policy period. The court excluded the evidence on the grounds that it contradicted the underlying complaint’s allegation that the youth minister assaulted the claimant during the policy period. However, the court acknowledged the possibility that an exception to the eight-corners rule might apply under different facts. In both GuideOne and Richards, the court issued rulings upholding the eight-corners rule based on the record before it but did not take a position on other potential exceptions.

If you have any questions or would like more information, please contact Kristin Ingulsrud at [email protected].

Governor Kemp Issues Comprehensive Executive Order Reopening And Impacting Businesses in Georgia

Posted on: April 28th, 2020

By: Andrew Kim

On April 23, 2020, Governor Brian Kemp issued an Executive Order that provides new and extensive guidance for businesses across Georgia, including restaurants, bowling alleys, theaters, childcare facilities and private social clubs, that are currently operating or seeking to re-open to in-person services after being closed by a previous Order by the Governor.

The general effective date of the Order begins on May 1, 2020 at 12:00 a.m. and ends on May 13, 2020 at 11:59 p.m., unless otherwise provided in the Order.

The Order spans 26 pages so any business operating in Georgia should review the Governor’s executive action to ensure it knows how it applies to its business, but below are some highlights: 

A.        General Provisions of the Executive Order:

1.         Shelter-In-Place Still Is In Effect For Certain Residents

Initially, it is important to note that, while the Order primarily addresses what businesses must do if they want to remain open, it also makes clear that certain residents of the State of Georgia are required to shelter in place.  Those residents are the following:

  • 65 years old or older
  • Living in nursing home or long-term care facility
  • Chronic Lung Disease
  • Moderate to severe Asthma
  • Severe heart disease
  • Immunocompromised (e.g., cancer treatment, smoking, bone marrow or organ transplant, poorly controlled HIV/AIDS)
  • Severe obesity
  • Those with diabetes, liver disease, chronic kidney disease undergoing dialysis

Those subject to the shelter-in-place restrictions can, however, conduct or participate in “Essential Services,” perform “Necessary Travel,” perform “Minimum Necessary Activities to maintain the value of a business” and perform work for a “Critical Infrastructure” business.  All of the above-quoted terms are specifically defined in the Order. 

2.         Businesses Are Limited To The Number Of Persons Physically Present

Unless a business is considered to be “Critical Infrastructure,” no business (including non-profit organizations, county and municipal government) shall allow more than ten (10) persons physically present at a Single Location if, to be present, persons are required to stand or be seated within six (6) feet of any other persons.

However, “groups of more than ten (10) people are permitted if their grouping is transitory or incidental, or if their grouping is the result of being spread across more than one Single Location.”

The Executive Order defines Single Location as, “a space where all persons gathered cannot maintain at least six (6) feet of distance between themselves and any other person.”

B.        Mandates for Restaurants Effective April 27, 2020:

The Executive Order allows restaurants to again provide dine-in services effective Monday, April 27, 2020, but does not permit them to have more than ten (10) patrons in the restaurant per 500 square feet of public space. The spaces that must be considered when calculating square footage include waiting areas and bar areas, but do not include hallways, restrooms; and spaces closed to patrons.

Additionally, the Order imposes several mandates on restaurants if they want to provide dine-in-services, including the following (this is not the entire list, but a highlight of the major obligations):

  1. Screen and evaluate workers who exhibit signs of illness, such as a fever over 100.4 degrees Fahrenheit, cough, or shortness of breath;
  2. Require all employees to wear face coverings at all times. Such coverings shall be cleaned or replaced daily;
  3. Require workers who exhibit signs of illness to not report to work or to seek medical attention. Per existing U.S. Food and Drug Administration Food Code requirements, employees who are sick should remain home. If an employee becomes ill or presents signs of illness at work, the operator should identify the employee’s condition during a pre-work screening and send the employee home.
  4. Implement staggering shifts for all possible workers;
  5. Where possible, stagger workstations to avoid employees standing adjacent to one another or next to each other. Where six (6) feet of separation is not possible, consider spacing options that include other mitigation efforts with increased frequency of cleaning and sanitizing surfaces;
  6. Increase physical space between workers and patrons and limit contact between wait staff and patrons;
  7. Discontinue use of salad bars and buffets;
  8. If providing a “grab and go” service, stock coolers to no more than minimum levels;
  9. Remove items from self-service drink, condiment, utensil, and tableware stations and have workers provide such items to patrons directly wherever practicable;
  10. Between diners, clean and sanitize table condiments, digital ordering devices, check presenters, self-service areas, tabletops, and commonly touched areas, and discarding single-use items;
  11. The use of disposable paper menus is strongly encouraged, which should be discarded after each patron use. Otherwise, businesses subject to this Section shall clean and sanitize reusable menus between each use by a patron. Non-touch menus are also acceptable for use;
  12. Update floor plans for common dining areas, redesigning seating arrangements to ensure at least six (6) feet of separation from seating to seating. Utilize physical barriers on both seating when available;
  13. Limit party size at table to no more than six (6);
  14. Post signage on entrances that no one with a fever or symptoms of COVID-19 is permitted in the facility;
  15. Where practicable, physical barriers such as partitions or Plexiglas at registers should be used;
  16. Do not allow patrons to congregate in waiting areas or bar areas. Design a process to ensure patron separation while waiting to be seated that can include floor markings, outdoor distancing, or waiting in cars;
  17. Mark ingress/egress to and from restrooms to establish paths that mitigate proximity for patrons and staff;
  18. Where practicable, take-out and curbside pick-up services should be prioritized over dine-in services; and
  19. All restaurant or dining room playgrounds shall be closed.

It is important to note that none of these mandates apply to the operation of dining services in:

  • Hospitals
  • Healthcare facilities
  • Nursing Homes
  • Or other long-term care facilities.

C.        Guidance for Businesses Defined as Critical Infrastructures Effective May 1, 2020:

The Executive Order also requires that, effective May 1, 2020 (and through May 13, 2020), Critical Infrastructure businesses that continue in-person operations implement measures which mitigate the exposure and spread of COVID-19.  The Order does not mandate any specific measures, but instead identifies various actions that such a business can (and should) take to the maximum extent possible.

  1. Screening and evaluating workers who exhibit signs of illness, such as a fever over 100.4 degrees Fahrenheit, cough, or shortness of breath;
  2. Disinfecting common surfaces regularly;
  3. Practice social distancing;
  4. Requiring hand washing or sanitation by workers at appropriate places within the business location;
  5. Permitting workers to take breaks and lunch outside, in their office or personal workspace, or in such other areas where proper Social Distancing is attainable;
  6. Implementing teleworking for all possible workers;
  7. Implementing staggered shifts for all possible workers;
  8. Holding all meetings and conferences virtually, wherever possible;
  9. Discouraging workers from using other workers’ phones, desks, offices, or other work tools and equipment;
  10. If in use, open sales registers must be at least six (6) feet apart;
  11. Point of sale equipment should be frequently cleaned and sanitized;
  12. Placing notices that encourage hand hygiene at the entrance to the workplace and in other workplace areas where they are likely to be seen; and
  13. Suspending the use of Personal Identification Number (PIN) pads, PIN entry devices, electronic signature capture, and any other credit card receipt signature requirements to the extent such suspension is permitted by agreements with credit card companies and credit agencies;

D.        Measures for Non-Critical Infrastructure Businesses Effective May 1, 2020:

Effective, May 1, 2020, Non-Critical Infrastructures continuing their in-person operations must adhere to various measures, including the following:

  1. Screening and evaluating workers who exhibit signs of illness, such as a fever over 100.4 degrees Fahrenheit, cough, or shortness of breath;
  2. If a retail business, posting a sign on the storefront stating that individuals who have a fever or other symptoms of COVID-19 shall not enter the store;
  3. Requiring workers who exhibit signs of illness to not report to work or to seek medical attention;
  4. Disinfecting common surfaces regularly;
  5. Requiring hand washing or sanitation by workers at appropriate places within the business location;
  6. Practice social distancing at work
  7. Permitting workers to take breaks and lunch outside, in their office or personal workspace, or in such other areas where proper social distancing is attainable;
  8. Implementing teleworking for all possible workers;
  9. Implementing staggered shifts for all possible workers;
  10. Holding all meetings and conferences virtually, wherever possible;
  11. Discouraging workers from using other workers’ phones, desks, offices, or other work tools and equipment;
  12. Placing notices that encourage hand hygiene at the entrance to the workplace and in other workplace areas where they are likely to be seen;
  13. For retailers and service providers, providing for alternative points of sale outside of buildings, including curbside pick-up or delivery of products and/or services if an alternative point of sale is permitted under Georgia Law;
  14. Open sales registers must be at least six (6) feet apart;
  15. Increasing physical space between workers and patrons; and
  16. Suspending the use of Personal Identification Number (PIN) pads, PIN entry devices, electronic signature capture, and any other credit card receipt signature requirements to the extent such suspension is permitted by agreements with credit card companies and credit agencies.

The Executive Order also recommends all Critical and Non-Critical Infrastructures that continue their in-person operations adhere to the following measures when practicable:

  1. Providing Personal Protective Equipment as available and appropriate to the function and location of the worker within the business location;
  2. Providing disinfectant and sanitation products for workers to clean their workspace, equipment, and tools; and
  3. Increasing physical space between workers’ worksites to at least six (6) feet.

The April 23, 2020, Executive Order defines Personal Protective Equipment as: “surgical masks, N95 masks, respirators, other facemasks, protective gloves, protective clothing, protective garments, and shoe coverings.”

E.        Measures for Retail Businesses and Food Establishments Effective May 1, 2020:

Effective May 1 and running through May 13, 2020, all retail businesses, which includes Food Establishments like Retail and Wholesale Grocery Stores, must implement the following additional measures:

  1. Limiting the number of patrons inside the store to 50% of fire capacity occupancy or eight (8) patrons per 1,000 square feet;
  2. Encouraging patrons to use hand sanitizer upon entering;
  3. Encouraging non-cash payments when possible;
  4. Sanitizing entrance and exit doors at least three (3) times per day;
  5. Encouraging workers to report any safety and health concerns to the employer;
  6. Installing protective screens or other mitigation measures where worker-patron interactions are likely; and
  7. Providing additional hand sanitizer within the business.

The Executive Order also requires that these retail businesses implement additional measures where practicable. The measures that the Executive Order recommends, to the maximum extent practicable, include:

  1. Schedule specific hours of operation for vulnerable populations to shop without other patrons;
  2. Reducing store hours to allow for increased cleaning and sanitation while the store is closed;
  3. Enacting policies and procedures to encourage social distancing for patrons and employees. Such measure may include:
    1. Protective Plexiglass screens at service counters and at cash registers;
    2. Decals on the floor or aisles with messaging on social distancing;
    3. Signs throughout the store giving visuals on social distancing;
    4. Limited occupancy if store becomes too crowded; and
    5. Use of one-way aisles.
  4. Providing Personal Protective Equipment as available and appropriate to the function and location of the worker within the business location;
  5. Encouraging patrons to wear face coverings;
  6. Utilizing in-store messaging to educate and remind patrons and employees on recommended hygiene and social distancing;
  7. Discontinuing sampling or cooking stations;
  8. Closing self-service salad bars and buffets;
  9. Adding additional staff to specifically oversee increased sanitation of grocery carts, and other high-touch areas such as door handles, point of sales equipment, conveyor belts, and other surfaces;
  10. Checking restrooms regularly, cleaning and sanitizing based on frequency of use, and ensuring adequate supply of soap and paper towels at all times;
  11. Allowing time for frequent hand washing for employees, including cashiers, that interact directly with patrons;
  12. Increasing or add hand sanitizing stations around stores for patrons and employees; and
  13. Procuring options with third-party cleaning companies to assist with the increased cleaning demands as needed.

The April 23, 2020, Executive Order specifically excludes the above measures for the following retail businesses:

  • Food Processing Plants;
  • Wholesale Sandwich manufacturers; and
  • Wholesale Salad manufacturers.

F.         Additional Measures for Gyms and Fitness Centers Effective Immediately:

In addition to the measures imposed on the other businesses, Gyms and Fitness Centers are required to implement the following measures immediately (through May 13, 2020):

  1. Placing signage at any entrance to instruct patrons that they cannot enter if they have been diagnosed with COVID-19, had symptoms of COVID-19, or had contact with a person that has or is suspected to have COVID-19;
  2. Placing signage at any entrance and throughout the facility to instruct patrons of the enhanced sanitation procedures, Social Distancing requirements, and other instructions and limitations, as applicable, set forth below;
  3. Screening patrons at entrance. Patrons exhibiting a temperature greater than 100.4 degrees Fahrenheit, cough, shortness of breath, or other respiratory symptoms shall not be permitted to enter;
  4. Limiting occupancy to enforce Social Distancing requirements and to prohibit Gatherings;
  5. Utilizing contactless forms of patron check-in;
  6. Providing hand sanitizer stations for patrons and encouraging use;
  7. Providing sanitation wipes at or near each piece of equipment and requiring users to wipe down the equipment before and after use;
  8. Requiring workers to patrol patron areas to enforce the equipment wipe-down policy and conduct additional cleanings during times when equipment is not being used;
  9. Limiting use of cardio machines to every other machine to maintain acceptable Social Distancing between users;
  10. Enforcing Social Distancing and prohibiting congregating between non-cohabitating patrons. Patrons should be encouraged to conduct their workout and exit the facility without unnecessary delay;
  11. Halting the provision of group classes;
  12. Halting the provision of in-facility child care services;
  13. Closing the following facilities and equipment within a gym or fitness center:
    1. Pools
    2. Basketball courts
    3. Group sport areas
    4. Hot-tubs
    5. Saunas
    6. Steam rooms
    7. Tanning beds
  14. Limit locker room use and avoid use if possible;
  15. Requiring patrons to spray showers with a provided cleaning spray after use; and
  16. Requiring workers to clean and sanitize bathrooms and locker rooms regularly throughout the opening hours in addition to the regular cleaning schedule.

G.        Additional Measures for Body Art Studios, Hair Salons, Estheticians, and Other Businesses Effective Immediately:

The April 23, 2020, Executive Order also issues additional measures for the following businesses, effective immediately (through May 13, 2020):

  • Body Art Studios, pursuant to Code Section 31-40-2
  • Businesses registered pursuant to Code Sections 43-10-11 and 43-10-18
    • Beauty Shops
    • Beauty Salons
    • Barber Shops
    • Schools of Cosmetology
    • Schools of Hair Design
    • Schools of Esthetics
    • Schools of Nail Care
    • Schools of Barbering
  • Individuals who, for compensation, engage in the practice of esthetics (massages, trims, dyeing, etc.), or cosmetic skincare, pursuant to Code Section 43-10-1(8)
  • Hair Designers, pursuant to Code Section 43-10-1(9)
  • Persons who practice Massage Therapy, pursuant to Code  43-24A-8; and
  • Tanning Facilities, as defined by Code Section 31-38-1(6)

The below measures are mandatory for the businesses listed above:

  1. Providing services by appointment only. Walk-in patrons should not be allowed;
  2. Patrons should be required to sanitize their hands upon entering the facility and before any treatment;
  3. Providing hand sanitizer or sanitization wipes to patrons upon arrival;
  4. Posting signs at the entrance and at eye-level at each workstation stating that any patron who has symptoms of COVID-19 must reschedule their appointment;
  5. Allowing only one (1) patron per service provider in the business at any one time,
  6. Allowing one (1) parent to be within a facility if a minor child is receiving a haircut;
  7. Requiring patrons to wait in car in his or her car until service provider is ready;
  8. Staggering use of every-other workstation or spacing workstations more than ten (10) feet apart, whichever option is practicable given the facility’s configuration;
  9. Staggering work schedules so that no more than 50% of the normal number of employees providing services will be in the business at a time;
  10. Requiring all employees to wear Personal Protective Equipment as available and appropriate to the function and location of the worker within the business location;
  11. Sanitizing all equipment, chairs, and tables used by employees and patrons between each client visit;
  12. Utilizing disposable materials and supplies as much as practicable according to state rules and regulations; and
  13. Training all employees on additional measures both verbally and in writing.

H.        Additional Measures for Theaters Effective May 1, 2020:

In addition to the above applicable requirements, indoor movie theaters and cinemas that choose to operate from May 1, 2020 to May 13, 2020 must implement the following additional measures:

  1. Each party of patrons must be seated at least six (6) feet apart. No party seated together may number more than six (6) individuals;
  2. At least one usher must be used in each theater room before and at some point, during each showing to ensure that proper Social Distancing protocol is enforced;
  3. Seats, armrests, handrails, doors, doorknobs, and door handles in each theater must be thoroughly sanitized before and after each showing;
  4. Tape must be applied to floors at ticket counters and concession stands to enforce proper Social Distancing protocol for patrons who are waiting in line;
  5. Restrooms must be cleaned and disinfected regularly, and touchpoints must be cleaned no less than once per hour;
  6. Foodservice areas must adhere to the same guidelines set for Restaurants and Dining Services;
  7. Party rooms located at theaters may not host parties or Gatherings; and
  8. Closing playgrounds and arcade rooms, if any.

I.          Additional Measures for Bowling Alleys Effective May 1, 2020

In addition to the above applicable requirements, bowling alleys that choose to operate from 12:00 a.m. May 1, 2020 to May 13, 2020, must implement the following additional measures:

  1. Placing signage at entrance and throughout the facility to instruct patrons of social distancing requirements and other instructions and limitations, as applicable;
  2. Providing hand sanitizer stations for patrons throughout the facility;
  3. Foodservice areas must adhere to the same guidelines set for Restaurants and Dining Services;
  4. Tape must be applied to floors at ticket counters and concession stands to enforce proper social distancing protocol for patrons who are waiting in line;
  5. Removing items from all self-service bowling ball, bowling shoe, and other bowling accessory stations and have workers provide such items to patrons directly;
  6. Allowing groups of six (6) patrons or less per lane;
  7. Staggering use of lanes so that only every other lane or every third land is in use to maintain Social Distancing between groups of patrons. Each party of patrons must be seated at least six (6) feet apart;
  8. Scorekeeping machines, ball returns, tables, seats, and other fixtures at each bowling lane must be thoroughly sanitized before and after each use;
  9. Bowling balls and bowling shoes must be thoroughly sanitized before and after each use;
  10. Party rooms located at bowling alleys may not host parties or groups of more than 10 people if they are not at least six feet apart; and
  11. Closing playgrounds and arcade rooms, if any.

J.         Measures for Businesses Performing Outdoor Work

People who perform work outdoors where regular contact with another person does not occur only need to practice social distancing and implement a sanitation process in accordance with the guidelines published by the Centers for Disease Control and Prevention.

The April 23, 2020, Executive Order lists the following businesses as examples of outdoor work:

  • Delivery Services
  • Contractors
  • Landscape Businesses
  • Agricultural Industry Services

K.        Measures Impacting Healthcare Businesses Effective Immediately

The Executive Order also includes provisions that apply to various healthcare businesses. The following provisions are effective immediately:

  • All persons, services, or entities delivering healthcare during the effective dates of the Order must follow the guidelines listed for Critical Infrastructure along with the additional Healthcare guidelines listed in the Order.
  • Dental practices and clinics continuing their in-person operations must not only adhere to the guidelines listed for Critical Infrastructures, but also adhere to the American Dental Association’s Interim Guidance for Minimizing Risk for COVID-19 Transmission and Interim Mask and Face Shield Guidelines.
  • Any previous previously issued Executive Order or rule that would prevent dental practices and clinics from providing the full scope of their services subject to the above requirements are suspended.
  • Licensed Optometrists and their staff continuing their in-person operations must not only adhere to the guidelines listed for Critical Infrastructures, but also adhere to the American Optometric Association’s Practice Reactivation Preparedness Guide and the Georgia Optometric Association’s COVID-19 guidelines for practices issued on March 17th and April 20th of 2020.
  • Any previous previously issued Executive Order or departmental rule that would prevent optometrists from providing the full scope of their services subject to the above requirements are suspended.
  • Licensed Opticians and their staff continuing their in-person operations must not only adhere to the guidelines listed for Critical Infrastructures, but also adhere to the Centers for Disease Control and Prevention’s Recommendations for Office Disinfection and Recommendations for Employers.
  • Any previous previously issued Executive Order or departmental rule that would prevent opticians from providing the full scope of their services subject to the above requirements are suspended.
  • Ambulatory Surgical Centers continuing their in-person operations must not only adhere to the guidelines listed for Critical Infrastructures, but also implement additional measures to prevent the spread of COVID-19. To the maximum extent practicable, these measures may include:
  1. Screening patients before visits and monitoring their health prior to starting surgery as party of the pre-operative procedure;
  2. Requiring staff to self-monitor and screen for viral symptoms daily;
  3. Continuing to use Personal Protective Equipment per the latest Centers for Disease Control and Prevention recommendations for all procedures;
  4. Following waiting room spacing guidelines, social distancing, face masking, and other recommended procedures for patients and visitors prior to entering the facility;
  5. Ensuring heightened disinfection to prevent and mitigate risk of spread;
  6. Ensuring patients have been medically cleared by their primary care physician where applicable;
  7. Balancing the needs of patient care with the risk of providing that care by prioritizing procedures for patients who have lower co-morbidities and surgical risks and procedures accompanied by lower risk with regard to airborne transmission and those with minimal risk of unintended hospital admissions;
  8. Performing regular rapid COVID-19 testing on providers and employees where feasible; and
  9. Performing COVID-19 testing on patients suspected to be experiencing COVID-19 and factoring the results of such testing into clinical decisions as to whether or not to proceed with procedures.
  10. As with the above sections, any previously issued Executive Order or departmental rule that would prevent ambulatory surgical services from providing the full scope of their services subject to the above requirements are suspended.

L.        Enforcement of Executive Order

The Executive Order allows “any law enforcement officer, after providing reasonable notice and issuing at least two (2) citations for violations of Code Section 38-3-7, is authorized to mandate the closure of any business, establishment, corporation, non-profit corporation, or organization not in compliance with this Order for a period not to extend beyond the term of this order.”

M.       So What Next?

Employers that are planning on reopening (or continuing to operate) their business based on Governor Kemp’s April 23, 2020 Order should immediately begin assessing the health and safety protocols they have in place now for employees and what additional steps they need to take to comply with the April 23 Order.  Further, we recommend that employers consult with their counsel to evaluate any industry or location-specific measures that should be taken to reduce any concerns by customers of contracting COVID-19 when visiting the employer’s establishment. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include re-opening the workplace, protecting business interests, shelter in place orders and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Massachusetts: Relief Funds For Nursing Home & Other Long-term Care Facilities Fighting COVID-19

Posted on: April 27th, 2020

By: Janet Barringer and William Gildea

Massachusetts Governor Charlie Baker announced on April 27, 2020 the Commonwealth will allocate $130 Million to nursing homes and other long-term care facilities in Massachusetts to assist in the ongoing battle against COVID-19. The COVID-19 Nursing Facility and Accountability Support document states “[n]ursing facilities account for more than half of COVID-19 related deaths in the state.” The rapid rate of infection and mortality is driven by the “health status of residents, lack of infection control sophistication and for crisis management, substantial staffing issues (up to 20-40% of call out rates), and difficulty cohorting residents to decrease transmission.”

Nursing homes and other long-term care facilities should take note of this new assistance offered by the Commonwealth to help the battle against COVID-19. The Press Release provides the following:

  • Funding will support staffing costs, infection control and personal protective equipment (PPE);
  • Funding is dependent on required COVID-19 testing of all staff and residents, regular infection control audits, appropriate allocation of funding and the public release of facility performance and funding use;
    • Facilities must test all staff and residents, and report results to the Commonwealth. Facilities are also encouraged to identify and pursue testing avenues with area hospitals, EMS or other providers. The state’s mobile testing program is available for those facilities unable to set up testing.
    • All nursing facilities will be regularly audited in-person for infection control and accountability, and each will receive a baseline audit during the first two weeks of May. These clinical audits will be conducted using a 28-point Infection Control Checklist, based on DPH, CDC and industry guidance. This checklist includes infection control, PPE supply and usage, staffing, clinical care, and communication requirements.
    • Frequency of audits is dependent upon a variety of factors including: Audit Rating, historically documented infection control issues, staffing levels based on industry standard hours per patient day of care and call-out rates, level of COVID-19 infection, and quality rating by the Nursing Facility Taskforce.
  • Facilities will be scored into three ratings: in adherence (green), in adherence but warrants inspection (yellow) and not in adherence (red).
  • The Commonwealth will offer support for temporary staffing assistance for all nursing homes in need, including clinical response teams of 120 nurses and Certified Nursing Assistants deployed in teams of 10 during emergency situations, crisis management support and deployment of the Massachusetts National Guard;
  • All performance measures and funding use will be publicly reported using a mandatory reporting template, and the Commonwealth will provide consolidated information in the testing completion status by facility, COVID-19 case counts and mortality of staff and residents, and audit results. These reports will be due shortly after June 30th, and the Commonwealth will then compile and deliver a public report.
  • Funding is directly linked to an audit rating over time and, if qualified, will be dispersed biweekly over four “pay periods.”

Governor Baker promised to be “aggressive” in assisting long term care facilities impacted by COVID 19. The $130 Million in relief funds and associated steps for protection are examples of the care extended by Massachusetts to those who live and work in nursing homes and other long-term care facilities.

If you have any questions or would like more information, please contact Janet Barringer at [email protected] and William Gildea at [email protected].

CARES Section 18006 Encourages Schools to Retain Staff to the “Greatest Extent Practicable”

Posted on: April 27th, 2020

By: Tia Combs

As many schools around the country make the final decision to remain closed for the school year, it may be tempting to cut back on staff to save money for what is predicted to be a historic budget shortfall next year. However, the wisdom of that move may be lost when districts consider legislation recently passed by Congress.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act”). The lengthy piece of legislation gives financial benefits to seven primary groups: 1) individuals, 2) small businesses, 3) mid-size and larger companies, 4) hospitals and public health facilities, 5) children and families, through federal safety net programs, 6) state and local governments, and 7) providers of educational services.

Of particular interest to educational institutions is the Education Stabilization Fund. The fund provides over $30 billion dollars to educational institutions. Roughly $16.5 billion of the fund is allocated for distribution to elementary and secondary schools through the Elementary and Secondary School Emergency Relief Fund and the Governor’s Emergency Education Relief Fund. Distribution of these funds are contingent on the educational institutions fulfilling certain labor and employment related requirements. 

In particular, pursuant to Section 18006 of the Act states:

A local educational agency, State, institution of higher education, or other entity that receives funds under “Education Stabilization Fund,” shall to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to Coronavirus.

For K-12 educational institutions, this means that they must continue to pay employees and see that contractors (and their employees) are paid to the greatest extent possible and be prepared to explain any failure to do so.  Many state educational agencies have given advised local districts to do what they can to retain workers. For example, the Indiana Department of Education has advised districts: 

In the application for the CARES Act funding, the LEA must attest that it has been paying all employees and contractors during the closure or disruptions related to the coronavirus, or that it will begin doing so immediately. If LEAs are not able to attest to this fact, then it must provide a reasonable explanation beyond reasons related to cash flow (as tuition support has not been reduced) in order to be eligible for the CARES Act funding. IDOE considers the employees and contractors to include, but is not limited to, the following positions: teachers, administrators, counselors, social workers, nurses, paraprofessionals, bus drivers, custodians, food service, and administrative staff.

In light of Section 18006, districts considering staffing reductions should make those decisions in consultation with legal counsel so that the district’s ability to receive these federal funds is preserved.

If you have any questions or would like more information, please contact Tia Combs at [email protected].

Georgia’s first taste of COVID-19 lawsuits in long term care facilities

Posted on: April 27th, 2020

By: Shaun Daugherty

It has been highly publicized that long-term care facilities were devastated by the effects of COVID-19 on its residents and the filing of negligence suits against long-term care facilities in its wake was inevitable. Four such cases were filed in Fulton State Court on April 23, 2020. All of the cases involve the same facility, the same plaintiffs’ firm, and similar fact patterns and allegations. 

Each complaint alleges that the facility negligently failed to follow precautionary restrictions that were put in place at the facility starting on March 11, 2020. Coincidentally, that is the same date that the WHO declared a global pandemic and two days before President Trump declared a national emergency. In fact, if the allegations in the complaints are accurate, then these restrictions were implemented by the facility ten days before the CDC issued guidance to nursing homes and long-term care facilities. 

However, the claims appear to be centered on whether the restrictions were followed rather than their timely implementation. Plaintiffs claim that despite the imposition of the restrictions, employees failed to wear personal protective equipment and asymptomatic staff that were exposed to COVID-19 were permitted to continue to work. In each of these four cases, it is alleged that the residents tested positive for COVID-19 and died as a result. 

These appear to be the first cases in Georgia of their kind. However, earlier this month, a negligence and fraud case was filed in Washington state related to the well-publicized issues that occurred at the Life Care Center at Kirkland and the subsequent death of one of the residents. These Georgia cases will likely be the first to test Governor Kemp’s Executive Order that extended civil liability immunity. There are also a host of additional defenses that will likely be asserted related to timeliness, reasonableness, and, significantly, proximate cause. There is a recognized difference in dying with a diagnosis of COVID-19 and dying because of the disease.  Residents in these facilities were likely already suffering from a number of co-morbidities that placed them in the high-risk category to begin with.  Expert testimony in the many fields of medicine will likely become involved on both sides. 

There are also a host of additional defenses that will likely be asserted related to timeliness, reasonableness, and, significantly, proximate cause. There is a recognized difference in dying with a diagnosis of COVID-19 and dying because of the disease.  Residents in these facilities were likely already suffering from a number of co-morbidities that placed them in the high-risk category to begin with.  Expert testimony in the many fields of medicine will likely become involved on both sides. 

These cases will be watched closely by the legal community and will likely be the measuring sticks on causes of action and defenses for the expected onslaught of new claims that are on the way. 

If you have any questions or would like more information, please contact Shaun Daugherty at [email protected].

Insurer seeks declaration that COVID-19 claims for closure-related losses are not covered

Posted on: April 27th, 2020

By Barry Miller

Travelers Insurance Company wants a federal court to declare it has no duty to pay business income loss to a California law firm which claims that COVID-19 closures have caused it to lose revenue.

The ABA Journal reports that Travelers is seeking a declaratory judgment in the Central District of California. The lawsuit addresses claims from the Geragos & Geragos firm in Los Angeles, which says it has lost revenue from its law practice and rent from a tenant because of the closure of its own office, and California courts.

Travelers alleges that attorney Mark Geragos told a claims representative that the COVID-19 virus causes physical damages because other countries affected by the virus have fumigated public spaces. He also stated that scientists have detected the virus in aerosols and on lingering surfaces for some time.

Travelers seeks a declaration the claim does not fall within the policy’s grants of coverage for either “Business Income and Extra Expense” or “Civil Authority.”  Travelers alleges that Geragos’ claims do not trigger the policy’s Business Income and Extra Expense that requires that a loss was “caused by direct physical loss of or damage to property at the described premises.” Likewise, Travelers contends that the Civil Authority coverage requires that any government closure order result from “direct physical loss of or damage to property at locations, other than described premises, that are within 100 miles of the described premises.”

Even if COVID-19 claims triggered either coverage, Travelers says that the Virus and Bacteria Exclusion would apply. It also relies on exclusions for damage caused by Ordinance or Law, Pollution, and acts of a group, organization, or governmental body as bases for the declaratory relief.

FMG has been reporting on lawsuits filed by restaurants, retail outlets, and other businesses making claims for business interruption coverage due to COVID-19 closures. The Travelers action appears to be the first one filed by an insurer.

If you have any questions or would like more information, please contact Barry Miller at [email protected].

Governor Kemp Issues Executive Order Reopening Certain Businesses in Georgia

Posted on: April 22nd, 2020

By: Andrew Kim

On April 20, 2020, Governor Kemp signed an Executive Order that will impact certain businesses in Georgia. The new Executive Order reopens some businesses previously closed due to the Coronavirus pandemic and removes certain restrictions for other types of businesses as well.

Here are some key provisions:

Health-Related Practices and Services Not Subject to Minimum Basic Operations Restrictions:

The following practices and services are not subject to the Minimum Basic Operations restrictions. Instead, these practices and services “should consider implementing the operational guidelines provided in Executive Order 04.02.20.01 for Critical Infrastructure:”

  • Medical practices
  • Dental practices
  • Orthodontics practices
  • Optometry practices
  • Physical therapists
  • Ambulatory Surgical Centers
  • Physicians performing elective surgeries
  • Healthcare Institutions
  • Medical Facilities
  • Any and all other healthcare-related practices and services that have elected to cease operations because of the spread of COVID-19.

The Executive Order urges these practices and services begin treating patients as soon as possible in accordance with the Centers for Disease Control and Prevention guidelines, Centers for Medicare and Medicaid Services guidelines, and the provisions of his April 20, 2020 Executive Order to prevent the spread of COVID-19.

Reopening of Certain Businesses Effective April 24, 2020:

The Executive Order reopens the following businesses on Friday, April 24, 2020:

  • Gyms
  • Fitness Centers
  • Bowling Alleys
  • Body Art Studios
  • Businesses registered pursuant to Code Sections 43-10-11 and 43-10-18
    • Beauty Shops
    • Beauty Salons
    • Barber Shops
    • Schools of Cosmetology
    • Schools of Hair Design
    • Schools of Esthetics
    • Schools of Nail Care
    • Schools of Barbering
  • Individuals who, for compensation, engage in the practice of esthetics (massages, trims, dyeing, etc.), or cosmetic skincare.
  • Hair Designers
  • Persons who practice Massage Therapy

However, these businesses must implement the following in-person Minimum Basic Operations in order to reopen:

  1. Screening and evaluating workers who exhibit signs of illness, such as a fever over 100.4 degrees Fahrenheit, cough, or shortness of breath;
  2. Requiring workers who exhibit signs of illness to not report to work or to seek medical attention;
  3. Enhancing sanitation of the workplace as appropriate;
  4. Requiring hand washing or sanitation by workers at appropriate places within the business location;
  5. Providing personal protective equipment as available and appropriate to the function and location of the worker within the business location;
  6. Prohibiting gatherings of workers during working hours;
  7. Permitting workers to take breaks and lunch outside, in their office or personal workspace, or in such other areas where proper social distancing is attainable;
  8. Implementing teleworking for all possible workers;
  9. Implementing staggered shifts for all possible workers;
  10. Holding all meetings and conferences virtually, wherever possible;
  11. Delivering intangible services remotely wherever possible;
  12. Discouraging workers from using other workers’ phones, desks, offices, or other work tools and equipment;
  13. Prohibiting handshaking and other unnecessary person-to-person contact in the workplace;
  14. Placing notices that encourage hand hygiene at the entrance to the workplace and in other workplace areas where they are likely to be seen;
  15. Suspending the use of Personal Identification Number (PIN) pads, PIN entry devices, electronic signature capture, and any other credit card receipt signature requirements to the extent such suspension is permitted by agreements with credit card companies and credit agencies;
  16. Enforcing social distancing for non-cohabitating persons on their property;
  17. For retailers and service providers, providing for alternative points of sale outside of buildings, including curbside pickup or delivery of products and/or services if an alternative point of sale is permitted under Georgia law;
  18. Increasing physical space between workers and customers;
  19. Providing disinfectant and sanitation products for workers to clean their workspace, equipment, and tools; and
  20. Increasing physical space between workers’ worksites to at least six (6) feet.

The April 20, 2020 Executive Order includes the same language and restrictions from the previous April 2, 2020 Executive Order. This language and restriction states that all businesses, non-profits, and county and municipal governments, other than those defined as “Critical Infrastructure,” shall restrict gatherings to ten (10) individuals at a single location if “such gathering requires persons to stand or be seated within six (6) feet of any other person.”

Reopening of Other Businesses Effective April 27, 2020:

Governor Kemp’s April 20, 2020 Executive Order does not include any provisions that reopen or lift restrictions for:

  • Restaurant dine-in services;
  • Private Social Clubs; and
  • Theaters

However, during his press conference on April 20, 2020, Governor Kemp announced that the above businesses will be allowed to reopen on Monday, April 27, 2020, should those businesses comply with specific social distancing and sanitation mandates. The Governor’s Office will be issuing these additional mandates for these businesses in the next few days.

Governor Kemp stated in his press conference that the following businesses will remain closed:

  • Bars
  • Nightclubs
  • Operators of Amusement Park Rides
  • Live Performance Venues

So What Next?

Employers that are planning on reopening their business based on Governor Kemp’s April 20, 2020 Order should immediately begin assessing the health and safety protocols they have in place now for employees and what additional steps they need to take to implement the protocols identified by the April 20 Order.  Further, we recommend that employers consult with their counsel to evaluate any industry or location-specific measures that should be taken to reduce any concerns by customers of contracting COVID-19 when visiting the employer’s establishment. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include returning to the workplace, business interruption coverage and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Stay at Home Orders Under Attack – What are the Limits and Rights of State Governments?

Posted on: April 22nd, 2020

By: Marc Finkel

Faced with the uncertainty of navigating through a global pandemic, governors throughout the United States have issued a series of executive orders aimed at slowing the spread of the novel coronavirus.  Many of these executive orders have placed restrictions on our daily lives from the closure of schools to the closure of restaurants, movie theaters, and barbershops.  Since the beginning of March, as the number of positive cases of the novel coronavirus began to increase in different parts of the United States, the frequency of additionally restrictive executive orders aimed at “flattening the curve” of the novel coronavirus has increased as well.  Due to the varying degrees of restrictions that have been placed on some of our freedoms, there has been a recent uptick in court challenges to several of these executive orders. 

A recent illustration of this has started playing out in the State of Kansas, where Governor Laura Kelly issued Executive Orders 20-18 and 20-25 that modified prior executive orders placing certain restrictions on public activities and mass gatherings to include a prohibition against in-person religious gatherings of more than 10 people.  On April 11, 2020, the Kansas Supreme Court upheld Governor Kelly’s limitations on such in-person religious gatherings on state law grounds.  However, recently, United States District Court Judge for the District of Kansas, Hon. John W. Broomes, granted a temporary injunction on behalf of the First Baptist Church and Calvary Baptist Church that enjoins Executive Orders 20-18 and 20-25 from being further implemented on U.S. Constitutional grounds. 

In First Baptist Church, et al. v. Governor Laura Kelly, No. 20-1102-JWB, (April 18, 2020), Judge Broomes determined that the Plaintiffs met the standard for the issuance of a temporary restraining order by finding that Executive Orders 20-18 and 20-25 were not facially neutral in the restrictions it placed upon in-person religious assemblies.  The Court primarily based its decision on the fact that religious assembly was previously considered an essential public activity under the first wave of executive orders issued by Governor Kelly to combat the novel coronavirus pandemic in the State of Kansas, and that Executive Orders 20-18 and 20-25 were issued specifically to place restrictions on the right of in-person religious assembly.  The Court also found that the restrictions on the right of in-person religious assembly were likely not narrowly tailored, because the safety concerns that serve the basis of Executive Orders 20-18 and 20-25 are not dissimilar to safety concerns with respect to other secular mass gathering activities deemed essential under prior executive orders issued by Governor Kelly (e.g., mass gatherings at airports).  The Court noted, however, that those other secular mass gatherings are subjected to less restrictive conditions under Executive Orders 20-18 and 20-25.  Furthermore, as this is a matter that concerns a limitation on a person’s First Amendment rights, even if only for a minimal period of time, the Court found that the Plaintiffs risk irreparable injury for the purpose of obtaining a temporary restraining order.

Hearing on a permanent injunction as to Executive Orders 20-18 and 20-25 is scheduled for April 23, 2020.  The Court recognized the novel coronavirus presents an “unprecedented health crisis” that places on Governor Kelly an “immense and sobering responsibility” to protect the lives of Kansans.  Therefore, the Court in granting the temporary restraining order, expressly stated that it would “not issue any restraint, temporary or otherwise, if the evidence showed such action would substantially interfere with that responsibility.”  Accordingly, it is unclear whether the Plaintiffs will ultimately obtain a permanent injunction as to the implementation of Executive Orders 20-18 and 20-25.  In fact, a reading of the Court’s decision granting the temporary restraining order suggests that a more facially neutral limitation on the right to in-person religious assembly may pass constitutional muster.  This is a critical matter worth following, as the Court’s decision on whether to issue a permanent injunction will likely serve as a roadmap for deciding constitutional challenges to similar executive orders throughout the United States.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include returning to the workplace, business interruption coverage and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

State Governments Extend Limited Immunity to Healthcare Providers Engaged in Treatment of Coronavirus

Posted on: April 17th, 2020

By: Shaun Daugherty, Erin Lamb and Andy Treese

As doctors, nurses, respiratory therapists, and other healthcare providers have thrown themselves wholly into the challenge of fighting the coronavirus, some have asked whether they are exposed to new or additional exposure for medical negligence.  Governors and state legislators across the country are working to curtail such exposure by extending limited immunity to healthcare workers responding to coronavirus. 

In Georgia, Governor Kemp has issued an executive order designating employees, contractors and staff of hospitals and other healthcare facilities as “auxiliary emergency management workers” within the meaning of the Georgia Emergency Management Act.  The designation brings the workers under the ambit of O.C.G.A. § 38-3-35, which affords immunity to auxiliary emergency management workers engaged in emergency management activities, when they are complying or reasonably attempting to comply with the state’s emergency management code, regulations or emergency orders issued by state under the authority code, or with locally issued ordinances or emergency orders.  The immunity, although powerful, does not apply where a provider acts with “willful misconduct, gross negligence, or bad faith” and is therefore unlikely to complete preclude litigation.  Previously state courts have expressed a willingness to permit discovery to determine whether an individual has acted in bad faith, while other courts are reluctant to grant summary judgment even where the standard is gross negligence.

In New Jersey, where Covid-19 prompted the state Department of Public Health to issue “last resort guidance” to hospitals to address bioethical questions about rationing ventilators, Governor Phil Murphy has signed Senate Bill 2333, granting civil and criminal immunity to not only health care professionals treating Covid-19 patients, but also extending that immunity to health care facilities and health care systems, retroactive to March 9, 2020.  The Bill grants immunity to any act or omission taken in good faith by any of those people or entities, including but not limited to those engaging in telemedicine or telehealth, and in diagnosing or treating patients outside the normal scope of the professional or facility’s licensing, so long as such efforts are in support of “the State’s efforts in fighting the Covid-19 pandemic.” The bill further extends immunity to damages for injury or death “in connection with the allocation of mechanical ventilators or other scarce medical resources,” so long as the facility or system adopts and adheres to a “scarce critical resource allocation policy that at a minimum incorporates the core principles identified by the Commission of Health…”  The state senate was unable to hold hearings on the bill, but attached a statement that its intent was to grant immunity to all medical personnel supporting “the Covid-19 response.” The statement specifically notes, however, that the Bill does not grant immunity to medical care rendered in the ordinary course of medical practice, including orthopedic procedures, OB/Gyn services, and necessary cardiological procedures. The New Jersey immunity does not apply to acts constituting crimes, actual fraud, actual malice, gross negligence, recklessness, or willful misconduct.

As of this writing, Alabama, Arkansas, Arizona, Connecticut, Kentucky, Illinois, New Hampshire, Vermont and Michigan have taken similar measures, whether by legislative act or executive orders.  In New York, Governor Cuomo has extended limited immunity to healthcare providers by executive order, and legislative measures are pending.  No legislative action has been taken in Pennsylvania, though media reports indicate that advocacy groups are asking Governor Wolf for an executive order.

Please contact Shaun Daugherty at [email protected], Erin Lamb at[email protected] or Andy Treese at [email protected] if you have specific questions about the immunities afforded to healthcare workers engaged in coronavirus response.  The healthcare team at Freeman Mathis & Gary will continue to monitor the status of state and local responses to the coronavirus pandemic. 

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Supreme Court to Hear Arguments Remotely, Including TCPA Constitutional Challenge

Posted on: April 16th, 2020

By: Matthew Foree

This week, the United States Supreme Court announced that it would hear oral arguments remotely for the first time in its history.  The Court will hear oral arguments by telephone conference on certain dates in May in a limited number of cases that had previously been postponed.  The cases are to be assigned dates for argument after confirming counsel’s availability.

The Court’s press release provides that “[i]n keeping with public health guidance in response to COVID-19, the Justices and counsel will all participate remotely.”  Interestingly, the Court stated that it “anticipates providing a live audio feed of these arguments to news media” and that “[d]etails will be shared as they become available.”

Among the cases the Court is set to hear in May is Barr v. American Association of Political Consultants, Inc., which concerns a constitutional challenge to the Telephone Consumer Protection Act (“TCPA”).  The Court has just scheduled argument in the Barr case for Wednesday, May 6, 2020.The TCPA generally prohibits calls to a cellular telephone using either an “automatic telephone dialing system” (ATDS) or an “artificial or prerecorded voice,” unless the call is made with the prior express consent of the recipient.  In a 2015 amendment to the TCPA, Congress exempted from this prohibition calls “made solely to collect a debt owed to or guaranteed by the United States.” 

In 2016, the Respondents in Barr initiated a declaratory judgment action against the Federal Communications Commission (“FCC”) and the Attorney General, arguing that the TCPA’s content-based ban on protected speech violated the First Amendment.  They sought declaratory relief and an injunction restraining the Government from enforcing the ban against them.  The case made its way to the U.S. Court of Appeals for the Fourth Circuit, which found a First Amendment violation and determined that the government-debt exception was severable from the rest of the TCPA.    

As we have discussed previously, TCPA litigation often centers around whether calls were made using an ATDS.  The current litigation landscape concerning the interpretation of the definition of ATDS has caused a split in the Circuit Courts and generated significant confusion that continues to this day.  In Barr, Respondents argue that the TCPA’s automated call restriction, not just the government-debt exception, violates the First Amendment.  Accordingly, practitioners in this area are anxious for the ruling on this matter, particularly as it relates to how far the Supreme Court will go to resolve the constitutional issue, which can have a major impact on the statute and TCPA litigation moving forward.  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

COVID-19’s Cascading Impact on Corporate Finances and Loan Obligations: Key Issues Facing Lenders and Borrowers

Posted on: April 15th, 2020

By: Jill Dunn and Travis Cashbaugh

As COVID-19 continues to disrupt financial markets and businesses across the country, now is a good time for borrowers and lenders to review the terms of any loan documents to consider the impact of recent developments on their rights and obligations. FMG’s April 16th, 2020 Webinar, COVID-19’s Cascading Impact on Corporate Finances and Loan Obligations (click here to register), will address these issues in greater detail. In anticipation of the webinar, some key issues that lenders and borrowers should consider as they navigate the COVID-19 crisis are listed below.

Events/Developments that may trigger an event of default:

  • Financial Covenants.  Financial covenants are the promises or agreements entered by a borrowing party which set out various financial marks that gauge areas such as a borrower’s liquidity and cash flow. Lenders and borrowers will need to assess the impact of COVID-19 on borrowers’ ability to comply with their financial covenants. For borrowing based calculations such as EBITDA, a drop in revenue is likely to adversely impact compliance with financial covenants leading to breach or default. For borrowers who believe a violation of financial covenants is imminent given this crisis, it might be prudent to speak with lenders about the possibility of obtaining waivers and amendments to their financial covenants.
  • Liquidity. Many businesses, because of COVID-19, are experiencing considerable cash flow and liquidity challenges. Lenders and borrowers should consider whether the loan agreement permits the incurrence of additional debt (for example, through SBA loans) to address potential cash flow issues, whether such action requires other lenders to consent, and what the related documentation process involves.
  • Material Adverse Effect (MAE). This is a covenant in most commercial loans and lines of credit in the borrower’s representations and warranties section of the loan agreement.  Through the MAE, the borrower represents there has been no circumstances having a material adverse effect on assets, business or financial condition of the borrower since the date of the parties first signing the agreement. Representations and warranties are terms considered continuous, meaning the obligations extend beyond the time the agreement is signed. Businesses accessing their lines of credit to get through the COVID-19 crisis could be in a difficult situation as they determine whether they can represent to lenders no MAE has occurred. While whether COVID-19 constitutes a MAE is fact-specific and dependent upon the language of the agreement, lenders and borrowers should review the details of any MAE and determine any necessary reporting requirements.
  • Reporting and notification. Particularly relevant to the COVID-19 crisis, lenders may require current financial statements from borrowers. With cities and states under complete or partial lockdown, some borrowers (likely growing in number by the day) will face disruption issues in the delivery of required financial disclosures/reporting to lenders that could violate the information delivery covenant. Borrowers should review their obligations to provide proper notices under the agreement and meet any deadlines by which they must deliver any such information and notices.

If a borrower is in default, it may trigger remedies by the lender.  Sometimes, such remedies can also be triggered by failure to comply with the loan covenants. Although not an exhaustive list, below are common remedies available to a lender upon a borrower’s default which may be relevant in the COVID-19 context.

Remedies available to Lender:

  • Acceleration of loan payback requirements. A borrower’s failure to issue payment when due under the terms of the agreement generally triggers an immediate event of default and gives lenders the ability to exercise acceleration rights. With the potential financial covenant and liquidity issues (discussed above) resulting from COVID-19, borrowers and their lenders should know the terms and thresholds within their agreements causing acceleration and similar loan loss provisions.
  • Receivership. A receivership occurs when a court appoints a third party to exercise independent oversight on specific assets. Given the anticipated increase in real estate and commercial disruptions related to COVID-19—likely leading to increased loan defaults—lenders will want to consider which borrowers are good candidates for a receiver; entities or people the lender will contact if a receivership becomes necessary; and the anticipated limit that, when reached, will cause the lender pursuing receivership, as opposed to other options during these highly uncertain financial times.   
  • Foreclosure.  If default occurs, particularly relevant to real estate transactions, agreements permit lenders to seek foreclosure on property or collateral identified in the agreement. Lenders may utilize foreclosure when they have concerns that if a borrower is in default, the borrower will not maintain the property, and the value of the collateral will decrease. Note however, states along with the federal government have acted through executive order and other legislation to limit home foreclosures in response to the COVID-19 crisis. Besides determining applicable state law, and considering the relationship and size of the loan, lenders should weigh the cost effectiveness of pursuing foreclosure against other options, including forbearance agreements or restructuring the loan.

Remedies available to Borrower:

  • Forbearance. Generally, in a forbearance agreement, the lender agrees to reduce or suspend payments for a period of time. In exchange the borrower must resume paying at the end of the forbearance period. Such agreements generally come in short-term and long-term forms. For short-term forbearance agreements, both the borrower and the lender believe that key issues affecting the borrower will be resolved soon. However, when cash flow problems—likely resulting from the COVID-19 crisis—are expected to last for longer periods, depending upon the relationship between the parties, a long-term forbearance arrangement might be feasible. Given the current state of affairs, lenders may be more willing to negotiate forbearance options, given the anticipated defaults and losses resulting from COVID-19. Borrowers should review their relevant loan agreements and contact their lenders to determine and agree upon any forbearance actions.
  • Modification. Modification differs from forbearance in terms of definiteness.  While a mortgage forbearance agreement provides relative short-term relief, a loan modification agreement is a permanent solution. Generally, in the modification context, a borrower seeks: principal reduction; interest rate reduction; waiver or deferment of payments; waiver of certain financial covenants; an extended-term of repayment; or conversion to a fixed-rate loan. A borrower experiencing cash flow problems regarding the COVID-19 crisis should contact its lender to see whether modification is possible.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Other topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**  

Considerations For CPAs Dealing With Unpaid Fees

Posted on: April 15th, 2020

By: Nancy Reimer, Nicole Graham, Elizabeth Lowery, Zinnia Khan, and Caroline Wu

Many Certified Public Accountants and accounting firms will likely be increasingly confronted with collecting fees as the COVID-19 health crisis continues.  In dealing with unpaid fees, a CPA must pay close attention to their professional duties and obligations with respect to the release of client records, tax returns and even their own workpapers. 

In every instance, a CPA must adhere not only to the American Institute of CPAs’ (“AICPA”) Code of Professional Conduct and guidance from the Internal Revenue Service (“IRS”), but also to state-specific statutes and regulations.  There are often key differences between the AICPA Code, IRS guidance and state law.  For example, the release of client records, including a tax return or audit report, is left to a CPA’s discretion under the AICPA Code – as it states that a CPA should provide certain records upon a client’s request.  In contrast, IRS Circular 230, § 10.28 provides a CPA must, at the request of a client, promptly return the client’s records.   

Accordingly, it is best to start with the requirements of the AICPA Code of Professional conduct and IRS Circular 230 (for tax returns) and then proceed to examine the obligations set forth under the laws of the state in which the CPA is licensed. 

AICPA Code section 1.400.200.07 governs a client’s request for records or the CPA’s work product in the CPA’s custody or control and which have not previously been provided to the client.  Under section 1.400.200.07, the CPA should respond by providing the prepared records and work product, except that such records may be withheld if fees are due to the CPA for that specific work product.  This language, however, is subject to the rules and regulations of other authorities, including state laws and regulations. 

Under IRS Circular 230, § 10.28, a CPA must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations.  The existence of a dispute over fees generally does not relieve the CPA of this responsibility.  IRS Circular 230 also defers to requirements under state law.  If the applicable state law permits the retention of a client’s records in the case of a fee dispute or unpaid fees, the CPA need only return those records that must be attached to the taxpayer’s return. 

The laws and regulations concerning the return of client records and other documents for various states are set forth below.  Not coincidentally, the states below are those where Freeman, Mathis & Gary, LLP maintains one or more offices.

California  

Regardless of whether there are unpaid fees, California CPAs are required to return all client’s records. California Board of Accountancy Regulations Article 9 § 68 specifically states that: “Unpaid fees do not constitute justification for retention of client records.  Although, in general the accountant’s working papers are the property of the licensee [CPA]…”  

California’s Business and Professions Code § 5037 goes on to say that the CPA’s “working papers”, “except the reports submitted by the [CPA] to the client…shall remain the property of the [CPA] in the absence of an express agreement.”  But it is unclear what “reports submitted by the [CPA] to the client” means, and whether it includes a CPA’s work product such as prepared returns.  

California Board of Accountancy Regulations Article 9 § 68.1 defines “working papers” as the “[CPA’s] records of the procedures applied, the tests performed, the information obtained and the pertinent conclusions reached in an audit, review, compilation, tax, special report or other engagement” and “include, but are not limited to, audit of other programs, analyses, memoranda, letters of confirmation and representations, abstracts of company documents and schedules or commentaries prepared or obtained by the [CPA].” Thus, the definition of “working papers” arguably includes all of a CPA’s work product.  This makes sense since, in the case of unpaid fees, there is no specific return requirement for any documents other than a client’s own records.

Connecticut                                                        

Conn. Gen. Stat. § 20-281k(b) provides, a CPA shall return a client’s original records to his client or former client upon the client’s request and reasonable notice.  The CPA may make and retain copies of such documents of the client when such documents form the basis for work done by him.  Unlike the AICPA Code, this language imposes a mandatory duty on CPAs to return client records upon request

Florida

Florida’s provides that a CPA must return all of the client’s own records upon request, and can charge reasonable fees for costs incurred in doing so.  Section (c) of the same rule appears to build in the requirement of payment by the client before any work product is released, as it defers to the terms of the engagement between the CPA and client.  Florida’s Regulation of Professions and Occupations, Title XXXII Chapter 473.318 addresses the ownership of working papers, and is almost word for word identical to that of California’s BPC § 5037 quoted above which states that working papers remain the property of the CPA. 

Georgia

In Georgia, section 20-12-.12. of the Rules of the State Board of Accountancy Public Accountancy Act of 2014, states:

A licensee[CPA] shall furnish to his or her client or former client, upon request made within a reasonable time:

(a) Any accounting or other records belonging to, or obtained from or on behalf of, the client which the [CPA] removed from the client’s premises or received for the client’s account, but the [CPA] may make and retain copies of such documents when they form the basis for work done by him or her; and

(b) A copy of the [CPA’s] working papers, to the extent that such working papers include records which would ordinarily constitute part of the client’s books and records and are not otherwise available to the client.

The Georgia State Board of Accountancy issued a Statement of Policy (Policy No. 5) relating to section 20-12-.12. of the rules.  The Statement of Policy explains:

During the course of a professional engagement, a [CPA] may possess certain records of a client, or may have developed certain records without which the Client Records would be incomplete. Retention of Client Records after the client has made a request for them is a violation of Rule 20-12-.12. The [CPA] does not have a lien on these records, and they must be returned regardless of the fact that the fee of the [CPA] may remain unpaid. For purpose of this Rule, the term “Client Records” refers to those journals, ledgers, bank statements and cancelled checks, copies of invoices and similar documentation of the transactions that are reflected in financial statements. It is anticipated that the client will have retained copies of financial statements, income tax returns, and similar documents. A [CPA] is not required to convert records that are not in electronic format to electronic format. However, if the client requests records in a specific format and the [CPA] was engaged to prepare the records in that format, the client’s request should be honored. If a [CPA] is engaged to perform certain work for a client and the engagement is terminated prior to the completion of such work, the [CPA] is required to return or furnish copies of only those records originally given to the [CPA] by the client. Any working papers developed by the [CPA] incident to the performance of the engagement which do not result in changes to the Client Records or are not in themselves part of the records ordinarily maintained by such client, are considered to be solely “accountant’s working papers” and are not the property of the client.  Once the [CPA] has returned the Client Records or furnished the client with copies of such records and/or necessary supporting data, the [CPA] has discharged the obligation in this regard and need not comply with any subsequent requests to again furnish such records. If the [CPA] has retained copies of Client Records already in possession of the client, the [CPA] is not required to return such copies to the client.

Kentucky               

Kentucky Revised Statutes Chapter 325.420(a) requires the licensee[CPA] to return any of the client’s own records upon request. Kentucky Revised Statutes Chapter 325.420(b) then builds in the requirement for payment by the client for services rendered, before the [CPA] is required to provide their work product, which specifically includes tax returns.

Maine

Maine compels the return of client records upon the client’s request.  Me. Rev. Stat. tit. 32, § 12280 states a CPA shall furnish to his client or former client upon request and reasonable notice:

  1. A copy of the CPA’s working papers, to the extent that the working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client; and
  2. Any accounting or other records belonging to, or obtained from or on behalf of, the client that the CPA removed from the client’s premises or received for the client’s account. The CPA may make and retain copies of those documents of the client when they form the basis for work done by him.

Massachusetts

Under 252 C.M.R. 3.03(3), a CPA shall furnish to a client or former client, upon request made within a reasonable time after original issuance of the document in question, if not previously furnished:

  • A copy of the tax return of the client;
  • A copy of any report or other document issued by the CPA to or for such client;
  • Any accounting or other records belonging to, or obtained from or on behalf of the client (but the CPA may make and retain copies of such documents of the client when they form the basis for work done by the CPA); and
  • A copy of the CPA’s workpapers, to the extent that such workpapers include records that would ordinarily constitute part of the client’s books and records and are not otherwise available to the client.

New Hampshire

Pursuant to N.H. Rev. Stat. Ann. § 309-B:19 (II), a CPA shall furnish to the client or former client, upon request and reasonable notice:

  • A copy of the CPA’s working papers, to the extent that such working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client; and
  • Any accounting or other records belonging to, or obtained from or on behalf of, the client that the CPA removed from the client’s premises or received for the client’s account. The CPA may make and retain copies of such documents of the client when they form the basis for work done by the CPA.
  • A copy of computer-prepared client data diskettes containing client ledger data, spread sheet data, client documents and any other such data of the client or former client that would ordinarily constitute part of the client’s records and not otherwise be available to the client.

New Jersey

N.J.A.C. 13:29-3.16 provides:

(a)  A licensee[CPA] or the [CPA’s] firm shall furnish to the [CPA’s] client or former client, upon request made within a reasonable time after original issuance of the document in question:

1.  A copy of a tax return of the client;

2.  A copy of any report, or other document, issued by the [CPA] to or for such client;

3.  Any accounting or other records belonging to, or obtained from or on behalf of, the client which the [CPA] removed from the client’s premises or received for the client’s account, but the [CPA] or the [CPA’s] firm may make and retain copies of such documents when they form the basis for work done by the [CPA]; and

4.  [CPA]-prepared client records that would ordinarily constitute part of the client’s books and records, are contained in the [CPA]’s or his or her firm’s working papers, and are not otherwise available to the client. Copies of such records shall be produced to the client in the same manner, media, and format as the record was created by the [CPA].

(b)  A [CPA] or the [CPA’s] firm shall not withhold client records for the non-payment of fees for services performed.

Pennsylvania 

A CPA shall furnish to its client or former client upon request made within a reasonable time after original issuance of the document in question:

(1) A copy of a tax return of the client.

(2) A copy of any report or other document issued by the [CPA] to or for such client and not formally withdrawn or disavowed by the [CPA] prior to the request.

(3) A copy of the [CPAs] working papers to the extent that such working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client. However, a [CPA] may require that fees due the [CPA] with respect to completed engagements be paid before such information is provided.

(4) Any accounting or other records belonging to, or obtained from or on behalf of, the client that the [CPA] removed from the client’s premises or received for the client’s account. The[CPA]  may make and retain copies of such documents of the client whenever those documents form the basis for work done by him.

(5) If a [CPA] can document compliance with the foregoing requirements, he need not comply with subsequent requests to again provide such information.

63 P.S. s. 9.11(b).

Rhode Island

Rhode Island law does not expressly address the return of client records, though R.I. Gen. Laws Section 5-3.1-22 governs the ownership of such records.  In Rhode Island, all statements, records, schedules, working papers, memoranda, and any other data, including, but not limited to, a data bank, that are retained by a CPA or accounting firm incident to or in the course of professional services rendered to clients are the property of that CPA or accounting firm in the absence of an express agreement to the contrary.

CPAs licensed in Rhode Island must therefore comply with the requirements prescribed by the AICPA code and IRS Circular 230, § 10.28 when examining their obligations to return client records.

Vermont 

Under Vt. Stat. Ann. tit. 26, § 81(c), original copies of client documents in the possession of the CPA are the property of the client and must be returned to the client upon request.  Subsection (a) provides, however, statements, records, schedules, working papers and memoranda made by a CPA are the property of the CPA.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

When Business Operations Resume, Employers Will Encounter A New “Normal” In The Workplace

Posted on: April 15th, 2020

By: Justin Boron

After about a month into business shutdowns across the country, employers and employees alike are hoping that a return to the workplace is not too far off into the future.  In anticipation for that moment, employers should start planning for a workplace that will be much different than the one that employees left when the shutdown orders were issued.   

When restaurants, retail stores, and offices eventually re-open, the COVID-19 pandemic will likely still be a threat, and the shutdowns themselves will likely have had an impact on the makeup of the workforce and the nature of the employment relationship.  So there will be an array of health and safety issues—in addition to legal issues—that need to be addressed.  To that end, we collected guidance from various sources in the key areas that an employer will likely confront when businesses re-open:

Health and Safety

A good starting point for health and safety is the CDC’s recent guidelines for businesses with critical infrastructure workers who—exempt from shutdown orders—have continued to operations during the COVID-19 pandemic.[1]

To the extent a worker has been in household contact or close contact within six feet of an individual suspected of having COVID-19, the CDC guidance would allow the employee to continue to work assuming the employer takes the following precautions:

  • Pre-Screen: Employers should measure the employee’s temperature and assess symptoms prior to them starting work. Ideally, temperature checks should happen before the individual enters the facility.
  • Regular Monitoring: As long as the employee doesn’t have a temperature or symptoms, they should self-monitor under the supervision of their employer’s occupational health program.
  • Wear a Mask: The employee should wear a face mask at all times while in the workplace for 14 days after last exposure. Employers can issue facemasks or can approve employees’ supplied cloth face coverings in the event of shortages.
  • Social Distance: The employee should maintain 6 feet and practice social distancing as work duties permit in the workplace.
  • Disinfect and Clean workspaces: Clean and disinfect all areas such as offices, bathrooms, common areas, shared electronic equipment routinely.

Health experts are also encouraging employers to begin assembling the infrastructure necessary for rapid on-site testing in the workplace.  Although this measure might seem strange in the workplace, it isn’t without precedent.  Employers commonly provide access to flu vaccines in the workplace.  In an article in the Wall Street Journal, Scott Gottlieb—a former FDA commissioner—and Lauren Silvis—a former deputy director of the FDA’s medical device center—advised employers to treat COVID-19 like the flu in the workplace:

Portable and relatively inexpensive testing platforms can be brought to businesses in mobile vans or deployed on-site and administered by professionals.  Testing companies are ramping up supply, and businesses can start placing orders now.

Restoring Employment Effectively

Many employers might have had to lay off or furlough all or parts of their workforces.  To the extent employers can recall some of these workers when their operations resume, there are potential pitfalls to consider in re-assimilating workers to on-site operations.

  • In the event of a reduced workforce, employers will likely need to re-assign responsibilities and job duties.  Employers should consider whether the change in duties would result in a need to change an employee’s classification under wage and hour laws from exempt to non-exempt and should review the new duties with the employee.
  • If the employer alters an employee’s pay structure, such as by adding incentive bonuses, the employer should consider whether the new pay structure alters the calculation of an employees’ regular rate of pay used to determine overtime amounts.
  • An employee who was let go without pay or benefits might need to be formally re-hired—requiring an employer to repeat its hiring procedures, including a meeting applicable I-9 requirements.

Protecting Against Discrimination

The EEOC and state discrimination agencies have keyed in on the potential for disability and national-origin discrimination arising from the COVID-19 crisis, so employers should be aware of the potential for claims.  State agencies have offered varied guidance with some—like the New Jersey Division on Civil Rights—taking fairly aggressive positions on workplace discussion about the origin of the virus and phrases like “Chinese virus” in the workplace.

To mitigate the risk of these kinds of discrimination, employers should review their handbook policies against discrimination with employees and include COVID-19 issues in any annual training that the employer conducts.  The EEOC also has issued special guidance for handling employee complaints about COVID-19 related harassment here.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. On Wednesday, April 22nd, Freeman Mathis & Gary will be hosting a webinar on this topic. Register here.

Other topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**


[1] The CDC is regularly updating its guidance, so employers should periodically check.

Los Angeles Mayor Issues Executive Order Requiring Employers To Provide COVID-19 Supplemental Paid Sick Leave For Employees

Posted on: April 14th, 2020

By: Michelle Harrington

What Does The Executive Order Require: The COVID-19 crisis has employers scrambling to stay on top of legal obligations imposed by recent federal legislation, including the federal Families First Coronavirus Response Act and the CARES Act, and various state law initiatives aimed at providing leave or unemployment benefits to employees affected by COVID-19.   Now, Los Angeles has entered the mix and, effective April 7, 2020, employers that have either 500 or more employees in the City or 2,000 or more employees nationally must provide supplemental paid sick leave of up to two weeks (80 hours) for COVID-19 related reasons to employees living within the City of Los Angeles.  The paid sick leave required to be provided under this Order is in addition to the paid sick leave employers are currently obligated to provide under California’s Healthy Workplaces Healthy Families Act and the Los Angeles paid sick leave ordinance. 

The complete supplemental paid sick leave Order may be viewed here, and sets forth the following:

Employees Covered by the Order: All Employees who have been employed by the same employer from February 3, 2020 through March 4, 2020 who have performed work within the geographic boundaries of the City of Los Angeles are entitled to supplemental paid sick leave. 

Employers Covered by the Order: An employer is a person (as defined in Section 18 of the California Labor Code) including a corporate officer or executive, who directly or through an agent or any other person, including through a temporary service or staffing agency or similar entity, employs or exercises control over the wages, hours or working conditions of any Employee.  The Order applies to Employers that have either 500 or more employees in the City of Los Angeles or 2,000 or more employees within the United States.

Supplemental Paid Sick Leave Employers Must Provide: An employee who works at least 40 hours a week or is classified as full-time by the employer is entitled to 80 hours of supplemental paid sick leave.  This leave is calculated based upon an employee’s average two-week pay over the period of February 3, 2020 through March 4, 2020.  Employees who work less than forty hours per week and are not classified as full-time are entitled to supplemental paid sick leave in an amount no greater than the employee’s average two-week pay over the period of February 3, 2020 through March 4, 2020.

Maximum Compensation Employers Must Pay for Leave: The supplemental paid sick leave amount paid to an employee shall not exceed $511 per day and $5,110 in the aggregate.

Qualifying Reasons for Supplemental Paid Sick Leave: Employees are entitled to take supplemental paid sick leave if they are unable to work or telework for any of the following reasons:

  1. the employee takes time off due to COVID-19 infection or because a public official or healthcare provider requires or recommends the employee self-isolate or quarantine to prevent the spread of COVID-19;
  2. the employee takes time off work because the employee is 65 years old or older or has a health condition such as heart, lung or kidney disease, asthma, diabetes or a weakened immune system;
  3. the employee takes time off to care for a family member who is not sick but who public health officials or healthcare providers have required or recommended isolation or self-quarantine; or
  4. the employee takes time off to provide care for a family member who requires care due to the temporary closure of a senior care facility, school or child care provider caring for a child under the age of 18 where such employee is unable to secure a reasonable alternative caregiver.

Employers May Not Require Doctor’s Note as Condition of Leave: An employer may not require a doctor’s note or other documentation for the use of supplemental paid sick leave.  The employee can request the leave verbally or in writing. 

Offset for Prior Allowance of Paid Sick Leave: The obligation to provide 80 hours of supplemental paid sick leave under the Order can be reduced for every hour that the employer allowed an employee to take other paid leave in an amount equal to or greater than such 80 hour requirement (not including previously accrued hours) on or after March 4, 2020 for any of the reasons listed in 1-4, above or in response to an employee’s inability to work due to COVID-19.

Exemptions for Certain Employers: The following employers are exempt from providing supplemental paid sick leave:

  1. Employers of Emergency and Health Services Personnel.  Employers of an employee who is either Emergency Personnel or a health care worker.  Emergency Personnel refers to individuals specified in the April 1, 2020 City of Los Angeles Safer at Home emergency order Paragraph 5(vi), including all first responders, gang and crisis intervention workers, public health workers, emergency management personnel, emergency dispatchers, law enforcement personnel and related contractors and others working for emergency services providers.  A health care worker includes those individuals described in California Government Code Section 12945.2(c)(6) or individuals, including contract workers, working at a health facility licensed under California Health and Safety Code Section 1250;
  2. Employers of Critical Parcel Delivery.  Employers that provide global parcel delivery services;
  3. Employers with Generous Leave.  Employers that have a paid leave or paid time off policy that provides a minimum of 160 hours of paid leave annually do not have to provide supplemental paid leave to any employee that received the more generous leave;
  4. Employers of New Businesses.  Employers that started businesses in the City of Los Angeles on or after September 4, 2019 through March 4, 2020 (not including construction businesses as defined by Los Angeles Municipal Code (“LAMC”) section 21.30 b.1 or film producers as defined by LAMC 21.109).  To qualify, an employer could not have been in business in the City of Los Angeles in the 2018 tax year;
  5. Government Employers.  Government agencies; or
  6. Employers of Closed Businesses and Organizations.  Employers that were closed or not operating for a period of 14 or more days due to a city official’s emergency order because of the COVID-19 or provided at least 14 days of leave.

Employee Enforcement of Order: The Order allows an employee who claims a violation of the Order to bring a civil action in the Superior Court of California.  The employee can seek civil remedies, including reinstatement, back pay, supplemental paid sick leave at the rate of the employee’s average rate of pay, other legal or equitable relief, and reasonable attorney’s fees and costs of suit.

Retaliation and Discrimination Prohibited: The Order prohibits retaliating or discriminating against an employee for opposing any practice proscribed by the Order, for requesting to use or actually using supplemental paid sick leave, for participating in proceedings related to the Order, for seeking to enforce the employee’s rights under the Order by lawful means, or otherwise asserting rights under the Order. 

No Waiver of Employee Rights Under the Order: Any waiver by an employee of any or all of the provision of the Order shall be deemed contrary to public policy and void and unenforceable.

Relationship to Other State and Federal Laws: With the exception of rights and remedies provided to employees under the FFCRA, the Order provides rights and remedies in addition to or independent of any other rights, remedies or procedures available under any other laws and do not diminish, alter, or negate any other legal rights, remedies, or procedures available to an employee. Nothing in the Order should be interpreted or applied to create any power or duty in conflict with any federal or state law. 

Impact of Collective Bargaining Agreements: The terms of a collective bargaining agreement in effect on April 7, 2020 supersede the Order if such agreement contains COVID-19 related sick leave provisions.  A collective bargaining agreement that expires or becomes open for renegotiation may expressly waive the provisions of the Order.  If an agreement is in place on April 7, 2020 but does not address COVID-19 related sick leave provisions, the employer must comply with the Order until the agreement is amended to expressly waive the provisions of the Order. 

Duration of Supplemental Paid Sick Leave: The Order is in effect from April 7, 2020 up until two weeks after the COVID-19 local emergency period ends.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Game, Set, Match: Wimbledon’s Decision To Purchase Pandemic Insurance Coverage Could Be A Winner

Posted on: April 13th, 2020

By: Bill Buechner

Among many other more serious impacts related to the COVID-19 pandemic, many prominent sporting events have been cancelled or postponed, including the NCAA Tournament, the Masters, the Kentucky Derby and the French Open tennis tournament.  Also, all American professional sports leagues (except for the NFL) have suspended their seasons indefinitely or postponed the beginning of their seasons, including the NBA, NHL, MLB and MLS.  Each of these scheduling changes has resulted in the loss or postponement of hundreds of millions of dollars in revenue. 

On April 1, Wimbledon announced the cancellation of its championship tennis tournament that was scheduled for June 29 to July 12 in London.  However, unlike the other events and leagues mentioned above, Wimbledon reportedly purchased event cancellation coverage that includes coverage for an event cancellation caused by an infectious disease.  (The British Open golf tournament, which has also been cancelled, also reportedly purchased pandemic insurance coverage).  The All England Lawn Tennis Club, which operates the Wimbledon championships, apparently purchased pandemic insurance coverage about 18 years ago after the SARS outbreak in 2002.  Neither the insurer nor the exact terms of the policy have been publicly disclosed, but several media reports indicate that Wimbledon paid an annual premium of approximately $2 million per year for comprehensive pandemic event cancellation coverage. 

The UK Daily Mail has reported that Wimbledon will receive approximately $141 million under its pandemic event cancellation policy.   Having paid approximately $34 million in premiums over the past 17 years, it appears that Wimbledon’s decision to purchase the infectious disease coverage will benefit Wimbledon to the tune of approximately $107 million.  Media reports estimate that Wimbledon has received approximately $310 million in revenues from the tournament in recent years. 

In contrast to Wimbledon, other events without similar insurance coverage, such as the Masters, the Kentucky Derby and the French Open, are scrambling to avoid or reduce massive losses by re-scheduling their events for the fall and hoping that the COVID-19 pandemic will be over by then and that fans and viewers will attend and watch these sporting events during a different time of year than normal.  Professional sports leagues without pandemic insurance coverage and hoping to limit or prevent substantial losses face uncertainty as to if or when they will be able to start their season (MLB and NFL) or if they will be able to complete their season, including playoffs (NBA, NHL, MLS). 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Congress Considers Reinsurance Program for Business Interruption Losses Due to Coronavirus

Posted on: April 9th, 2020

By: Zach Moura

Business interruption coverage typically requires that there be direct physical loss of or damage to property, and many business interruption policies contain virus exclusions. But there are currently a number of legislative proposals at the state and federal level seeking to expand business interruption coverage to cover pandemic-related business losses more generally, both prospectively and retroactively.

The House Financial Services Committee has proposed a bill that aims to create a reinsurance program similar to the Terrorism Risk Insurance Act (TRIA), but for pandemics. The Pandemic Risk Insurance Act (PRIA) would extend business interruption insurance to cover any loss resulting from a public health emergency arising from an infectious disease outbreak or pandemic. According to Chairwoman Maxine Waters, the PRIA “would create a reinsurance program similar to the Terrorism Risk Insurance Act for pandemics, by capping the total insurance losses that insurance companies would face.” Like the TRIA, the PRIA is forward-looking and seeks to safeguard businesses against future losses.

The PRIA would create the Pandemic Risk Reinsurance Program within the Treasury Department. Participation in the program would be voluntary and involve payment by carriers of a reinsurance premium to the Treasury, based upon actuarial calculations and program administration costs.

Under the current draft of the PRIA, the total amount insurers would have to pay out against a public health emergency is capped at $500 billion per year. The discussion draft of the PRIA offers several possibilities for establishing a qualifying public health emergency, such as a declaration under the Public Health Service Act, a presidential declaration under the Stafford Act, or certification by the Secretary of the Treasury.

In the event of a public health emergency, participating insurers would be obligated to pay out for covered losses up to 5% of their direct earned premiums from the preceding calendar year as a deductible. The program would reinsure the rest.

A professor at Butler University in Indiana who helped craft, outline, and lobby for the PRIA explained to Inside Indiana Business that the PRIA is “just a more efficient way for the government to backstop the insurance industry so that this coverage can exist in the private marketplace.” He believes that the PRIA could “turn the market for [business interruption] coverage back on.”

There is some question as to whether the proposed size of the program is sufficient. Some prominent investors have recently predicted that the COVID-19 pandemic could end up costing U.S. businesses as much as $4 trillion, 8 times the proposed cap on the program.

Nonetheless, some industry insiders are in favor of creating a backstop like that proposed under the PRIA, noting that the insurance industry is in the best position to offer this coverage as it has the experience to properly price it.

We will continue to monitor developments related to the PRIA and provide updates as they occur.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Narrow Victory for Law Enforcement and Commonsense in Kansas v. Glover

Posted on: April 9th, 2020

By: Peter Dooley

The scope of reasonable judgments that police officers can make during traffic-stops under the Fourth Amendment was recently widened, at least narrowly, by the U.S. Supreme Court on April 6th in their 8-1 decision in Kansas v. Glover.  The stop in question involved a deputy with the Douglas County Kansas Sheriff’s Office observing an individual operating a 1995 Chevy pick-up.  Upon running the license plate information, the deputy discovered that the registered owner of that truck had a revoked license and that the model of the truck listed on the registration was the exact model he observed. 

While the stop was conducted and the deputy’s suspicion was confirmed afterwards, it also unearthed serious concerns related to Fourth Amendment searches and seizures and the required reasonable and articulable suspicion that the person stopped has, is, or is about to commit a crime.  These concerns led the Kansas Supreme Court to publish an Opinion deciding that the stop was “only a hunch” and lacked the “factual basis” required for reasonable suspicion under the Fourth Amendment.  Justice Thomas summarizes the Court’s response and reasoning for reversing the decision best when he states that the deputy’s search was valid because, from the facts at hand, “Deputy Mehrer drew the commonsense inference that Glover was likely the driver of the vehicle, which provided more than reasonable suspicion to initiate the stop.” 

The majority were not persuaded by Sotomayor’s dissenting opinion that the inference was unreasonable as it was not grounded in “law enforcement training and experience.”  The majority explained that case precedent clearly states that police officers may use similar commonsense inferences and judgments in reasonable suspicion determinations; these decisions need not require specialized training or experience as justification but, instead, can be “a reasonable inference made by ordinary people on a daily basis.”  The argument that this destroys the requirement for specific and articulable facts failed similarly as the Opinion explains that it was not merely a hunch or probability determination here, but that the stop was actually made in reliance upon the facts regarding the license plate database information and officer observations.  Justice Thomas writes, “combining database information and commonsense judgments in this context is fully consonant with this Court’s Fourth Amendment precedents.” 

Potentially due to concerns in the Kagan Concurrence, the narrowness of the holding is highlighted throughout, and the Court explains how the presence of additional facts can easily dispel reasonable suspicion.  Commonsense inferences made before a stop must be based on database information that provides a logical and strong inference of lawlessness.  Additionally, officers cannot ignore the fact that the driver they observe does not match the age, gender, or other known descriptions of the individual or vehicle.  However, as no such information existed prior to the stop in Glover and the database information was sufficiently conclusive, the officer’s inference was reasonable, and his actions were justified. 

When looking to the real-world application of this decision, one takeaway is the Court’s continued preference for reliance on judicial sense and commonsense determinations as opposed to those requiring statistics or training as justification.  More specifically law enforcement officers may now use commonsense inferences in Fourth Amendment traffic-stops such as determining that the owner is likely the person seen driving the car and similar determinations with the assistance of databases.  This decision is not groundbreaking but is an important victory on the side of general likelihoods and commonsense reasonable suspicion determinations in the constant tug-of-war between effective law enforcement practices and Fourth Amendment protections. 

If you have any questions or would like more information, please contact Peter Dooley at [email protected]

Georgia Governor Passes Order Altering Inspection Regulations for Construction of Hospitals and Other Projects During COVID-19 Emergency

Posted on: April 8th, 2020

By: Tom Ward

On March 30, 2020, Governor Brian Kemp issued an executive order that applies to the plan review and inspection requirements for the construction of hospitals, ambulatory health care centers, nursing homes, jails, penal institutions, airports, buildings or structures that impact national or state homeland security, or any building defined as a high-rise building in the State Minimum Standards Code. Under this executive order, the builders of such projects are allowed to immediately use private professional providers to review plans or inspect projects under O.C.G.A. 8-2-26(g)(4)-(5).

The March 30 executive order actually amends the provisions of an earlier executive order, and the texts of both orders can be accessed by this link (https://gov.georgia.gov/executive-action/executive-orders/2020-executive-orders).

Special fees apply to private plan review and inspection. Those fees are set by the local permitting authority.

Moreover, only the local permitting authority can issue the certificate of occupancy, so it is imperative to hire only qualified and experienced private inspectors who will pay special attention to the documentation required by the local building official for issuance of the certificate of occupancy.

Free public access to the full text of O.C.G.A. 8-2-26(g) can be accessed via LexisNexis using the following link: http://www.lexisnexis.com/hottopics/gacode/default.asp  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

U.S. Department of Labor Issues Temporary Regulations for Families First Coronavirus Response Act

Posted on: April 8th, 2020

By: Catherine Scott, Natalie Pulley and Gregory Blueford

On April 6, 2020, U.S. Department of Labor (“DOL”) published its most comprehensive interpretation of the paid leave provisions of the Families First Coronavirus Response Act (the “FFCRA”). These temporary regulations expand on the additional guidance provided by the DOL, which our firm previously discussed here.

Key highlights of the temporary rule include:

EMERGENCY PAID SICK LEAVE ACT (“EPSLA’)

  • How to Calculate Entitlement to Paid Sick Leave

Full-Time Employees: Full time employees are entitled to 80 hours of paid sick leave. Employees with varying schedules should take the weekly average of six-months of their employment or the average since their start date (whichever time period is less) prior to the date on which leave is requested to determine if employee is a full-time employee. An individual employee is limited to a maximum of two weeks under the EPSLA (even if this employee changes jobs in a calendar year).

Part-Time Employees:  A part-time employee, scheduled to work fewer than 40 hours per week, is typically entitled to paid sick leave equal to the number of hours he or she is scheduled to work over a two-workweek period. For a part-time employee with a varying schedule who has worked at least 6 months with the employer, the employee is owed fourteen times (14x) the average number of hours the employee was scheduled to work per calendar day over the six month period ending on the date on which the employee takes paid sick leave. An employer may also use twice the number of hours that an employee was scheduled to work per workweek, on average, over the six-month period.

If the employee has been employed for less than 6 months, the employee is entitled to fourteen times (14x) the expected number of hours the employee and employer agreed to at the time of hiring that the employee would work, on average, each calendar day. In the absence of an agreement, a part-time employee with a varying schedule who has been employed for less than six months is entitled to fourteen times (14x) the average number of hours per calendar day that the employee was scheduled to work over the entire period of employment, including hours for which the employee took leave of any type.

  • Six Qualifying Reasons Employees Are Entitled to Emergency Paid Sick Leave (“EPSLA”)

Reason #1:  Subject to Federal, State or Local Quarantine or Isolation Order.  If an employee is unable to work or telework because he or she is subject to a COVID-19 quarantine or isolation governmental order (including the now well-known “Stay-in-Shelter” and “Shelter-in-Place” Orders), the key consideration is whether the employee would be able to work or telework “but for” the quarantine or isolation order.   For example, an employee who is subject to a Stay-in-Shelter Order, but whose worksite is closed because of a Stay-in-Shelter Order (even the same one), would not qualify for EPSLA leave.  If, on the other hand, an employee’s worksite is open, but the employee cannot go into the worksite because of a Stay-in-Shelter Order, then the employee would be eligible under this category of the EPSLA.  Also, an employee permitted to telework would not qualify for paid leave under the EPSLA.

Reason #2: Healthcare Provider Advises Employee to Self-Quarantine for COVID-19. Advice to self-quarantine must be based on the health care provider’s belief that the employee has, may have or is particularly vulnerable to COVID-19.

Reason #3: Employee is Experiencing COVID-19 Symptoms and is Seeking Medical Diagnosis. This is limited to the time the employee is unable to work because he or she is taking affirmative steps to obtain a medical diagnosis. Note, the employee may not take paid sick leave to self-quarantine without seeking a medical diagnosis.

Reason #4: Employee Caring For Another. An employee may be eligible under the EPSLA because: (a) they need to care for an individual who is subject to quarantine or isolation order (the individual must be an immediate family member, roommate, or similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person) and, but for that order, the employee would be able to work; or (b) the employee’s family member has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.

Reason #5: Unable to Work Due to Childcare. This applies if an employee is unable to work because the employee needs to care for his or her son or daughter because: (a) the child’s school or place of care has closed; or (b) the childcare provider is unavailable, due to COVID-19 related reasons. This will apply only when the employee needs to, and actually is, caring for his or her child (and another suitable individual such as a co-parent, co-guardian, or the usual childcare provider cannot). The definition of “son or daughter” includes children under 18 years of age or 18 years of age or older and incapable of self-care because of a mental or physical disability.

Reason 6: Catch-All for Unknown Future Considerations. An employee is unable to work because the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

EMERGENCY FAMILY AND MEDICAL LEAVE EXPANSION ACT (“EFMLEA”)

The DOL clarified that the first two weeks of unpaid leave are defined as 14 calendar days and not 10 workdays.

The DOL also provided calculations for the rate of pay for employees, again differing between employees with “normal schedules” and those with variable schedules.

  • Normal (i.e. Routine) Workweek Pay: Two-thirds (2/3) of an employee’s full regular rate of pay times the number of hours the employee would normally be scheduled to work that day;
  • Variable Schedule (6+ Months Work): Average number of hours the employee was scheduled per day over the six-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type; and
  • Variable Schedule (Less Than 6 Months Work): The reasonable expectation of the average number of hours per day that the employee would normally be scheduled to work at time of hire. Absent an agreement, employer should use the average number of hours per workday that the employee was scheduled to work over the entire period of employment, including hours for which the employee took leave of any type.

Nevertheless, all employees are due up to a maximum of $200 per day or $10,000 in total for the additional ten workweeks.

LEAVE TO CARE FOR A CHILD DUE TO SCHOOL OR PLACE OF CARE CLOSURE OR CHILD CARE UNAVAILABILITY: INTERSECTION OF EPSLA, EFMLEA AND FMLA

Both the EPLSA and the EFMLEA permit an employee to take paid leave when needed to care for his or her son or daughter whose school or place of care is closed, or childcare provider is unavailable due to COVID-19 reasons. Where an employee qualifies under both Acts, the employee may take paid leave under the EPSLA, which would run concurrently with any leave entitlement under the EFMLEA. Employers cannot, however, force employees to use paid EPSLA in lieu of unpaid EFMLEA.

Where an employee has already taken FMLA leave in the current 12-month leave year as defined by the employer, the maximum 12 weeks of EFMLEA leave is reduced by the amount of FMLA leave entitlement taken in that year. Therefore, if an employee has taken 12 weeks of FMLA leave in the calendar year as defined by the employer and prior to April 1, 2020, then the employee is not entitled to any EFMLEA leave.  However, even if an employee has already used his or her 12 weeks of FMLA leave, he or she may still take EPSLA leave for COVID-19 qualifying reasons. If an employee first takes leave under the EPSLA for a different qualifying reason, it does not prevent an employee from later taking EFMLEA (only the first two weeks will be unpaid.)

Employees are limited to a total of twelve weeks of leave under the EFMLEA, even if the applicable time period (April 1, 2020, to December 31, 2020) spans two twelve-month leave periods under the FMLA. Employers and employees may agree, where federal or state law permits, to have employee’s accrued, unused paid leave supplement pay under the EFMLEA so the employee receives the full amount of his or her pay. For example, an eligible employee and employer may agree to supplement the EFMLEA by substituting one-third hour of accrued vacation leave for each hour of EFMLEA.

NOTICE REQUIREMENTS

  •  Employer Notice Requirements

The FFCRA requires employers keep posted in a conspicuous place where employees or job applicants at a worksite may view it a notice of the law’s requirements, which can be downloaded, free of charge, from the WHD website at https://www.dol.gov/whd. The DOL has not adopted employer notice requirements or employer-specific notice obligations that are adopted in the FMLA regulations. However, the DOL suggests that employers should apply their FMLA practices to EFMLEA leave users if possible.

  •  Employee’s Notice Requirements

An employee must provide his or her employer documentation in support of paid sick leave or expanded family and medical leave. Such documentation must include a signed statement containing the following information: (1) The employee’s name; (2) the date(s) for which leave is requested; (3) the COVID-19 qualifying reason for leave; and (4) a statement representing that the employee is unable to work or telework because of the COVID-19 qualifying reason.

  • Under Reason #1, the employee must also provide the name of the government entity that issued the quarantine or isolation order to which the employee is subject.
  • Under Reason #2, the employee must also provide the name of the health care provider who advised him or her to self-quarantine for COVID-19 related reasons.
  • Under Reason #3, the normal FMLA certification requirements still apply.
  • Under Reason #4, the employee must also provide either (1) the government entity that issued the quarantine or isolation order to which the individual is subject or (2) the name of the health care provider who advised the individual to self-quarantine, depending on the precise reason for the request.
  • Under Reason #5, the employee must also provide: (1) the name of the child being care for; (2) the name of the school, place of care, or child care provider that closed or became unavailable due to COVID-19 reasons; and (3) a statement representing that no other suitable person is available to care for the child during the period of requested leave. The employee must give notice as soon as practicable. If employee fails to give proper notice, the employer should give him or her notice of the failure and an opportunity to provide the required documentation prior to denying the requested leave.

The employer also may request an employee to provide such additional material as needed for the employer to support a request for tax credits pursuant to the FFCRA.

 POST-LEAVE REQUIREMENTS

  • Return to Work

In most instances, an employee is entitled to be restored to the same or an equivalent position upon return from paid sick leave or expanded family and medical leave in the same manner that an employee would be returned to work after FMLA leave. For employers with fewer than 25 employees, the restoration provisions do not apply if all four of the following conditions are met:

(a) The employee took leave to care for his or her son or daughter whose school or place of care was closed or whose childcare provider was unavailable;

(b) The employee’s position no longer exists due to economic or operating conditions that (i) affect employment and (ii) are caused by a public health emergency (i.e., due to COVID-19 related reasons) during the period of the employee’s leave;

(c) The employer made reasonable efforts to restore the employee to the same or an equivalent position; and

(d) If the employer’s reasonable efforts to restore the employee fail, the employer makes reasonable efforts for a period of time to contact the employee if an equivalent position becomes available. The period of time is specified to be one year beginning either on the date the leave related to COVID-19 reasons concludes or the date twelve weeks after the employee’s leave began, whichever is earlier.

  • Recordkeeping

An employer is required to retain all documentation provided pursuant to EPSLA and/or EFMLEA for four years, regardless of whether leave was granted or denied. If an employer denies an employee’s request for leave pursuant to the small business exemption (under 50 employees), the employer must document its authorized officer’s determination that the prerequisite criteria for that exemption are satisfied and retain such documentation for four years.

A more detailed explanation of how Employers may claim tax credits can be found at https://www.irs.gov/forms-pubs/about-form-7200 and https://www.irs.gov/pub/irs-drop/n-20-21.pdf.

  • Prohibited Acts and Enforcement

Under the EPSLA, employers are prohibited from discharging, disciplining, or discriminating against any employee because the employee took paid sick leave, initiated a proceeding under or related to paid leave, or testified or is about to testify in such a proceeding. An employer who violates the paid sick leave requirements is considered to have failed to pay the minimum wage required by section 6 of the FLSA, and an employer who violates the prohibition on discharge, discipline, or discrimination is considered to have violated section 15(a)(3) of the FLSA. However, an employee may not bring a private action against an employer under the EFMLEA if the employer, although subject to the EFMLEA, is not otherwise subject to the FMLA.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Georgia Governor Passes Order Altering Inspection Regulations for Residential Builders During COVID-19 Emergency

Posted on: April 8th, 2020

By: Tom Ward

Governor Brian Kemp recently passed an executive order allowing residential builders to immediately employ private inspectors to perform required plan reviews or inspections without having to wait out the time frames required by O.C.G.A. 8-2-26(g)(4).

The relevant text of the Order, which can be accessed by this link (https://gov.georgia.gov/executive-action/executive-orders/2020-executive-orders), provides as follows: 

Whereas: Counties and municipalities responsible for regulating inspections of buildings or similar structures to ensure compliance with the state minimum standard codes have smaller workforces and cannot meet the demand for inspections in this State…

It is ordered: That because of limited staffing and increasing wait times, I have determined that all counties and municipalities in this state that regulate inspections of buildings or similar structures to ensure compliance with the state minimum standard codes in accordance with Code Section 8-2-26 may not be able to provide regulatory action or inspection within the time frames required by Code Section 8-2-26(g)(4). Therefore, it is hereby ordered that all applicants seeking plan review or inspections in these cities and counties pursuant to Code Section 8-2-26 are not required to wait out the time frames required by Code Section 8-2-26(g)(4) and have the option of retaining “private professional provider[s]” immediately to provide the required plan review or inspection in accordance with the provisions of Code Section 8-2-26(g)(5). The Order does not otherwise amend or abate the requirements of Code Section 8-2-26, nor does it suspend the enforcement of its provisions.

Thus, instead of requiring residential builders to wait the state mandated timeframes (30 calendar days for plan review and 2 business days for an inspection) before retaining a private inspector under O.C.G.A. 8-2-26(g)(4), the builder can immediately employ a private inspector to perform the required review or inspection. 

It is important to note that special fees apply for employing private inspectors under O.C.G.A. 8-2-26(g)(4), which, by statute, should not exceed more than fifty percent of the required regulatory fee. The fee for private plan review and inspection are set by the local permitting authority.

Moreover, only the local permitting authority can issue the certificate of occupancy, so it imperative to hire only qualified and experienced private inspectors who will pay special attention to the documentation required for issuance of the certificate of occupancy.

Free public access to the full text of O.C.G.A. 8-2-26(g) can be accessed via LexisNexis using the following link: http://www.lexisnexis.com/hottopics/gacode/default.asp  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Georgia Supreme Court Overrules Precedent on Attorney’s Fees for Counterclaimants

Posted on: April 8th, 2020

By: Jake Carroll

Georgia law permits the award of attorney’s fees to a claimant where the party defending the claim has “acted in bad faith” in making the contract, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense. O.C.G.A. § 13-6-11. The “bad faith” refers to bad faith in the making or performance of the contract, and may exist whether or not there is a bona fide controversy otherwise existing between the parties.  Thus, “bad faith” relates to the making or performance of the contract and not the conduct of the litigation. The terms “stubbornly litigious” and “unnecessary trouble and expense” relate to the conduct of the litigation and may be found to exist where there is a lack of bona fide controversy.

Both the Georgia Supreme Court and Court of Appeals have repeatedly held that “the award of expenses of litigation under O.C.G.A. § 13-6-11 can only be recovered by the plaintiff in an action under the language of the statute; therefore, the defendant and plaintiff-in-counterclaim cannot recover such damages where there is a compulsory counterclaim.”[1]

However, the decision in SRM v. Travelers overrules prior holdings, and allows a counterclaimant to recover attorney’s fees under O.C.G.A. § 13-6-11, regardless of whether the counterclaim is independent of the plaintiffs claim.

In light of the Travelers decision, claimants should evaluate the potential risk of claims for attorney’s fees from their counterclaimants. In commercial and construction contract disputes, the Travelers decision impacts risk for counterclaims of attorney’s fees based on a claimant’s conduct during litigation, as well as bad faith in making or performing the underlying contract.

For Georgia insurers, this ruling does not call into question the status of Georgia’s insurance bad faith statute, O.C.G.A. § 33-4-6, which is the exclusive remedy for and insurer’s refusal to pay a “covered loss.” Although the claims at issue in SRM were against an insurance company, they involved the calculation of premium as opposed to a coverage issue within the purview of Section 33-4-6. Be sure to follow FMG’s Insurance Coverage and Bad Faith BlogLine for analysis of current state-wide and national trends in insurance litigation.

If you have questions regarding this decision, or any other construction or commercial contract questions, Jake Carroll practices construction and commercial law as a member of Freeman Mathis & Gary’s Construction Law, Commercial Litigation, and Tort and Catastrophic Loss practice groups. Mr. Carroll represents business and commercial entities in a wide range of disputes and corporate matters involving breach of contract and warranty claims, business torts, and products liability claims. He is available at [email protected].


[1] See Byers v. McGuire Properties, Inc., 679 S.E.2d 1 (Ga. 2009); Graybill v. Attaway Constr. & Assocs., 802 S.E.2d 91 (Ga. Ct. App. 2017) (attorney’s fees not permitted on compulsory counterclaim);Singh v. Sterling United, Inc., 756 S.E.2d 728 (Ga. Ct. App. 2014); Sanders v. Brown, 571 S.E.2d 532 (Ga. Ct. App. 2002).

COVID-19: Bankruptcy and its Impact on Managing Risk

Posted on: April 7th, 2020

By: Jake Carroll

In the wake of COVID-19 and the now-present economic uncertainty, individuals and companies may be considering the impacts of bankruptcy. While bankruptcy can offer certain protections, including delayed payments, discharge of some debts, and a general “fresh-start,” not all debts are dischargeable, and certain obligations could survive after the bankruptcy.

The decision to file for bankruptcy relief, or seek alternative asset protection, can be dependent on several factors, and should not be undertaken without seeking legal counsel, as well as the advice of financial advisors and other risk management professionals. A hasty or poorly-reasoned decision can have negative impacts on many business and personal rights, and limit other options for debt relief or reorganization. FMG’s April 9, 2020 Webinar, COVID-19’s Cascading Impact on Corporate Finances and Loan Obligations (click here to register), will address these issues in greater detail. In the meantime, FMG has prepared a list of Frequently Asked Questions and answers addressing bankruptcy issues below:

  • What is bankruptcy?  Bankruptcy is a general term used to describe proceedings in federal court in which consumers and businesses make seek to delay or reduce their payments, shed debt, and repay creditors only on specialized terms or conditions.
  • Who can file for bankruptcy? As long as you meet certain eligibility criteria, and have not recently filed for bankruptcy, relief may available for both individuals and businesses.
  • Is bankruptcy the same as a receivership? No, although they are similar proceedings.  Receiverships are primarily governed by state laws and involve liquidations of assets by an appointed receiver under court supervision.
  • What are the different bankruptcy “Chapters,” and what is the Importance? Chapters 7, 11, and 13, are the most common types of bankruptcies, and refer to three different Chapters of the Bankruptcy Code, Title 11 of the United States Code. Each Chapter applies to a different situation:
    • Chapter 7.  Chapter 7 bankruptcies are liquidation proceedings for businesses and individuals. In a Chapter 7 proceeding, property is typically sold in order to pay back debts based on secured priorities and formulas determined by the Court.
    • Chapter 11. Chapter 11 bankruptcies are normally used by struggling businesses as a way to get their affairs in order and pay off their debts, while ultimately retaining control of the company. Some individuals may also file for Chapter 11 when they are not eligible for Chapter 13 or own large amounts of non-exempt property (like several homes)..
    • Chapter 13.   Chapter 13 bankruptcies, like Chapter 11, are also used for “reorganizations,” but will involve the appointment of a trustee who can control personal and corporate decisions.   In Chapter 13, a debtor may be allowed to keep some property, but must submit and stick to a plan that will allow repayment of some or all debts within three to five years.
  • What is the automatic stay? The bankruptcy court offers certain protections to debtors during bankruptcy proceedings, the first of which is an “automatic stay” that prohibits creditors from taking action against you or your assets without further order of the Court.
  • What do I do if I receive a notice of a bankruptcy from someone who owes me money? Given the relatively quick pace and potentially significant impacts bankruptcy proceedings can have on outstanding debts, you should contact your attorney or seek legal counsel as soon as possible to ensure your rights are protected, and that all necessary forms are filed to protect your financial interests in any recovery.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Ready Camera One: Remote Litigation in the Era of Social Distancing

Posted on: April 7th, 2020

By: Jennifer Adair, Jennifer Markowski and Andy Treese

Evaluating claims to move them towards resolution or trial is the lifeblood of a defense practice. This typically requires direct interaction with a plaintiff and key witnesses, either at deposition (to hear their testimony, to form impressions of how they will be received by a jury), at mediation (to assure the plaintiff personally understands the strengths and weaknesses of the case), or at trial.  In person interaction is simply not as practical as it used to be and, in some places, it might be illegal.  It is not surprising that we have been fielding inquiries from claims professionals and their insureds about whether we can continue to move their cases forward by conducting discovery and settling claims in an age of social distancing. 

The answer is yes.  At Freeman Mathis & Gary our attorneys routinely take depositions remotely and have had great success with remote mediation.  Both, however, carry their own practical considerations.

  • Depositions.  Remote depositions have been around for well over a decade, but the increased demand is changing the marketplace.  Many lawyers who have never used or have avoided remote deposition technology no longer have a practical choice.  Some are adapting more quickly than others:  we have seen some opposing counsel take clean, effective depositions by video, but we have also seen opposing counsel take depositions that were not effective due to lack of familiarity with the technology and/or a misunderstanding of the different methodologies necessary to prepare for a remote deposition.  Counsel should consider several factors when preparing for and conducting an online deposition: 
    • Is this a deposition you are willing to take remotely?  Minor witnesses, some experts, or witnesses in cases with low exposure can probably be deposed remotely without concern.  Depending on the facts and exposure associated with the case, there may be some witnesses you may simply want to depose in person, even if it delays the case for 45-60 days. 
    • Prepare for your deposition at least two days early.  Identify the exhibits you are certain to use at the deposition and assure they can be presented cleanly to the witness.   For those that are obvious (complaint, incident report, interrogatory responses, etc.) consider having them pre-marked and distributed by email to opposing counsel, the witness and court reporter to speed the deposition along.  Also, identify documents you may want to use (medical records, photographs, etc.) and have those available and ready to present during the deposition. These can be circulated by email and shown to the participants using the screen sharing function of most videoconferencing technology.
    • Understand the technology. What program will be used? How will exhibits be presented?  Have you tested the video conferencing software or any other technology you need to use during the deposition?  How does the audio system work (i.e. can more than one person speak at a time or would an objection by counsel also inadvertently mute the witness’ microphone)?
    • Consider the logistics of the oath.  Who will place the witness under oath and where will they be?  Does your state permit oaths to be administered remotely?  Consider making a formal stipulation on the record that, due to the pandemic, the parties agree to the sufficiency of an oath administered remotely.
    • Decide how objections will be handled.  If it suits your purpose strategically, you and opposing counsel may choose to reserve some objections that would typically be made on the record.
    • Understand the cost and the final product.  How much is the vendor charging for this deposition as opposed to a standard deposition?  Are they generating a traditional transcript or is the deposition also being recorded?
    • Make a plan for confidentiality. If the witness is your client, plan in advance how you will communicate (by email, texting, etc.) during the course of the deposition to avoid inadvertent disclosures. Make sure you know how to turn off your camera and microphone or, better yet, go into another room to converse with your client.
    • Expect the deposition to take longer than usual. Don’t allow logistical limitations to curtail zealous representation.
  • Mediations.  Mediation and other forms of ADR are effective because a knowledgeable, competent mediator can provide litigants and their counsel on both sides a “reality check” as to the strengths and weaknesses of their cases.  The process works better when the mediator can speak directly to the parties and for that reason, our instinct in the past has been to require personal attendance at mediation.  So far, however, we have found remote mediation to make sense for several reasons:
    • Remote mediation is generally effective.   Some cases simply don’t settle until a mediator twists a metaphorical arm or two.   Is that effective when the literal arms aren’t in the same room as the mediator?   So far, anyway, the answer seems to be yes – when the technology works.  Where that is the case, mediators can still engage in private caucuses and have the ability to review or share exhibits, documents, etc. as needed.   We can envision specific cases where a video mediation might not be appropriate but so far, remote mediation has been getting cases resolved.
    • Remote mediations keep cases moving.  Governmental orders aside, many of our adjusters and risk managers have been restricted by their employers from non-essential travel for the foreseeable future.  Remote mediation presents a cost-effective opportunity to resolve cases now.
    • Remote mediation is cost effective (for now).  Most of our vendors are currently providing remote mediation services at no extra charge.  Remember, mediation centers are a business, too, and have a vested interest in keeping their dockets full by providing the technology and know-how to make mediation convenient to the parties, via Zoom or similar systems. 
    • Litigants may have a greater motivation to settle their claims when faced with the reality that jury trials for civil cases seem unlikely to take place for at least several months after state and local judicial emergencies resolve.
    • Attorneys want to keep cases moving, too. Counsel may view remote mediation as a step that can be taken towards trial.  Most courts already require ADR / mediation before trial.  Others are likely to being imposing that requirement to control their post-coronavirus dockets. 
    • Understand privacy issues related to the technology. Media reports suggest that Zoom and potentially other platforms are at risk for security issues.  Make sure the mediator provides a password for participants to gain access, and that meetings are locked so that nobody can join without the moderator’s permission. Ensure that the mediator has disabled the recording function, and that chat is not archived. Ask your mediator to send instructions in advance so that you are comfortable with the measures being taken, and can request any additional protections you deem appropriate.

At Freeman Mathis & Gary, our team will continue to monitor and report on the use of emerging technologies to litigate claims and obtain favorable outcomes for our clients.

Additional information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Federal Judge Refuses to Enjoin Kentucky Governor from Restricting Interstate Travel

Posted on: April 6th, 2020

By: Barry Miller

A federal judge has refused to halt enforcement of an order that directed Kentuckians not to travel outside the state for two weeks because of COVID-19.

Governor Andy Beshear issued the order on March 30. It makes exceptions for those traveling to meet work requirements, buy necessary supplies, seek health care, or provide care for the elderly or disabled.

Plaintiff Allison Alessandro sued the governor in the United States District Court for the Eastern District of Kentucky on April 2. She filed her motion for a temporary restraining order with her complaint.

That motion argued that the right of interstate travel is “virtually unqualified,” and because this constitutional right was being impaired, irreparable injury is presumed. Judge Gregory Van Tatenhove said Alessandro still must show that any harm to her is immediate. He said he desire to visit friends and family in Ohio failed to satisfy that requirement.

Ms. Alessandro resides in Campbell County, Kentucky, which is on the Ohio border.

Judge Van Tatenhove also questioned whether Alessandro had shown irreparable harm. Because Ohio has also restricted travel it was not clear that enjoining Beshear’s travel order would give her a remedy.

The order also discussed a balance of harms, saying that enjoining the order might substantially harm other citizens, particularly those more vulnerable to COVID-19. Typically, if a law is unconstitutional, there is no harm to others by enjoining it, Judge Van Tatenhove wrote. The judge stated his review was preliminary. “In-depth consideration of the constitutional issues at play will require additional briefing from the parties,” he wrote, noting that the Commonwealth had not yet briefed those issues. He scheduled a telephonic conference with the parties for Monday.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include employment issues, the real-world impact of business restrictions, education claims and more. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Plaintiffs and Lawmakers Raise Bad Faith Issues in COVID-19 Claims

Posted on: April 3rd, 2020

By: Adrianna Michalska and Eric Retter

Every American is reminded daily that Coronavirus spreads easily and quickly. So has the impact on the insurance industry. How fast? Less than a month after the first U.S. death attributed to the virus on February 29, an insurer already faces a coverage and bad faith lawsuit over a COVID-19-related claim.

While the speed with which the first bad faith case arrived may be unexpected, there was little doubt such cases were coming. Other lawsuits hinted at such claims weeks ago, and state efforts to require carriers to pay business interruption claims—regardless of whether their policies actually cover such claims—may also lead to extra-contractual claims.

Restaurants are leading the charge

Several restaurants have sued their insurers, seeking declaratory judgments for potential business interruption claims in the wake of COVID-19. But Big Onion Tavern Group, LLC et. al. v. Society Insurance, Inc., filed March 27 in the Northern District of Illinois,features the first actual denial of such a claim, which prompted the boilerplate bad faith claim.

On March 15, 2020 Illinois Governor Pritzker ordered all restaurants, bars, and movie theaters to close. Executive Order 2020-07 posits that “frequently used surfaces in public settings, including bars and restaurants, if not cleaned and disinfected frequently and properly, also pose a risk of exposure.” One of the plaintiffs in the Big Onion case, Legacy Hospitality, operates a Chicago restaurant called The Vig. On March 20, Legacy asked Society Insurance to pay a claim resulting from the shutdown. Society denied the claim three days later. The denial stated that there was no direct physical loss or damage to property triggering either a business interruption or civil authority claim (Society also denied claims for spoilage and contamination in the denial letter, attached as an exhibit to the Complaint).

The other restaurant owners who are plaintiffs in the Big Onion do not attach denial letters as exhibits, but each alleges that its claims were similarly denied. All of the plaintiffs rely on an email from Society’s CEO and President dated March 16, averring that it indicates the insurer’s intent to deny all such claims without investigating them. (The last page of the email states that it is a “TEST EMAIL ONLY,” sent for the purpose of testing a draft message.)

Suits seeking declarations that these types of losses are covered have been filed in other jurisdictions. On March 30, our colleague Katie Cusack  reported on a declaratory judgment action that was filed in mid-March in a Louisiana state court by a New Orleans restaurant seeking a declaration of prospective coverage under a business interruption policy based upon events and losses that are not alleged to have occurred. [Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al., Civil District Court for the Parish of Orleans, Louisiana].

Political pressure mounts

On the same day the Cajun Conti suit was filed, New Orleans TV station WWL4 reported that  Mayor LaToya Cantrell filed an emergency declaration in the same court. That order states that COVID-19 “caus(es) property loss and damage in certain circumstances.” If there were any doubt about her intentions to influence insurance payments, Mayor Cantrell announced that “[w]e have also been very aggressive as it relates to business interruption support and … insurance. We understand pandemic infections are not included in their insurance coverage, which makes this a priority for my administration to push for these reasons at the state and federal level.”

Mayor Cantrell is not the only politician aggressively pressuring insurers. New Jersey introduced a proposed bill in mid-March that would force insurers to cover business interruption insurance even if they expressly excluded virus and bacteria losses in their commercial property policies. Several states have proposed similar legislation, including New York, where Assemblyman Robert C. Carroll planted the notion that it would be “unconscionable” for insurers to rely on such exclusions after they received bailouts in 2008.

Massachusetts has also proposed such a law. Bill SD.2888 would construe any business interruption policy to include among the covered perils loss of use and occupancy, and business interruption directly or indirectly resulting from COVID-19. The bill would require this construction even when the policy contains express language excluding any losses “on account of (i) COVID-19 being a virus . . . ; or (ii) there being no physical damage to the property of the insured or to any other relevant property.”

Proponents of the Massachusetts bill go a step further by trying to tie the bill to Chapter 176D of the General Laws. Chapter 176D concerns Unfair Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of Insurance. Along with Chapter 93A, it provides relief for bad faith handling of insurance claims. Together, the statutes allow for possible recovery of attorneys’ fees and even double or treble damages for knowing and willful violations.

To date, no state has yet passed bills into law that seek to override policy provisions precluding coverage for business interruptions claims associated with COVID-19. FMG will continue to monitor these bills along with other political efforts that impact the insurance industry and the construction of such provisions in particular.

The FMG #Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include employment issues, the real-world impact of business restrictions, education claims and more.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include employment issues, the real-world impact of business restrictions, education claims and more. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

FMG Responds to Coronavirus Crisis with Multiple Client Resources

Posted on: April 3rd, 2020

We know these are challenging times, but we want our clients and friends to know that FMG remains open for business and is here to help. Our lawyers and staff have worked tirelessly to provide a broad cross-section of capabilities to address all of your legal needs arising out of this crisis, including the following:

  • Coronavirus Task Force – Our multi-disciplinary team of attorneys continues to provide up-to-the-minute information, strategic advice, and practical solutions for our clients and potential clients. You can find out more about the team by clicking here or emailing the team at [email protected]. We are endeavoring to respond to all questions submitted to this email address by a professional skilled in your area of concern.
  • FMG COVID-19 Insurance Coverage Practice Team – Our team of highly experienced insurance coverage attorneys can handle coverage questions and disputes that arise throughout the country. They are uniquely situated to service insurers as national counsel to provide consistent advice and litigation positions as COVID-19 issues arise. For more details on what our team and its members can do for you, please click here.
  • FMG’s Coronavirus Resource Center – We also have established a Coronavirus Resource Center you can access on our website, click here. In one place, you can review summaries of court operations in all jurisdictions that FMG services and also review blogs and other educational information that will be helpful to you.
  • Daily Webinars – Our team also has scheduled multiple daily webinars on topics such as the new CARES Act and subject-specific topics including employment, insurance coverage, cybersecurity, tort liability, and California-specific employment and cyber issues. Webinars are free of charge and open to anyone who would like to attend. To review topics and register, click here.

Our attorneys, wherever they are working, have dedicated themselves to being available before, during, and after normal working hours in order to be readily available to you. They are always accessible 24/7 by email or their personal cell phones (contained in their email signatures). If you have any other questions or concerns, please reach out to us, including to me personally, if there is anything we can do to assist you. 

Benton J. Mathis, Jr.
Managing Partner

Pennsylvania Orders Halt to Construction Projects Other than Emergency Repairs and the Construction of Health Care Facilities

Posted on: April 2nd, 2020

By: Sean Riley

Governor Tom Wolf has issued an executive order closing all businesses in Pennsylvania that are not deemed to be “life-sustaining.” Residential and non-residential building construction, as well as utility subsystem, road and bridge construction are all specifically listed as businesses that must immediately cease physical operations. However, “emergency repairs” and “construction of healthcare facilities” are permitted to continue. Businesses that are part of the supply chain or are otherwise necessary to support life-sustaining business may apply for a waiver but must do so on or before the April 3, 2020 deadline. Businesses should consult with legal counsel to determine whether such a waiver is appropriate.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

COVID-19: Protecting Those Who Protect Us

Posted on: April 2nd, 2020

By: Parisa Saleki

The Volunteer Protection Act of 1997 (Public Law 105–19) came into effect over two decades ago with a simple goal: promote volunteerism by limiting, and sometimes eliminating, a volunteer’s risk of tort liability. The recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act) further builds on the goal of encouraging volunteerism.

Specifically, the CARES Act limits liability of health care professional volunteers during the COVID-19 emergency response with respect to the diagnosis, prevention, or treatment of COVID-19 or the assessment or care of a person’s health-related to COVID-19. Section 4216 of the CARES Act states that a volunteer health care professional “shall not be liable under Federal or State law for any harm caused by an act or omission of the professional in the provision of health care services during the public health emergency.”

The CARES Act does not, however, eliminate liability altogether. Volunteers should be cautious of several exceptions to the new rule. For example, the limitation will not apply if a person sustained harm as a result of a volunteer’s willful act or gross negligence, reckless misconduct, or a conscious flagrant indifference to the rights or safety of the harmed individual. Further, liability will not be limited if a health care professional volunteer rendered services and caused a person harm while under the influence of alcohol or an intoxicating drug.

So, who exactly do these new rules apply to? The CARES Act defines the term “volunteer” as a health care professional who, with respect to the health care services rendered, does not receive compensation or any other thing of value in lieu of compensation, which includes a payment under any insurance policy or health plan, or under any Federal or State health benefits program.

For legal professionals handling claims under this section of the CARES Act, it is important to note that the section is not retroactive. The limitation of liability only applies to claims for harm in which the act or omission that caused harm occurred on or after the date the CARES Act was enacted. Lastly, the effect of this section comes to a halt once the COVID-19 public health emergency is declared over.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Zoom Class Action Raises Privacy Concern with Favored Online Meeting Platform

Posted on: April 2nd, 2020

By: Barry Miller

A class action filed March 30 alleges that the popular Zoom Video Communications platform is rife with privacy concerns.

That story has piqued the interest of the legal community, as Zoom has become the platform of choice among mediators working to resolve disputes during a time when in-person meetings are prohibited or discouraged.

The class action, Cullen v. Zoom Video Communications, Inc., 5:20-cv-02155 (N.D. Cal.), alleges that Zoom “has failed to properly safeguard the personal information of the increasing millions of users of its software application….” It states that “[u]pon installing or upon each opening of the Zoom App, Zoom collects the personal information of its users and discloses, without adequate notice or authorization, this personal information of its users….”

The lawsuit states claims under the California Consumer Privacy Act, as well as the state’s Unlawful and Unfair Business Practices and Consumers Legal Remedies laws. It also makes common-law claims for negligence, invasion of privacy, and unjust enrichment.

Forbes magazine reported yesterday that some users are complaining that the recording of private chats in Zoom results in disclosing chats thought to be private. Messages to other chat users are visible when the chat is downloaded, according to a Twitter user Forbes quoted. Zoom this in its story, although it did say that if a host records a Zoom meeting locally, private chats become part of that recording. Another outlet is reporting that Zoom meetings do not support encryption end-to-end.

Both the U.S. Attorney General and the N.Y. Attorney General are investigating Zoom privacy concerns. As a result of such investigations and complaints, Zoom has reportedly removed code that sent user data to Facebook without clearly disclosing that to the user.

Zoom has said that its app did not share sensitive data, such as user names, emails, or phone numbers, but did provide information about user devices (including specifications), operating systems, and time zones.

The federal and New York investigations bear watching by attorneys. Since mid-March, when COVID-19 caused many state and federal courts to close or restrict access to courthouses and ban in-person proceedings, mediators have (commendably) continued to work at getting cases settled without in-person meetings. Most court orders encourage the use of technology to continue the progress of cases. Mediators were among the first to heed that encouragement, and the Zoom platform emerged as their consensus choice.

California mediator Jean Lawler does not believe mediators will stop using Zoom, but she does believe both mediators and the attorneys they work with must have a good understanding of the technology before using it. She notes that Zoom gives users the ability to control settings, and users must be aware of how they are set. “[A]nyone who hosts an online meeting, on any platform, would be well advised to very judiciously take a look at their settings and options to ensure settings that can protect the privacy of the participants,” said Lawler in an email.

Among the most important things, she said, is not to allow recordings of mediation sessions, not allowing chat, requiring unique identifiers and passwords from attendees, and having attendees go to a virtual waiting room so the mediator can allow them into mediation after confirming their identity.

Zoom makes similar security recommendations in a whitepaper available on its site.

Attorneys may also wish to review Zoom’s Compliance Statement with the European Union’s General Data Protection Regulation, and inquire whether the same protective steps have been taken to protect data in the United States. This is particularly true if the mediation may involve the data of EU residents, or data collected from someone while they were visiting the EU.

Another mediator told FMG that confidential information in his mediations continues to be exchanged by mail and email. None of that information is exchanged via Zoom.

As government leaders talk about flattening the contagion curve, Zoom is a reminder that attorneys, mediators, and judges are finding they must accelerate their technology learning curve.  

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Will E&O Policies Protect Attorneys for Claims Arising Out of Remote Notarization During the COVID-19 State of Emergency?

Posted on: April 2nd, 2020

By: Kathleen Cusack

As stay-at-home orders increase in number, duration, and severity across the country, many businesses have moved to remote functions to avoid business interruption and limit in-person contact.  Most states, though, require that notaries public acknowledge the signing of a document in person.  Attorneys in many practice areas are routinely called upon to acknowledge documents. Even though attorneys providing services such as real estate closings or estate planning have been deemed in some states to be “essential” and are permitted to continue operations, they and their clients are understandably looking for alternatives to face-to-face meetings. One such alternative being considered is remote notarization, which utilizes audio-visual technology to see and communicate with a signor rather than being physically present with the signor. Currently, 23 states allow for remote notarization.  Four other states have authorized plans for remote notarization in the future and ten states are considering legislation to allow for remote notarization.  In addition, federal legislation regarding remote notarization was introduced on March 18, 2020, by Sen. Kevin Cramer (R, ND) in bill S.3533.    

In response to COVID-19, several states that do not permit remote notarization are considering implementing temporary emergency measures to allow for it.  Attorneys who plan to notarize documents remotely should take note of the language in their relevant insurance policies, including their errors and omissions (“E&O”) policy, to determine whether claims arising out of a document that was acknowledged remotely will be covered.  Many E&O policies exclude from coverage claims that arise out of documents that were acknowledged when the signor was not present “in person”.  Whether the term “in-person” will be interpreted to include signors that were present by audio-visual technology may depend on the insurance provider.  Thus, for attorneys acknowledging documents remotely – even on a temporary basis – it is important to know whether their policy contains such exclusion and, if so, seek guidance on how the exclusion is being or has been interpreted.            

You can review guidance for which states allow for remote notarization here. As stated herein, some of the states that do not currently allow for it are considering temporary emergency measures in direct response to COVID-19.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

The New “CARES Act” in Plain English- Simplifying the Latest Federal Benefits in Response to the COVID-19 Crisis

Posted on: April 1st, 2020
While the Coronavirus/COVID-19 continues to wreak havoc on the health and welfare of individuals throughout the world, triggering shelter-in-place orders and disruptions to normal supply chains and service client relationships, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed by Congress, and signed by President Trump on March 27, 2020, in order to provide important financial benefits to seven primary groups: 1) individuals, 2) small businesses, 3) mid-size and larger companies, 4) hospitals and public health facilities, 5) children and families, through federal safety net programs, 6) state and local governments, and7) providers of educational services.

FMG’s executive summary highlights the key provisions of the CARES Act, allowing you to investigate the provisions that may be of value to you or your company. Because many of these provisions require an analysis of your situation, including relevant risks, benefits, and obligations, we stand prepared to provide you with individualized guidance in seeking benefits to which you may qualify in this potential time of need. We can also provide references to other professionals, such as professional tax advisors, should you not already have someone meeting those needs for you. In this regard, FMG is offering a variety of resources including the following:
 
FMG’s Coronavirus Task Force – Our multi-disciplinary team of attorneys continues to provide up-to-the-minute information, strategic advice, and practical solutions for our clients and potential clients. You can find out more about the team by clicking here or emailing the team at [email protected] We are endeavoring to respond to all questions submitted to this email address by a professional skilled in your area of concern.  

FMG‘s Coronavirus Resource Center – We also have established a Coronavirus Resource Center you can access on our website, click here. In one place, you can review summaries of court operations in all jurisdictions that FMG services and also review blogs and other educational information that will be helpful to you.

Daily Webinars – Our team also has scheduled multiple daily webinars on topics such as the new CARES act, and subject-specific topics including employment, insurance coverage, cybersecurity, tort liability, and California-specific employment and cyber issues. Webinars are free of charge and open to anyone who would like to attend. To review topics and register, click here.

I.     SBA Financial and Support Services


Through the Small Business Administration, specific benefits are provided to small businesses and entrepreneurs in four primary areas:
Financial Capital to Help Businesses Retain Their Employees
The Paycheck Protection Program (“PPP”)
A Limited Cash Infusion to Help Meet Current Cash-Flow Needs
The Emergency Economic Grant Program (“EEGP”)
Deferral/Management of Existing Small Business Association (“SBA”) Loans
The Small Business Debt Relief Program (“DRP”)
Counseling Services to Help Address Current Economic Uncertainties
The Resource Partner Program (“RPP”)
 
Each of these Programs is further explained below, with additional and more detailed information available at https://www.sbc.senate.gov/public/index.cfm/guide-to-the-cares-act.
 
A.    The Paycheck Protection Program
 
The PPP will provide cash-flow assistance from federally guaranteed loans (with no SBA fees) to employers who maintain their payroll during this emergency. The Program generally involves the following rights and benefits:
Loans can be sought for up to 250% of the average monthly payroll costs over the last year (maximum $10 million) for COVID-19 caused harm between February 15 to June 30, 2020 – special retroactive provision to February allows for laid off workers to be brought back now
The Loan can be for a maximum of 10 years, at a maximum of 4% interest.
6-month payment deferral, with a deferral possibility up to a year for ongoing obligations
Loans may be fully or partially forgiven. Generally speaking, as long as employers continue paying employees at normal levels during the 8 weeks following the origination of the loan, the amount they spend on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined, and that portion of the loan can be forgiven. 
The loan forgiveness cannot exceed the principal balance of the loan, the  amount of the loan forgiveness will be reduced if the average number of full-time equivalent (FTE) employees during the 8-week forgiveness period is less than the average number of FTE employees during the same periods in 2019.
Applies to traditional small businesses, IRS 501(c)(3) entities, and other businesses having less than 500 employees (“affiliation” rules do not apply)
The loans are subject to additional limitations and restrictions that can be found on the website above and from the SBA.
 
B.    The Emergency Economic Grant Program
 
The EEGP provides eligible companies affected by COVID-19 losses with up to $10,000 as an emergency grant (not a loan), which must be used for:
Providing sick leave to employees unable to work due to COVID-19;
Maintaining payroll to retain employees during business interruption;
Meeting increased costs to obtain materials unavailable from the applicant’s original source due to supply chain interruptions; or
Repaying obligations that cannot be met due to revenue losses.
To obtain the grant, the company must apply for an SBA Economic Injury Disaster Loan (EIDL) and request an advance against the loan funds which will be made available 3 days later, and is available whether or not the EIDL is approved.
 
C.    Small Business Debt Relief Program
 
The DRP provides immediate relief to small businesses with non-disaster SBA, with the SBA covered all loan payments for 6 months. This relief will also be available to new borrowers who take out loans within 6 months of the CARES Act becoming law.
 
D.    Counseling and Training
 
Local Small Business Development Centers (SBDC), Women’s Business Center (WBC), and SCORE mentorship chapters (and related entities) will receive additional funds to expand their services.  Counseling is free; training may have a limited cost. 


There is a separate goal to create a “joint platform” to help consolidate information and resources related to COVID-19 questions and concerns. Additional resources include the SBA (www.sba.gov/local-assistance/find) and the Minority Business Development Agency’s Business Centers (MBDCs – not every state/local jurisdiction has one).
 
II.    Additional Assistance for Mid-Size Firms.
 
For midsize companies (between 500 and 10,000 employees), who often would not qualify for assistance from the SBA, and would also not qualify for the PPP, the CARES Act also provides important areas of relief if certain conditions and criteria are met. 


Direct loans will be available under the Emergency Relief and Taxpayer (“ERT”) portion of the Act, upon a “good-faith certification” that the company will comply with requirements, such as:
The intent to restore at least 90% of the company’s workforce, as it existed as of February 1, 2020, including compensation and benefits as they existed on that date. This restoration must be accomplished within 4 months after Health and Human Services declares an end to the COVID-19 health emergency;
A promise not to outsource jobs for the length of the loan (which cannot exceed 5 years), and for 2 years after the loan repayment date;
A representation that it will not “abrogate” an existing collective bargaining agreement for the term of the loan, and for 2 years after the loan repayment date.
The employer will remain “neutral in any union organizing effort for the term of the loan.”
For companies interested in such loans, the Act states that principal and interest payment obligations can be stayed for up to 6 months, with an interest rate no higher than 2% annually
The importance of the accuracy of the required certifications cannot be understated.  The knowing submission of a false statement in support of the loan request may expose the company and its directors and officers to civil and criminal liability under the False Claims Act and other federal laws.
 
III.    Employee Retention Tax Credit
 
A tax incentive is provided for eligible employers who retain their employees despite the COVID-19 crisis. An employer is eligible if (1) its operations are fully or partially suspended by a government order relating to COVID-19, or (2) gross receipts during a calendar quarter are 50% less than the gross receipts for the same quarter in 2019. For eligible employers, the tax credit is calculated by multiplying 6.2% (the employers’ Social Security tax percentage) by the qualified quarterly wages paid to each employee after March 12, 2020 and before January 1, 2021 (which cannot exceed $10,000 for all quarters), which is then subject to the following provisions:
For employers with more than 100 employees in 2019, the qualified wages are limited to only those wages paid by the employer during the period of time when the business was shut down, and only to those employees who are not providing services.
For employers with 100 or less employees in 2019,  the qualified wages include both the period of time the business was shut down, and the period of time suffered the requisite 50% decline in business, and applies whether or not the employee was provided services.
This tax credit may be reduced or eliminated if the employer is already receiving tax credits under certain other programs.
 
IV.    Expansion of Unemployment Benefits
 
The ACT provides for an estimated $260 billion in expanded unemployment insurance benefits to unemployed/underemployed workers impacted by COVID-19. Primary benefits include:
Extends an additional 13 weeks of eligibility for benefits; 
Makes unemployment compensation available for those who would not otherwise be eligible for unemployment benefits, including those with limited work histories or those who have exhausted their state unemployment compensation benefits. 
Eligible or “covered individuals” include anyone providing a self-certification that they are otherwise able and available to work, and now includes individuals who are self-employed, are seeking part-time employment, or who do not otherwise have a sufficient work history, as long as they are not (a) working remotely for pay, or are on paid sick leave or paid family medical leave (FMLA or similar statutes). If the individual falls within these guidelines, they must also show that they are unemployed/underemployed because of at least one of the following circumstances: 
The individual has been diagnosed with COVID-19, or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
A member of the individual’s household has been diagnosed with COVID-19; 
The individual is providing care for a family member or household member who has been diagnosed with COVID-19; 
The individual is the primary caregiver for another person in the household who is unable to attend school or another facility as a direct result of COVID-19 and such school or facility care is required for the individual to work; 
The individual is unable to reach their place of employment because of a quarantine imposed as a direct result of COVID-19; 
The individual is unable to reach their place of employment because a health care provider has advised the individual to self-quarantine due to COVID-19 concerns; 
The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19; 
The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19; 
The individual is forced to quit their job as a direct result of COVID-19; or 
The individual’s place of employment is closed as a direct result of COVID-19. 
For an individual meeting all of these standards and requirements, they may then be entitled to seek up to:
An additional $600 payment per week for the first four months (ending on or before July 31, 2020), in addition to the amount that may be additionally owed under any state law, and an additional 13 weeks of unemployment benefits if they remain unemployed after their state unemployment benefits are exhausted (ending on or before December 31, 2020); but
Total assistance shall not exceed 39 weeks, unless otherwise extended
The Secretary of Labor is empowered to issue operating instructions or other guidance necessary to implement these provisions, with States also specifically authorized to waive the normal first week benefit waiting period, so that eligible individuals can immediately seek benefits.
 
V.    Special Limits on Executive Compensation 
 
As a condition of receiving emergency financing from the Secretary of the Treasury under CARES, certain airline industry companies (airline, air cargo, and ancillary airline service industries, including those essential to national security) must agree to limit their executive compensation. For the company to remain eligible for financial support services, no officer or employee whose 2019 compensation exceeded $425,000 (excluding certain collectively bargained employees) may not (i) receive compensation greater than the amount received in 2019 over a 12-month period, or (ii) receive severance pay or benefits upon termination which exceed two times the total compensation received in 2019. 


Additionally, an officer or employee who received total compensation in 2019 exceeding $3,000,000 may not receive compensation greater than $2,000,000, plus 50 percent of the amount greater than $3,000,000 received in 2019. 
 
VI.    Retirement Funds
 
For qualifying individuals adversely affected by COVID-19, the CARES Act makes it easier—and less financially burdensome—to access early distributions or loans from their retirement funds.  A qualifying individual includes:
An individual diagnosed with SRS-COV-2 or COVID-19 by a test approved by the CDC,
An individual whose spouse/dependent is diagnosed with one of these diseases, or
Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced, or being unable to work due to lack of childcare.
Qualifying individuals may then:
Withdraw up to $100,000, without an early withdrawal (10%) penalty, from an IRA or 401k, and income taxes on the withdrawn amount can be avoided if it is repaid within 3 years; or
Obtain a nontaxable loan from the IRA/401k, within 180 days of CARE’s enactment, up to $100,000.
In addition, the required minimum distributions from retirement accounts normally imposed on individuals beginning at age 72 have been waived. 
 
VII.     ERISA Plans 
 
For qualified employer plans governed by ERISA, the CARES Act changes the rules for certain disclosure obligations, distributions, and contributions. These include:
Deadlines for benefit plans and their sponsors to file required submissions, and/or take certain actions, can now be extended for up to 1 year
The contribution date(s) for single-employer defined benefit plan contributions otherwise owed in 2020 are extended to January 1, 2021.
VIII.    General Labor Provisions
 
A.    FMLAA and EPSLA Additional Provisions
The CARES Act makes clear that the caps within the Emergency Paid Sick Leave Act (EPSLA) and the Federal and Medical Leave Amendment Act (FMLAA) are per employee. As a result:
Under FMLAA, an employer shall not pay more than $200 per day, and $10,000 in the aggregate, for each eligible employee; and
Under EPSLA, an employee shall not pay more than (i) $511 per day, and $5,110 in aggregate, for each eligible employee for reasons 1-3 of EPSLA; and (ii) $200 per day, and $2,000 in aggregate, for each eligible employee for reasons 4-6 of EPSLA 
For rehired employees, ESPLA applies to an individual who was laid off by the employer on or after March 1,2020, and after the employee had worked for the employer for not less than 30 of the last 60 calendar days prior to his/her layoff and rehiring dates.
 
B.    Federal Contractor Special Protections
 
The CARES Act also included specific relief for federal contractors whose employees (1) cannot perform work on a “site that has been approved by the Federal Government ” during the COVID-19 public health emergency due to facility closures or other restrictions and (2) cannot telework because their job duties cannot be performed remotely. 


The Act authorizes federal agencies to use any available funds to modify affected contracts – without separate or consideration from the contractors – to reimburse the contractors for paid leave, including sick leave, that a contractor provides to its employees or subcontractors in order to keep them in a ready and available state.  The authorized reimbursements may cover an average of 40 hours per week, “at the minimum applicable contract billing rates.”  The maximum reimbursement must be reduced, however, by the amount of any credit the contractor is allowed pursuant to Division G (“Tax Credits for Paid Sick and Paid Family and Medical Leave”) of the recently enacted Families First Coronavirus Response Act, and by any other applicable credits that the contractor is allowed under the CARES Act. 
 
C.    Additional Tax Credit Against Tax Deposits
 
Employers are also entitled to receive a special tax credit that can be applied, in accordance with forms and instructions available from the Secretary of Labor, against required tax deposits, with any penalties waived under the Internal Revenue Code related to the use of the credit against such amounts. 
**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests. We cannot respond to all unsolicited requests for representation. If you need legal advice, please contact an attorney and enter into a valid, written attorney- client relationship. See also our terms of service for this website.**

Nursing Homes at Highest Risk, States Respond

Posted on: April 1st, 2020

By: Shaun M. Daugherty

States across the country are taking every measure possible to fight the spreading deadly COVID-19.  One of the most at-risk groups are the elderly, especially those with lengthy lists of other health problems.  In those instances where people reside in close quarters with attendants and staff constantly moving between rooms, it can be a disaster for the residents if the virus breaches its defenses.  The reports on March 30, an eon ago in this pandemic, were that over 400 nursing facilities across the United States have countless confirmed infected residents and/or staff.  The news confirms daily that states are being hit hard with reports of high levels of outbreak in their long-term care facilities. 

The CDC issued its checklist for long-term care facilities that recommend the restriction of all visitation except in those end of life situations; restriction of all non-essential personnel; cancel all group activities and communal dining, and implement active screening of resident that show any symptoms of the disease.  Centers for Medicare & Medicaid Services (CMS) has also issued guidance for nursing homes mirroring the CDC’s recommendations. 

Some nursing homes have temporarily been converted to COVID-19 only recovery centers.  Massachusetts has 12 such facilities currently.  In New York, the mandate is that nursing facilities are ordered to accept hospital discharges, even those that have tested positive for COVID-19.  These measures are providing the desperately needed bed space in the overburdened hospital systems.     

In Georgia, Governor Brain Kemp has issued an order to have the National Guard deployed to the state’s nursing homes to provide much-needed assistance in the attempts to stop the deadly spread of this disease in its elderly population.  The main role of the National Guard at these facilities will be for education and implementation of better sanitation methods and to train the staff on more aggressive infectious disease control measures.  They will also assist in deep cleaning the facilities where necessary. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Massachusetts Sees Tensions Between Municipal Construction Bans and Governor’s “Essential Services” Order

Posted on: April 1st, 2020

By: Catherine A. Bednar, Esq.

On March 17, 2020, Boston became the first city to issue a moratorium on construction projects as an emergency measure to slow the spread of COVID-19. Boston’s order includes exceptions for emergency and essential work, such as emergency utility work and construction needed to support public health facilities, maintain reliability of the transportation network, and keep residential buildings habitable. Following Boston’s ban, Nantucket, Cambridge, and Somerville and other local governments issued similar orders which, like Boston, include exceptions for emergency work and certain projects.

On March 23, Governor Baker issued an Order “Assuring Continued Operation of Essential Services in the Commonwealth, Closing Certain Workplaces, and Prohibiting Gatherings of More than 10 People”. The order sought to close a broad range of public facilities, workplaces and establishments while maintaining critical services and functions.  In particular, the Order identified two categories of construction industry workers as “essential” who may continue to work, which encompassed a significantly broader swath of workers than the exceptions set forth in the municipal bans, including workers and vendors involved in the construction of “critical or strategic infrastructure” and construction workers on all construction sites and construction projects including housing construction. 

Two days later on March 25, as municipalities continued to issue orders restricting construction work, the Governor’s Legal Office issued a letter invoking Section 8A of the Massachusetts Civil Defense Act, which mandates that any local government order “shall be inoperative” to the extent it is inconsistent with an order issued by the Governor during the period of the emergency. The letter, which called on municipalities to withdraw any directives that are inconsistent with the Governors’ Order, was met with resistance.

On March 27, 2020, Somerville’s mayor issued a statement that “due to Somerville’s dense urban environment” and in order to protect workers and the community, the City’s construction suspension will remain in full force.  Likewise, Boston’s mayor affirmed the city’s construction ban would be extended. The islands of Nantucket and Martha’s Vineyard petitioned the Governor’s office seeking an exemption.

During a press conference on March 26, Governor Baker expressed a level of tolerance for those municipalities issuing construction bans.  Baker noted that the state’s COVID-19 guidelines for ensuring safety on job sites provides for oversight and enforcement to be performed at the municipal level.  Baker explained, “Boston and several other municipalities have said — and it’s a fair point — that they don’t believe that they’re in position at this point to do the work that would be associated with ensuring that those guidelines are being adhered to on the ground with all the projects that are either underway or planned.” Boston Mayor Marty Walsh also indicated the City was working with the construction industry to “determine protocols that would allow these sites to safely re-open in Boston.”  Similarly, officials from Martha’s Vineyard and Nantucket held a weekend conference call with the Governor’s office to work on resolving the issue. On Monday, March 30, the Town of Edgartown posted on its website that “The Governor’s representatives stated that the local boards of health retain the power to ban construction if warranted by local considerations”, such as the local hospital capacity.

Whether the Governor takes future action to compel municipalities to withdraw their local orders or instead continues to give cities and towns latitude, will likely depend on the scope, duration and impact of the current local measures going forward.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Coronavirus and Impact on Landlords and Tenants

Posted on: April 1st, 2020

By: Michael Bruyere,Ryan Greenspan and Ali Sabzevari

Commercial and residential tenants, whether due to operational closures or loss of jobs or income, will face difficulties meeting their rent obligations, and some may even abandon their properties.  Landlords may face both a loss of rents, as well as physical closures or abandonment of properties making sites more vulnerable to vandalism or theft. We provide this brief overview regarding how each party’s rights and obligations may be impacted by the COVID-19 crisis.

Eviction Limitations

Regulations have recently been enacted in New York, Boston, Los Angeles, San Francisco and St. Louis banning evictions for nonpayment of rent, often in both the residential and commercial settings.  Some states, such as California and New York have also instituted statewide eviction moratoriums.  Federal agencies, such as U.S. Department of Housing and Urban Development, have also announced that they are suspending evictions and foreclosures until April 30, 2020, with the CARES Act placing a 120-day eviction moratorium on tenants in special housing assistance (Section 8) or federally backed mortgage loan programs.  While these provisions prevent evictions, they do not address the tenants’ ongoing rent payment obligations.

Lease Provisions and the Impact on Rent

Unless they are on a month-to-month tenancy, the parties’ rights and obligations are evaluated under their leases.  The most likely lease provisions relating to potential efforts to avoid rent payments include: 

  • Force Majeure.  It is unclear whether COVID-19 will fall within potential force majeure clauses.  Most of these clauses have detailed listing of covered items, but pandemics are not included.  An epidemic might not also be considered an “Act of God.”  As such, the interpretation of such clauses, which might vary from state-to-state, will need careful analysis.
  • Act by Civil Authority.  Given civil shelter-in-place/business cessation orders, this type of clause may be relevant to the extent a particular business is forced to close its operations.  Not all “civil authority” clauses are written in the same way, so careful attention to the language used will be needed.

Withholding Rent/Rent Strikes

While evictions might be halted, tenant groups are seeking the additional right to not just delay rent payments, but to also negate rent obligations during the COVID-19 crisis.  Finding a legal justification for the failure to pay rent may be difficult.

For month-to-month residential renters, as long as the premises remains “habitable,” rent can almost always be compelled in the absence of an overriding statute or regulation.  Because personal homes should remain “habitable,” absent very odd circumstances, residential renters should seemingly owe their rent.  Many jurisdictions do not apply the “habitability concept” to commercial properties.   In commercial and residential lease agreements, while there may be provisions allowing for “rent holidays,” such provisions often remain “landlord friendly” as well.  Consequently, there may be few (if any) instances where a commercial tenant can also legally avoid a rent payment obligation, even if their business has been shut down (unless the force majeure or civil authority provisions apply).

Yet, threatened “rent strikes” and general intent to not pay rent, particularly in cases where evictions are not presently permitted and money may be needed for other necessities, are likely to occur.  To avoid the loss of funds, without any benefit or potential chance of later recoupment due to possible bankruptcies or lack of collection opportunities, landlords may wish to consider lease alterations.  A renegotiated lease (extended period/modified terms), or an interim lease credit, may generate opportunities to work with a tenant to find the most satisfactory outcome in an adverse economic climate.  Such an approach, with a jointly signed writing, can also avoid later issues of “waiver’ or “estoppel” in seeking to enforce lease terms.  Involving both “business” and “legal” considerations, finding a path to try and continue a positive income stream for landlords, and a workable payment plan for tenants, might be in the best interests of all concerned.

Breakdown of COVID-19 Rules on Housing Across the Nation

A breakdown of COVID-19 rules on housing across the country can be accessed here.

If you have any questions or would like more information, the National Contract and Risk Management Team at Freeman Mathis & Gary, LLP is here to help. Most circumstances are case and state-specific.  To learn more, or if you have specific questions regarding your situation, please contact A. Ali Sabzevari at [email protected], Michael P. Bruyere at [email protected], or Ryan J. Greenspan at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

More Restaurant Owners ask Courts to Find that COVID-19 Has Caused “Direct Physical Loss” Triggering Business Interruption Coverage

Posted on: April 1st, 2020

By: Renata Hoddinott and Isis Miranda

Famed chef Thomas Keller’s restaurant groups sued two insurers in Napa County Superior Court last week, seeking a declaration that the policies cover business interruption losses incurred because of a Shelter-at-Home Order. In the lawsuit, two of the Keller group’s Yountville restaurants, The French Laundry, a Michelin three-star winner, and also-acclaimed Bouchon Bistro, seek a determination that Hartford Fire Insurance Company and Trumbull Insurance Company (collectively “Hartford”) are obligated to pay substantial business interruption losses.

Those losses occurred, according to the Complaint, after the Napa Health Officer issued the Shelter-at-Home Order on March 18, 2020, that directed all residents to stay at their homes and all non-essential businesses to halt operations. As a result of the order, the Keller group temporarily shuttered the two restaurants and furloughed more than 300 employees.

During the COVID-19 pandemic, most states have ordered restaurants to close their dining rooms, including in California, Nevada and New York, where Keller operates several restaurants, as well. While some restaurants have shifted their operations to takeout and delivery, many—for logistical or financial considerations—have elected to closed entirely.

While restaurants and businesses of all sizes are experiencing losses, Keller’s may be greater than others as the nine-course tasting menu at The French Laundry is $325 per person with any selection from its extensive wine list not included in that price.  It is not unusual for dinner for two at The French Laundry to cost $1,000. Thus, Keller’s losses will be substantial.

But will they be covered? Property insurance policies typically require “physical loss or damage” to property. When property is destroyed by fire or storm, that threshold requirement is easily met. But here the alleged “physical loss or damage” from a virus is invisible.

California courts generally adhere to the traditional interpretation of the term “physical,” as requiring some tangible aspect perceptible through the senses. In MRI Healthcare Center of Glendale, Inc. v. State Farm General Insurance Co., a California appellate court concluded that the insured had not sustained a “physical loss” because it failed to demonstrate any “distinct, demonstrable [or] physical alteration” of the MRI machine, which failed after it was turned off to allow for repairs to the hospital for rain damage. The court explained: “For there to be a ‘loss’ within the meaning of the policy, some external force must have acted upon the insured property to cause a physical change in the condition of the property, i.e., it must have been ‘damaged’ within the common understanding of that term.”

In so holding, the MRI Healthcare court relied on another California appellate court case, Ward General Insurance Services, Inc. v. Employers Fire Insurance Company (2003), which found that loss of information stored in a database did not constitute “direct physical loss.” The court in Ward General referred to the dictionary definition of the term “physical” before concluding: “Thus, relying on the ordinary and popular sense of the words, we say with confidence that the loss of plaintiff’s database does not qualify as a ‘direct physical loss,’ unless the database has a material existence, formed out of tangible matter, and is perceptible to the sense of touch.”

The requirement that property must be physically altered or changed to constitute property damage may preclude coverage for business owners looking to their property policies to mitigate their losses. Property policies also typically require that the resulting loss of income was caused by the property damage. Therefore, California courts would need to find that the alleged damage to physical property was the predominant cause of the loss of income, rather than, for example, fear of contagion.

Keller alleges that Hartford issued an all-risk policy to his restaurants, providing coverage for losses from direct physical loss or direct physical damage unless the loss is specifically excluded or limited. The Complaint also alleges that Keller’s policy includes additional coverages in the event of business closures by order of Civil Authority and specifically extends coverage to direct physical loss or damage caused by virus.

Like similar complaints filed in the wake of COVID-19, Keller’s Complaint claims the scientific community has largely recognized the virus as a case of real physical loss. It claims that the virus can remain on surfaces of objects or materials for up to 28 days.

The Complaint also invokes the government’s authority, claiming that the Napa County Health Department explicitly states it issued the Order because of evidence of physical damage to property. The Order provides: “This Order is issued based on evidence of increasing occurrence of COVID-19 throughout the Bay Area, increasing likelihood of occurrence of COVID-19 within the County, and the physical damage to property caused by the virus.”

Typical “Civil Authority” policy provisions provide coverage for business interruption losses stemming from a government order that prohibits access to the insured’s premises. They generally require that lack of access result from “physical loss or damage” to property other than the insured’s premises, which itself resulted from a “covered cause of loss.”

Keller alleges that all access to the restaurant properties is denied as a result of the Order. Notably, however, Keller’s lawsuit does not include his other Yountville eatery, the more casual Ad Hoc, which is open for takeout orders per its website.

A court might also need to address whether the Order “prohibits” access to the affected restaurants and whether the Order was issued because of physical damage to property. Although the Order itself provides that it was “issued based on evidence of . . . physical damage to property caused by the virus,” and Keller alleges that the presence of  COVID-19 constitutes property damage by lingering on surfaces for up to 28 days, California precedent may not support a finding that the property has been physically changed or altered.

Keller seeks a judicial determination that: (1) the Order constitutes a prohibition of access to premises by a Civil Authority as defined in the policy; (2) the Order triggers coverage because the policy does not include an exclusion for a viral pandemic and actually extends coverage for loss or damage due to virus; and (3) the policy provides coverage for any current and future civil authority closures of restaurants in Napa County and provides business income coverage due to physical loss or damage from COVID-19.

Keller’s attorney says the suit against Hartford–and other similar challenges filed by business owners–is intended to establish legal precedent that businesses facing mandated coronavirus closures are covered by their business interruption insurance policies. Keller is not the only restauranteur seeking such a determination relating to the COVID-19 pandemic. Earlier this month, one of Keller’s attorneys filed suit on behalf of New Orleans seafood restaurant Oceana Grill seeking a declaration that its policy with Lloyd’s of London covers “direct physical loss” from “the event of the businesses closure by order of Civil Authority.”

The American Property Casualty Insurance Association has issued a broad statement that it believes most insurance policies—including those with business interruption coverage—do not cover losses stemming from viruses such as COVID-19, and that to “retroactively rewrite existing insurance policies” could put the insurance industry at risk.

Those seeking to evaluate coverage in a specific context must, of course, analyze the language of the specific policies, including, but not limited to, coverage provisions regarding crisis management, business interruption and contingent business interruption, and civil authority coverage.

While similar suits for business interruption losses were filed by insureds following the mad cow disease outbreak, the 9/11 terrorist attacks, and the Ebola virus, the widespread reach of COVID-19 indicates that coverage litigation stemming from it will be equally widespread. FMG will continue to report on coverage issues arising from these and future cases that will undoubtedly be filed in the coming days and months.

UPDATE:

Scratch Restaurants LLC, which operates Scratch Bar and Sushi Bar Los Angeles, sued Farmers Group in the Los Angeles Superior Court on April 1. The Scratch lawsuit asks the Court to declare whether stay-at-home orders and orders restricting in-person dining, issued by Los Angeles and Santa Barbara authorities, trigger Civil Authority and Business Income coverage under their policy.

Unlike some of the complaints reported on in this and other FMG blog posts, Scratch’s does not allege as fact that coronavirus has caused physical damage. Instead, Scratch asks the Court to declare whether it is entitled to coverage if it “can prove that there has been a physical loss and damage to the property in the immediate area of the insured properties.” It alleges that such a declaration will prevent Scratch “from being left without vital coverage acquired to ensured the survival of [its] businesses.” By implication, if nothing else, Scratch is seeking relief for losses that it cannot (yet) prove to be covered.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

CARES Act and Paycheck Protection Program

Posted on: April 1st, 2020

All businesses with 500 or fewer employees, including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – can apply for loans that may be forgiven. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries

The Department of Treasury has released the Paycheck Protection Program Application and explanatory information explaining how to complete the application process.  Additional information regarding other programs and assistance can also be found on the Treasury Department’s website.  

You can click on this link for the Application and Instructions.  You can click on this link for the associated Borrowers’ Guide

While most banks and credit unions should be able to process your program Application, you should verify that your existing bank intends to support the program and, if not, potentially seek out another lender willing to meet the program requirements, which for lenders can be found here Lenders’ Guide.

As a reminder, a forgivable loan from this program: 

  • Can reach up to 250% of your average monthly payroll over the last year (up to $10 million)
  • Have a loan term up to 10 years; interest rate at a maximum of 4%; and with a potential 6-month deferral
  • Can be used for employee salaries under $100,000, paid sick or medical leave, insurance premiums, and mortgage, rent and utility payments;
  • May be 100% forgivable, for the principal value of the loan, if used for the above purposes, the employee headcount for the 8-week forgiveness period remains same as compared to 2019, and certain additional conditions are met

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests. We cannot respond to all unsolicited requests for representation. If you need legal advice, please contact an attorney and enter into a valid, written attorney- client relationship. See also our terms of service for this website.**

U.S. Department of Labor Issues Two Additional Rounds of Guidance in Advance of April 1, 2020, Effective Date for the Families First Coronavirus Response Act

Posted on: April 1st, 2020

By: Robert Young

Over the weekend, the Department of Labor (DOL) Wage and Hour Division (WHD) issued two additional rounds of guidance to help employers navigate issues relating to the Families First Coronavirus Response Act (FFCRA or the Act), as the effective date of the Act rapidly approaches on April 1, 2020. 

The new guidance adds to the DOL’s “Questions and Answers” document it posted last week (we analyzed Q&As 1 – 14 here) and addresses critical questions regarding teleworking, intermittent leave, furloughs and definitions of certain employers/employees in response to the Emergency Family and Medical Leave Expansion Act (FMLEA) and the Emergency Paid Sick Leave Act (EPSLA).

Here are some key highlights:

Teleworking Employees Are Not Entitled to Paid Leave:

  • An employee whose employer allows them to telework his/her normal schedule (even if, for example, the teleworking employee works early in the morning or late at night) is not eligible for leave under the FFCRA unless a COVID-19 qualifying reason prevents them from working that schedule.
  • If an employee cannot telework for a qualifying reason, the employee is entitled to emergency paid sick leave or expanded FMLEA, depending on the qualifying reason. This leave can be taken in any increment, so long as the employer and he employee agree on the amount.

Employees Can Only Take Intermittent Leave to Care for Children:

  • An employee who still is permitted to go into work cannot take intermittent paid sick leave under the EPSLA, except to care for a child whose school or place of care is closed, or whose childcare provider is unavailable, because of COVID-19 related reasons. Even when an employee is taking care of his/her child, intermittent leave can only be taken with the permission of the employer. For any other qualifying reason, the employee must take all their paid sick leave at the same time.
    • For example, if the employer agrees, an employee may take intermittent paid sick leave on Mondays and Wednesdays to care for their child and may return to work at their normal worksite on Tuesdays, Thursdays and Fridays. 
  • Likewise, an employee may take intermittent expanded FMLEA to care for his/her child at home, provided he/she has permission from his/her employer.

Employers Are Not Obligated to Pay FMLEA or EPSLA Leave Following Worksite Closures, Furloughs and Reductions in Employee Hours:

  • If an employer closes a worksite or business prior to or after April 1, 2020 because of a lack of work or in response to a governmental order, then expanded FML or emergency paid sick leave cannot apply once the worksite is closed.
  • Likewise, if an employer furloughs an employee or reduces their hours prior to or after April 1, 2020 because of lack of work or in response to a governmental order, the employee cannot get expanded FML or emergency paid sick leave (unless the employee returns to work and then has a qualifying reason). 
  • If an employer closes its worksite because of lack of work or in response to a governmental order while an employee is already on emergency paid sick leave or extended FMLEA, the employer must pay that employee’s benefits up until the date the worksite closed, at which point the obligation to pay leave benefits ends.

Employees Cannot “Double Dip” FFCRA Leave with Unemployment Benefits or PTO:

  • If an employee is collecting FFRCA paid sick leave or expanded FMLEA, he/she is not eligible for unemployment insurance. However, if the employee’s hours or pay have been reduced, the employee may be eligible for partial benefits depending on the unemployment guidelines in his/her State.
  • If an employee is eligible to take paid sick leave or expanded FMLEA under the FFCRA, as well as paid leave that is already provided by his/her employer, the employee must choose one type of leave to take. The employee cannot simultaneously take both unless the employee is receiving two-thirds of his/her pay under the FFCRA and the employer and employee agree to allow the employee to supplement his/her leave with PTO time in order to receive full pay. 
    • Employers who allow employees to supplement their FFCRA leave should note they will only receive a tax credit for leave they are obligated to pay under the FFCRA.
  • Employees are allowed to continue health insurance while on expanded FML (in the same way they are permitted to under traditional FMLA).

Employees Generally Have a Right to Return to Work After Taking Emergency Paid Sick Leave or Expanded FML:

  • Employers are required to provide the same (or a nearly equivalent) job to an employee who returns to work following leave.
  • Employers are also prohibited from firing, disciplining or otherwise discriminating against an employee because he/she took leave under the FFCRA or because an employee filed a complaint or proceeding regarding taking leave under the FFCRA
  • Employers, however, are permitted to lay off an employee on FFCRA leave, but (similar to a traditional FMLA analysis) the employer must be able to demonstrate it laid an employee off for legitimate business reasons (such as closure of a worksite).

Public Sector Employees Are Generally Covered Under the FFCRA:

  • If an employee works for a public agency or other unit of government, he/she is generally entitled to paid sick leave under the EPSLA, with the exception of health care professionals and emergency responders as described below. 
  • Federal employees are most likely not entitled to expanded FML. However, non-federal public agency employees, such as employees who work for the government of a State, the District of Columbia, a Territory or possession of the United States, a city, a municipality, a township, a county, a parish, or a similar entity, are likely eligible for expanded FML.

Health Care Providers and Emergency Responders Are Generally Excluded from Paid Sick Leave or Expanded FML:

  • As previously reported, the FFCRA provides that employers of health care providers and emergency responders can exempt such employees from the provisions of the FMLEA or the EPSLA.
  • Prior to the DOL Guidance, the open question was the correct definition of “health care providers” and “emergency responders.”
  • The DOL has now clearly answered that question in a broad manner by providing that a “health care provider” is:
    • Anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy or any similar institution, employer or entity. 
  • Further, the definition of “emergency responders” also is quite broad and includes any employee who is necessary for the transport, care, health care, comfort, and nutrition of COVID-19 patients, or whose services are otherwise needed to limit the spread of COVID-19. Specifically, emergency providers include:
    • Military or national guard members, law enforcement officers, correctional institution personnel, firefighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility.

Small Businesses with Fewer Than 50 Employees May Be Exempt From The FMLEA and the EPSLA:

  • A small business with fewer than 50 employees, including religious and non-profit organizations, can claim this exemption if providing FMLEA or EPSLA leave would:
    • Result in the small business’s expenses and financial obligations exceeding available business revenues and would cause the small business to cease operating at a minimal capacity;
    • Result in a substantial risk to the financial health or operational capabilities of the small business because of its employees’ specialized skills, knowledge of the business, or responsibilities; or  
    • Result in a shortage of employees who are able, willing, qualified and available to perform the labor or services necessary for the small business to operate at a minimal capacity.
  • Importantly, a small business with fewer than 50 employees can only claim this exemption if the employee is seeking FMLEA or EPSLA leave due to a school or place of care closure or childcare provider unavailability for COVID-19 related reasons.

The DOL’s published guidance so far includes a Fact Sheet for EmployersFact Sheet for Employees, the Questions and Answers document described above, as well as required workplace posters for federal and non-federal employers. We will update you if the DOL issues any additional guidance.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Coalition of Insurance and Business Groups Propose the COVID-19 Business and Employee Continuity and Recovery Fund

Posted on: April 1st, 2020

By: Nicole L. Graham and Zachariah E. Moura

A broad coalition has urged the federal government to create a recovery fund for businesses hit hard by the COVID-19 pandemic.

Representatives of 36 trade groups from real estate, insurance, retail and other sectors issued a joint letter to the Trump Administration and Congress asking for rapid delivery of liquidity to impacted businesses—regardless of size, industry or location—to mitigate a larger financial crisis. 

The coalition gratefully acknowledges the loan programs instituted by the CARES Act and the Act’s support for “Main Street” businesses but advises that businesses seeking to avoid an “unprecedented systemic, economic crisis” need more liquidity. 

The proposed COVID-19 Business and Employee Continuity and Recovery Fund (the “Recovery Fund”) would be financed by the government. A special administrator would oversee the fund, with significant oversight and authority to enter into contracts to provide immediate relief to eligible businesses. 

The Recovery Fund would serve to help businesses retain and rehire their employees and meet operating expense obligations during a time when the businesses are unable to fully operate.  Quarantine and shelter-in-place measures, travel restrictions, and social distancing measures have created an unprecedented level of disruption across all industries. 

The letter warned, “[w]ithout broad-based and expeditious federal action, long-term damage to the financial markets, rampant unemployment, and irreparable harm to communities are almost certain.”  The proposed Recovery Fund is modeled after the 9/11 Victims Compensation Fund and is designed to provide short-term and immediate relief to impacted businesses.  Some of the signatories including National Association of Mutual Insurance Companies and International Council of Shopping Centers have issued statements in support of the establishment of the Fund and called for swift action from the government. 

We will continue to monitor developments related to the Recovery Fund and provide updates as they occur. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CARES Act, education claims, law enforcement, the real-world impact of business restrictions, and the viruses’ impact on the construction industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

With the 2020 Drafts in Limbo due to COVID-19, could College Athletes find Coverage under “Loss of Value” Policies?

Posted on: March 31st, 2020

By: Matthew Jones

The effective shutdown of sporting events due to the spread of COVID-19 is having a financial effect on many people in all walks of life.  Perhaps overlooked are college athletes who aspire to have contracts with professional teams. Increasingly, college athletes are insuring their careers against “Loss of Value” to protect the value of future contracts from decreasing below a predetermined amount due to significant injury or illness suffered during the coverage period. These policies are particularly important for athletes during the year leading up to their draft eligibility. Whether delays in the drafts will be covered by these policies is uncertain.

The policies require medical underwriting and may exclude specific pre-existing injuries or illnesses, such as osteoarthritis or degenerative conditions, drug and alcohol use, criminal acts, and mental, nervous or psychological disorders. Insurers first determine an athlete’s eligibility based on projected draft position. Depending on that position, policy limits vary between $1 million and $10 million. The underwriters then set a loss-of-value threshold: If the athlete is drafted below a specific position, and must sign for a lesser amount, the policy may be triggered. If the contract amount falls below that threshold as a direct result of injury or illness, the insurer will pay the difference between the contract’s value and the predetermined threshold.

Injury or illness does not automatically trigger benefits.  Instead, the athlete must tie the injury or illness directly to a decrease in value or lower draft position. Insurers evaluate other issues as well, including off-field conduct, poor performance during the season or at pre-draft events, a rise in the draft value of other athletes, and changes in a professional teams’ needs.

Loss of Value insurance generally applies in the context of injuries and illnesses, but what happens when a season has been forfeited?  The NCAA cancelled all spring sports for the remainder of the season, effectively ending the careers of many senior athletes in spring sports.  While some athletes may look to their Loss of Value insurance policies for protection, the policies may not apply if it the loss is not based on injury or illness. 

If an athlete contracted the coronavirus the analysis is much different.  When the NCAA is considering questions raised by an athlete’s illness it looks at “illness first manifested in the insured athlete during the period of this insurance which requires medical treatment by a physician and has negatively affected the athlete’s skills in a manner that causes substantial and material deterioration in his ability to perform in his occupation.”  It seems clear that coronavirus is as an “illness” under this definition assuming the athlete requires medical treatment, the illness negatively affects the athlete’s skills, and the negative effect causes substantial and material deterioration in the athlete’s ability to perform as a professional. 

In an attempt to help these athletes, the NCAA granted an extra year of eligibility.  But what does such a decision do to those athletes who contracted the virus?  Does it mitigate or diminish the potential losses of the athletes? As with other COVID-related matters, these unprecedented questions will likely need to be resolved through litigation.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Education Claims, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected]law.com.

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Challenges Begin to Coronavirus “Shelter In Place” Ordinances

Posted on: March 31st, 2020

By:  William J. Linkous, III

On March 24, 2020 a corporation “engaged in the business of purchasing, trading, and selling firearms, ammunition, tools, and other defensive and safety supplies to law enforcement and civilians” filed one of the first lawsuits in Georgia challenging a local government’s “Shelter in Place” ordinance.  The lawsuit, Clyde Armory, Inc. v. Unified Government of Athens-Clarke County et al., Athens-Clarke County Superior Court, lists the government entity as a defendant, as well as both the City/County Manager and the City/County Attorney in their official capacity as additional defendants.  The ordinance challenge is being brought “as applied” to Plaintiff, as well as “as applied” to other gun stores within the Athens-Clarke County jurisdiction.  The lawsuit brings challenges under both the Georgia Constitution, and the Federal Constitution, the latter of which raises the specter that the suit may be removed from Superior Court to Federal Court.

The lawsuit alleges that on March 16, 2020, Governor Brian Kemp declared a state of emergency in Georgia due to the COVID-19 virus pursuant to O.C.G.A. § 38-3-51.  It goes on to allege that on March 19, 2020, Athens-Clarke County passed its “Shelter in Place” ordinance pursuant to O.C.G.A. § 38-3-28.  The lawsuit alleges that although the ordinance might be interpreted to list gun stores as “Essential Activities” under the ordinance’s definition section, gun stores are not clearly listed as “Essential Businesses” allowed to remain open as normal during the state of emergency.  Interestingly, the lawsuit alleges that the City/County website indicates that gun stores are “Essential Businesses” that can remain open, but that the website does not have the force of law.

Calling the ordinance a quarantine, the lawsuit seeks an emergency injunction and declaratory judgment declaring the ordinance as an ultra vires act and an abuse of police powers.  It alleges that the ordinance legislates in an area for which the State of Georgia has enacted general laws in violation of O.C.G.A. § 36-35-3 (a) and complains that the ordinance cannot be appealed in the same manner as violations of state health regulations under state law.  It alleges more specifically that O.C.G.A. § 31-12-2.1 grants the Georgia Department of Public Health the primary responsibility for responding to public health emergencies.  The Plaintiff goes on to allege that the ordinance violates the Due Process and Equal Protection clauses of the U.S. Constitution and the Georgia Constitution, citing to Old South Duck Tours v. Mayor and Aldermen of City of Savannah, 272 Ga. 869 (2000).  The suit also contends that the language of the ordinance is overly broad and vague as to the term “Essential Business” (citing Bullock v. City of Dallas, 248 Ga. 164 (1991)), that the ordinance creates arbitrary and capricious classifications, exceeds the scope of the City/County’s police powers, and violates the U.S. Second Constitutional Amendment right to bear arms, as well as the Georgia Constitution’s similar protections under Article I, Section I, Paragraph VIII.  The lawsuit includes hints at a wider challenge of such ordinances, citing to Bankers Life & Cas. Co. v. Crenshaw, 486 U.S. 71 (1988) and Truax v. Raich, 239 U.S. 33 (1915) for broader Due Process and Equal Protection concepts under the Fourteenth Amendment.

The lawsuit seeks a declaration that the ordinance is unlawful, and an injunction stopping its enforcement.  It also seeks a declaration that Plaintiff can carry on its business as normal as an “Essential Business,” and seeks attorneys’ fees and costs under 42 U.S.C. § 1988 but does not seek damages.  Ultimately, the resolution of this matter may come down to Federal law, perhaps to be decided in Federal Court.  The Georgia Supreme Court’s 2017 decision in Lathrop v. Deal, 301 Ga. 408 (2017) extended sovereign immunity to injunction and declaratory judgment claims against local governments where the constitutionality of their enactments is at issue, thus creating a possible barrier to the relief Plaintiff is seeking in the Clyde Armory case except as to the Federal claims.  Moreover, because in Georgia suits against local government officials in their official capacity are, in reality, suits against the local government itself, the inclusion of the local government Manager and Attorney would not seem to prevent the application of sovereign immunity to the claims.  In any event, it will be interesting to see whether the COVID-19 crisis ends before the Court can issue a definitive ruling in the Clyde Armory case.

Another lawsuit has been filed in Texas, challenging a “Shelter in Place” order issued by the Mayor of McKinney, Texas, although the basis of that lawsuit appears to be conflicting provisions of pandemic orders.  Last week, the NRA and other Second Amendment groups filed a Federal lawsuit in California to stop instances where local officials interpreted Governor Gavin Newsom’s “Shelter in Place” orders as making gun stores “non-essential.”  In addition, a coalition of gun-rights activists filed a lawsuit earlier this week against New Jersey Governor Phil Murphy under the Second Amendment to the U.S. Constitution for closing gun stores and suspending legally required background checks amid the pandemic.  The same activists are considering whether to file lawsuits against other states and cities that have deemed firearms retailers as “non-essential.”  Interestingly, according to news reports, guns sales have skyrocketed during the pandemic, while crime rates have dropped, particularly in large cities.  Abortion rights groups have also reportedly filed suit in Texas to keep abortion clinics from being designated as “non-essential” businesses.  Local government officials and attorneys should pay close attention as these lawsuits progress, and evaluate their orders and ordinances accordingly.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

More States are Following New Jersey’s Lead in Enacting Legislation to Require Insurers to Cover COVID-19 Losses

Posted on: March 31st, 2020

By: Erin Lamb and Ben Dunlap

FMG reported extensively after New Jersey began debating a bill that would force insurers to cover Business Interruption losses arising from COVID-19. The New Jersey bill would require courts to ignore virus and bacteria exclusions, or other policy language that might exclude such losses.

Now legislatures in other states are joining that effort.

New York:  Assemblyman Robert C. Carroll, whose district covers parts of Brooklyn including Park Slope, introduced A10266, an Act “requiring certain perils be covered under business interruption insurance during the coronavirus disease 2019 (COVID-19) pandemic.” The bill starts by saying it applies  “[n]otwithstanding any provisions of law, rule or regulation to the contrary.…” It goes on to decree that any policy of insurance insuring against loss or damage of property that includes the loss of use and occupancy and business interruption, must treat such interruption as a “covered peril” during a period of “declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.”

The New York bill appears designed to nullify the 2006 ISO exclusion on losses for virus or bacteria. Assemblyman Carroll wrote an op-ed stating that it is “…unconscionable that insurance companies that were bailed out in 2008 won’t pay out… because they say ’viruses’ were either explicitly carved out of policies or because adjusters claim a ‘virus’ is not a ‘physical’ interruption.” Like the New Jersey bill, the New York law would apply to businesses with less than 100 eligible employees and calls for funds to be collected and made available for relief and reimbursement for insurers who must pay claims under this Act. Such funds would be collected from the insurance companies themselves in a special purpose apportionment. It would be retroactive to March 7, 2020.

Carroll is calling for the New York State Legislature to push off passing a state budget until COVID-19 related policy issues are addressed. Such a measure is essentially the only way that the law could pass in this legislative session, and it would still be subject to constitutional challenge.

Massachusetts: The Massachusetts legislature is considering another bill that attacks the virus exclusion, and states that “…no insurer in the commonwealth may deny a claim for the loss of use and occupancy and business interruption on account of (i) COVID-19 being a virus (even if the relevant insurance policy excludes losses resulting from viruses); or (ii) there being no physical damage to the property of the insured or to any other relevant property.”

The bill’s application is limited to policies issued to businesses in Massachusetts with 150 or fewer full-time employees. It would also apply only until the termination of the state of emergency declared in the Governor’s March 10, 2020 Executive Order 591.

The Massachusetts bill also creates a reimbursement process. Before it can be passed in the current session, the legislature must first grant the bill special emergency status.

To FMG’s knowledge, the Massachusetts bill is the first of its kind to tie COVID-19 denials to unfair practices. It specifically invokes the provisions of M.G.L. c. 176D, which regulates unfair practices by insurance companies, creating the potential for substantial penalties on insurers.

Ohio: HB No. 589 also would require insurers offering business interruption insurance to cover losses attributable to COVID-19.

If passed, the Ohio bill would provide that “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption, in force in [Ohio] on the effective date of this section, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic during the state of emergency.”

It also would require that “[t]he coverage required by this section shall indemnify the insured, subject to the limits under the policy, for any loss of business or business interruption for the duration of the state of emergency,” which the bill defines as “the state of emergency declared under Executive Order 2020-01D, issued on March 9, 2020, to protect the well-being of Ohio citizens from the dangerous effects of COVID-19.”

The bill would limit its effects only to insureds: (1) located in Ohio; and (2) who employ 100 or fewer eligible employees; and (3) are covered by a policy in force on the effective date of this section.

Like the other bills in this category, Ohio’s bill would allow insurers who pay applicable COVID-19-related losses to request from the Ohio Superintendent of Insurance “relief and reimbursement from funds collected and made available” for the purpose of the bill. Further, the bill would require the Superintendent to assess all Ohio insurers for the funds needed to satisfy eligible reimbursement claims.

Federal reaction: At the federal level, Congresswoman Mikie Sherill of New Jersey signed a bipartisan letter to the heads of various industry groups urging them to consider coverage of such claims. Sherill told The Daily Beast that Congress is monitoring the issue and may include specific aid for business interruptions in a future stimulus bill.

We will continue to see these bills rolled out as Covid-19 claims increase. We will likely see a second round of such bills in the fall, once the pandemic has ceased enough for Americans to begin to see the toll of Covid-19 losses on local restaurants and small businesses, particularly if Congress has not acted.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Telemedicine in a Time of Crisis

Posted on: March 31st, 2020

By: Shaun Daugherty

Social distancing has become a new phrase in our lexicon which has specific meaning and pervasive general understanding within the population.  Telemedicine seems like the ideal format for delivery of certain medical services during the emergency period caused by COVID-19.  However, pre-emergency regulations, restrictions and requirements for qualification and reimbursement to telehealth providers greatly reduced access to these kinds of services.  The CARES Act has taken aim at suspending many of these prior limitations on access and reimbursements to open much needed medical care to those that are in the most need. 

During the existence of the current medical emergency, Medicare beneficiaries are temporarily granted access to telemedicine services in several ways.  Previously, to provide medical services via telemedicine, the provider must have seen and treated the patient within the last three years.  In addition, the pre-emergency restrictions also required stringent real-time audio-visual technology be available on both ends of the service.  The new law temporary lifts and eases these restrictions and opens up the options for services to a broader base of patient.  Now, both new patients and existing patients can take advantage of telemedicine.  No longer does one need to be an established patient for a telemedicine visit.  Additionally, the provider does not have to be compliant with the strict real-time audio-visual requirements as before and things such as FaceTime or Skype calls are permissible. In certain instances, audio only visits are allowed as long as no images are being reviewed.  This is especially useful in those places where there may be limitations in the technology available as well as the functional limitations of those receiving the care. 

The new law temporarily allows for hospice recertification without a face-to-face visit and home dialysis patients to receive periodic evaluations using the telehealth technologies.  The geographic or location restrictions for providers of telemedicine services are also temporarily lifted.  Previously, the regulations limited reimbursements for Rural Health Clinics (RHC) and Federally Qualified Health Clinics (FQHC) to only those services defined as a face-to-face encounter.  The current Act lifts these restrictions and allows for Medicare to reimburse for telemedicine services provided by these RHCs and FQHCs.  The Act also provides the HHS Secretary with the authority to relax additional statutory restrictions on telehealth services to be covered by Medicare. 

Of the $2 trillion total allocated in the CARES Act, $14.4 billion has been specifically earmarked to increase the access of telemedicine to patients of the Veterans Administration facilities throughout the country.  An additional $2.15 billion has been allocated to the Department of Veterans Affairs Information Technology to improve the infrastructure and increase the capabilities to deliver these types of healthcare services.  This is on top of the $27 billion allocated to the HHS’ Public Health and Social Services Emergency Fund to address increased access and infrastructure for telehealth generally. 

Opening the access to telemedicine services will hopefully help reduce the current strain on the healthcare communities by allowing providers to access patients remotely without exposing themselves or their patients to risks that could be avoided.  Those patients in remote or otherwise restricted locations can be screened and, in some instances, treated with the use of a smartphone.   While these measures are only temporary, the hope of many organizations that promote telemedicine is that it will pave the way for a more meaningful method of delivery of telemedicine services into the future. 

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Practice of Medicine Without a License in Georgia Under COVID-19

Posted on: March 30th, 2020

By: Shaun Daugherty

In the early evening hours of March 23, Georgia’s Governor Kemp signed an executive order addressing the current medical crisis that has developed due to the novel coronavirus, COVID-19.  Under this executive order, any “administrative rules that prohibit the practice of medicine, surgery, osteopathic medicine and osteopathic surgery” without a current license will not be enforced.  This only pertains to those individuals whose license has been inactive or lapsed within the last five (5) years, have no ongoing investigations and have had no history of administrative action adverse to the licensee.  The suspension of the enforcement of these provisions is limited to the treatment “of victims of the existing public health emergency and solely for the duration of the Order.” 

In addition, the Governor has permitted the Georgia Board of Nursing to grant temporary licenses to those registered nurses (RN) and practical nurses (PN) who have completed their training, but have yet to take and pass the licensing exam.  These temporary licenses will allow the graduates to work “under a licensed registered nurse or licensed practical nurse” during the effective dates of the Order.  This has generated Policy 1.16 from the Georgia Board of Nursing regarding the process and procedure of applying for the temporary permit.  This also allows nursing professionals from out of state to apply for and obtain temporary permits as well. 

Basically, if you have recently retired or allowed your medical license to lapse for other reasons, you are allowed to jump in and help provide medical care and treatment to those infected or suspected to be infected with the virus and not be charged with practicing medicine without a license.  That is as long as your last license was unencumbered and without prior adverse administrative action.  In addition, if you have recently graduated from nursing school and have not yet completed your licensing exams for this state, you too can practice immediately, under the supervision of an already licensed RN or LPN.  Applications for the emergency temporary permits can be found at the Georgia Board of Nursing website at https://sos.ga.gov/index.php/licensing/plb/45/emergency_temporary_permits

These provisions are clearly meant to address the growing shortage of health care providers available to treat the pandemic that has developed.  The next step is going to be finding places for them to treat the patients.  If you have any questions, please contact Shaun Daugherty at [email protected]

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Federal Government Issues New CMS Guidance To Protect Nursing Home Residents From COVID-19

Posted on: March 30th, 2020

By: Kevin G. Kenneally, Michael P. Giunta and William E. Gildea

Nursing home and skilled nursing facilities have been particularly hard hit by the COVID-19 virus.  The resident populations are uniquely vulnerable and outbreaks in facilities nationwide have sparked actions to protect elderly and disabled residents.

The Centers for Medicare & Medicaid Services (“CMS”) provided new guidelines in a memorandum detailing protections for nursing home residents from COVID-19.  CMS recommends that all facilities restrict visitation of all visitors and non-essential health care personnel, absent certain compassionate care situations.  This follows on the heels of the preliminary results of the inspection of the Kirkland, Washington nursing home, which was the epicenter of the COVID-19 outbreak.  In addition to a focused inspection process provided to all facilities and inspectors, which is designed to ensure each facility is prepared to prevent the spread of the virus, the memorandum addresses additional guidance. If an individual enters a facility for a compassionate care situation, facilities should require visitors to perform hand hygiene and use Personal Protective Equipment like facemasks.  Decisions about visitation during these situations should be made on a case by case basis after careful screening of the potential visitor.  Facilities are expected to notify potential visitors to defer visitation until further notice. 

The memorandum lists specific guidelines that facilities should adhere to, including but not limited to: (1) cancelling communal dining and all group activities; (2) performing active screening of residents and staff for fever and respiratory symptoms; (3) reminding residents to practice social distancing and perform frequent hand hygiene; (4) screening all staff at the beginning of their shift for fever and respiratory symptoms; and (5) identify staff that work at multiple facilities and actively screen and restrict them appropriately.  The memorandum further discusses how facilities should consider hygiene and monitoring symptoms for persons entering/exiting facilities.  Facilities are encouraged to review and revise how their vendors deliver supplies, such as implementing dedicated drop-off locations for supplies at facilities.  If a nursing home has a resident suspected of having COVID-19, it should contact their local health department immediately. 

Instead of visits, facilities should consider offering alternative means of communications and assigning staff as primary sources of contact for residents.  If an individual enters a facility for a compassionate care situation, facilities should require visitors to perform hand hygiene and use Personal Protective Equipment like facemasks.  Decisions about visitation during these situations should be made on a case by case basis after careful screening of the potential visitor.  Facilities are expected to notify potential visitors to defer visitation until further notice.

The March 13, 2020 memorandum, in part, calls for facility staff to regularly monitor the Centers for Disease Control’s (“CDC”) website for additional information and resources. CMS recommends that facilities perform frequent monitoring for potential symptoms of respiratory infection.  The facilities should further maintain a “person-centered approach to care,” which includes communicating effectively with residents, resident representatives and/or family and further understanding the individual needs and goals of care for residents.  If a facility experiences an increased number of respiratory illnesses (regardless of suspected etiology), it should immediately contact their local or state health department for further guidance.

State governments closely regulate nursing homes, and many are issuing state specific guidance.  If a state government implements actions that exceed CMS requirements through an executive order, the facility will not be out of compliance with CMS’ requirements.  The memorandum further states that “State and Federal surveyors should not cite facilities for not having certain supplies (e.g., PPE such as gowns, N95 respirators, surgical masks and ABHR) if they are having difficulty obtaining supplies for reasons outside of their control.”  However, CMS still expects “facilities to take actions to mitigate any shortages and show they are taking all appropriate steps to obtain the necessary supply as soon as possible.”

The memorandum provides the following email address for a point of contact: [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Navigating Insurance Coverage Questions in the Age of COVID-19

Posted on: March 30th, 2020

By: Katie Cusack

It is no secret that concerns about coronavirus and COVID-19 have impacted tens of thousands of businesses across the world.  In many industries, its effects are novel, and many businesses are unsure of what their obligations are at this time and whether their insurance policies will cover any losses stemming from the effects of the virus and the disease it causes.  Two insurance policy types are particularly relevant to questions related to COVID-19 – business interruption and event insurance.    

Business Interruption Insurance

Whether business interruption insurance providers will be obligated under contract to cover business losses resulting from COVID-19 depends largely on the precise language of the policy and the facts surrounding any loss.  Due to somewhat recent viral outbreaks across the globe, many policies include language to exclude coverage for losses stemming from viral outbreaks.  Litigation over this issue has begun.  In mid-March a New Orleans restaurant company filed for a judgment that losses due to government-mandated closures related to COVID-19 would be covered by its property and business interruption policy.  New Orleans restaurants at the time the suit was filed were instructed to limit seating capacity, but now may only offer carry-out, drive-through, or delivery services.  According to the complaint, the restaurant’s business interruption insurance policy does not include any exclusions for losses caused by viruses or global pandemics. 

Last week, on March 24, two Native American tribes in Oklahoma – the Chickasaw Nation and the Choctaw Nation – filed lawsuits in Oklahoma state court seeking declarations that their “all risk” property insurance policies cover their “losses and expenses related to the COVID-19 pandemic and infection” because “the United States of America became infected by COVID-19 resulting in a pandemic,” which is alleged to result in “direct physical loss or damage” to each Nation’s property.

On March 26, a California restaurant company also filed for a court judgment to confirm the restaurant’s insurance would cover losses resulting from COVID-19.  The restaurant company, French Laundry LP, claims it furloughed 300 employees after local authorities ordered individuals to stay at home.     

The outcome of these cases will of course depend on the terms and conditions of the insurance contract and the evidence.  

Event Insurance

Thousands of weddings, conferences, and other events across the country have been cancelled as a precaution against coronavirus and COVID-19.  As with business interruption insurance, whether coverage exists will be fact-specific.  And terms and conditions of event cancellation policies are often tailored to the specific event and its circumstances.  Many event insurance policies require a “necessary” cancellation or postponement for coverage to exist.  This will require close analysis of the cause – government-induced, fear-based, etc. – of a cancellation or postponement. 

The governmental restrictions on weddings, funerals, and general gatherings of individuals have varied from state-to-state, town-to-town, and within the same governmental area, day-to-day.  And in some places, gatherings have been permitted to go forward, but with a restriction on the number of participants.  Again, the policy language and the evidence should control the outcome. 

Pressure to Waive Coverage Exceptions

However, it is worth noting that there may be considerations outside of the language of an insurance policy and the factual situation surrounding a particular case.  Insurance providers may be pressured to make exceptions to their policies. 

In the case of medical insurance, some states have requested that providers waive certain costs for testing for COVID-19.  In addition, in other industries, some companies have waived conditions of a contract in the wake of the COVID-19 outbreak.  For example, certain airlines have waived change fees to allow customers to rebook their flights that were affected by COVID-19.    

The landscape changes daily, and it is important to understand the details behind the headlines.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

U.S. Department of Education Announces Temporary Halting of Wage Garnishments

Posted on: March 30th, 2020

By: Jeffrey A. Hord

On March 25, 2020, the Department of Education (DOE) announced that it will temporarily halt seizing wages and/or withholding tax refunds from borrowers who have defaulted on their student loans held by the federal government.  As part of the Trump Administration’s multifaceted response to the COVID-19 national emergency, the DOE has suspended any wage garnishments and stopped all requests to the U.S. Treasury Department to withhold money from defaulted borrowers.  The directive is retroactive to March 13, 2020, and will last for a period of at least sixty (60) days.  The DOE also instructed private collection agencies to stop all “proactive collection activities,” including making phone calls to borrowers and issuing collection letters and billing statements.

Employers who are responsible for properly processing wage garnishments should take note of this announcement.  In its official press release, the DOE emphasized that, while borrowers whose paychecks were being garnished will now be entitled to their full wage, it is the responsibility of the employer to make the necessary change to the employee’s paycheck:

“The Department must rely on employers to make the change to borrowers’ paychecks, so it will monitor employers’ compliance with the request to stop wage garnishment. Borrowers whose wages continue to be garnished after March 13 should contact their employers’ human resources department.”

While the directive unambiguously prohibits “new” wage garnishments, Social Security offsets, and collection actions, the DOE’s announcement leaves some room for doubt as to whether garnishments and offsets put into effect prior to March 13, 2020 are similarly impacted.  However, in a contemporaneous set of FAQ published on the DOE’s official Federal Student Aid website, the Department seemed to clearly signal its intent:

If your wages continue to be garnished after the president’s March 13, 2020, announcement, you should contact your employer’s human resources department. If DOE receives funds from your paycheck that should have been stopped as a result of the March 13 announcement, we will refund your garnished wages.

The good news for employers who make payments towards their employees’ outstanding student loans as a benefit of employment is that they can now do so tax-free until January 1, 2021, for up to $5,250 annually.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  On April 2, we will discuss the impact of Coronavirus on law enforcement.  Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

The New CARES Act Allows Pandemic Victims to Borrow from Their 401(k)s and IRAs Without Penalty and Defer Required Minimum Distributions

Posted on: March 30th, 2020

By: Greg Fayard

The federal Coronavirus Aid Relief and Economic Security (CARES) Act signed into law March 27, 2020, includes retirement tax relief for victims of the pandemic—namely victims’ 401(k)s and IRAs.

Under section 2202 of the $2 Trillion law (which amends the IRS code), victims under 59 and a half may withdraw up to $100,000 (or the entire balance if less than that) from their retirement accounts (401(k)s and Individual Retirement Accounts (IRAs)) WITHOUT paying the normal 10% penalty as long as they pay back the withdrawn amount within three years.

But who qualifies as a Coronavirus victim and can take advantage of this provision? To qualify, individuals (or their spouse or dependent) needs to be diagnosed with the COVID-19 disease, or experienced adverse financial consequences from being quarantined, furloughed, laid off, having work hours reduced, or being unable to work due to lack of child care stemming from the pandemic. Any early Coronavirus-triggered withdrawals, however, would be taxed depending on the individual’s income and tax bracket, which usually falls in the 20% to 25% range. Hence, while the Coronovirus-sanctioned withdrawals avoid the normal 10% penalty, it does not permit tax-free withdrawals (unless the withdrawal is from a Roth 401(k)). 

Borrowing from your 401(k), however, regardless of the penalty, should be a last resort—especially now, considering the steep decline in retirement account balances resulting from the pandemic. With a turbulent stock market likely in the near future given the extension of the federal “slow the spread” protocols to April 30, 2020, only the most desperate should consider an early 401(k) withdrawal, even if the 10% penalty is temporarily waived for 2020.

There is also tax relief for required minimum distributions under the CARES Act. The recently enacted Setting Every Community Up for Retirement Enhancement (SECURE) Act (enacted December 20, 2019, taking effect January 1, 2020), provides retirees who turned 72 before April 1, 2020, who have traditional IRAs or a 401(k), must take minimum distributions, or RMDs, by the end of the year. If they don’t take their Required Minimum Distribution, they will be penalized 50% of the RMD amount. The RMD is subject to federal income tax. For those who turned 70 and a half in 2019, the RMDs would normally have to be taken by this April. 

Additional Information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  On April 2, we will discuss the impact of Coronavirus on law enforcement.  Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Labor & Employment, Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Local Governments Face First Amendment Challenges to Coronavirus Emergency Orders

Posted on: March 27th, 2020

By: Andy Treese

Can the government ban public gatherings, church services, political rallies, or protests during a global pandemic? The question isn’t hypothetical. Federal, state and local officials across the United States are struggling to prepare appropriate emergency orders targeted at slowing the spread of coronavirus. Some jurisdictions have banned gatherings of various sizes altogether, while others have banned a variety of assemblies with carveouts for essential services, religious gatherings and for other reasons.

Not everyone is complying with emergency orders, however. In Louisiana, a large Church reportedly continues to hold services with more than 1,000 attendees, defying the governor’s order banning gatherings of more than 50 people. Church officials have suggested the ban violates First Amendment protections of free exercise and freedom of assembly. That may or may not be correct, but few local governments want to find themselves at the tip of the spear of a costly constitutional challenge while trying to handle an emergency.

First Amendment challenges to coronavirus emergency orders may be unavoidable, but local governments may wish to consider a few key principles when preparing or amending them:

  • Content-neutral limitations on assembly are far more likely to survive constitutional scrutiny than limitations based on the purpose/content of an assembly. The Supreme Court has permitted state and local governments to impose content-neutral restrictions on the time, manner and place of assembly, provided the restrictions further an important governmental interest and leave open alternative means of communication. Content-based restrictions will be subject to the far more rigorous strict scrutiny standard, i.e. whether the order is narrowly tailored to further a compelling governmental interest. The Supreme Court, however, has recognized a state’s police power to promote public health by quarantine or mandatory vaccination since the 1800s. This interest seems even more compelling given the emergent nature of the pandemic response, and even courts applying strict scrutiny might be inclined to uphold thoughtful, well-reasoned bans on assembly.
  • Consider whether your order can (or should) be tailored to exclude application to protected speech. Several state and local bodies/executives have enacted orders containing exceptions for protected forms of speech or assembly such as church services. These exceptions seem likely to preclude facial constitutional challenges. Whether or not they reflect sound policy, of course, is a decision to be made by each jurisdiction.
  • Think now about the arguments that will be made later. Whatever degree of scrutiny will ultimately apply to your order, spend time identifying its time, place and manner restrictions. Does the order prohibit mass gatherings everywhere, or only where social distancing cannot be accomplished consistently with medical guidance? Does your order have an expiration date (perhaps subject to renewal) or is it indefinite? Are alternative forms of expression available and adequate? What guidance was considered when crafting your jurisdiction’s order? Consider whether to itemize these issues in the prefatory recitals of your order – or to document them elsewhere for future reference. Also, context is critical and a decision that seems reasonable based on today’s information may seem unreasonable later. If you rely on external guidance from the CDC, state or local health authorities, consider making hard copies or electronic copies organized by date, because that guidance is likely to change over time.
  • Finally, remember the power of qualified immunity. Governmental officials struggling to craft an appropriate response to the coronavirus outbreak should not have to worry about personal financial liability for their choices. Qualified immunity affords protection officials from individual capacity suits, even where they violate a plaintiff’s constitutional rights unless they violate clearly established law. Local officials will also be entitled to invoke various immunities from state law claims, though the nature and scope of immunity vary from state to state.

The local government team at Freeman Mathis & Gary will continue to monitor emerging constitutional issues arising from governmental response to the coronavirus outbreak.

Additional information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  On April 2, we will discuss the impact of Coronavirus on law enforcement.  Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Disclaimer

Posted on: March 27th, 2020

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests. We cannot respond to all unsolicited requests for representation. If you need legal advice, please contact an attorney and enter into a valid, written attorney- client relationship. See also our terms of service for this website.** 

U.S. Department of Labor Issues Guidance on the Families First Coronavirus Response Act Before Legislation Goes into Effect on April 1, 2020

Posted on: March 25th, 2020

By: Robert Young

In the time since the President signed the Families First Coronavirus Response Act (FFCRA or the Act) into law a few days ago, employers have asked many questions about how the new legislation will affect them once it goes into effect. To answer these questions, the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) recently issued its first round of published guidance for employers.

The DOL guidance addresses critical questions employers may face in response to the (i) Emergency Family and Medical Leave (FML) Expansion Act, which adds a basis for FMLA leave related to employees whose children’s schools closed due to an emergency order, and (ii) Emergency Paid Sick Leave Act, which requires emergency paid sick leave for certain COVID-19 related absences, in addition to any PTO that the employer already provides.

DOL Guidance for the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act

In addition to providing a detailed overview of which employers and employees are covered and the duration of leave and calculation of pay under the FFCRA (explained in depth here), the WHD guidance provided answers to several previously unanswered questions. The latest guidance provides as follows:

Effective Date:

  • The FFCRA’s paid leave provisions are effective on April 1, 2020, not April 2, 2020 as previously indicated, and apply to leave taken between April 1, 2020 and December 31, 2020.
  • The FFCRA is not retroactive. Leave eligibility begins April 1, 2020. Therefore, if an employer is currently offering an employee paid sick time due to COVID-19 concerns, these employees would be still be eligible for 80 hours of emergency paid sick leave as of April 1, 2020.

FFCRA Coverage:

  • Covered employees who qualify towards the 500-employee threshold under the FFCRA include:
    • All full-time and part-time employees within the United States, including any State of the United States, the District of Columbia, or any Territory or possession of the United States;
    • Employees on leave;
    • Temporary employees who are jointly employed by the employer and another employer (regardless of which employer maintains the employee’s payroll); and
    • Day laborers supplied by a temporary agency (regardless of whether the employer is the temporary agency itself or the client firm of the temporary agency, as long as there is a continuing employment relationship).
  • For purposes of calculating the 500-employee threshold:
    • The number of employees is determined on the date the employee takes leave.
    • A corporation (including its separate establishments or divisions) is a single employer and its employees must each be counted towards the 500-employee threshold.
    • If two entities are found to be joint employers under the FLSA, all of their common employees must be counted in determining whether paid sick leave must be provided under the Emergency Paid Sick Leave Act and expanded family and medical leave must be provided under the Emergency FML Expansion Act.
    • For purposes of the Emergency FML Expansion Act, if two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of expanded family and medical leave.
    • Independent contractors are not covered for purposes of the 500-employee threshold.
  • Small businesses with fewer than 50 employees will be required to document why they meet certain criteria set forth by the DOL to qualify for an exemption to the FFCRA, which will be established by the DOL in a forthcoming regulation. We will update you when this regulation is published.

Interaction of the Emergency FML Expansion Act and Paid Sick Leave Act:

  • An employee may be eligible for both types of leave, but only for a total of twelve weeks of paid leave.
  • Employees who qualify under the Emergency FML Expansion Act may use 80 hours of paid sick leave under the Emergency Paid Sick Leave Act for the first ten workdays. After the first ten workdays have elapsed, a covered employee will receive 2/3 of his/her regular rate of pay for the hours he/she would have been scheduled to work in the subsequent ten weeks under the Emergency FML Expansion Act.
  • Importantly, an employee can only receive the additional ten weeks of expanded family and medical leave under the Emergency FML Expansion Act for leave to care for a child whose school or place of care is closed or if child care provider is unavailable, due to COVID-19 related reasons.

The published guidance includes a Fact Sheet for Employers (linked here), Fact Sheet for Employees (linked here), and a Questions and Answers document (linked here). The DOL stated it will provide a workplace poster required for most employers later this week, as well as additional facts sheets and guidance. We will update you when the DOL issues this information.

Additional Information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Labor & Employment, Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Coverage for unclean hands? Plaintiffs Say Manufacturer Misrepresented Sanitizer’s Effect on Coronavirus

Posted on: March 25th, 2020

By: Renata Hoddinott and Barry Miller

On March 23 FMG presented the webinar Navigating Coverage Issues Arising from COVID-19. Presenters Marc Shrake, Erin Lamb, and Barry Miller discussed four lawsuits that already have been filed alleging claims related to coronavirus.
A few additional cases bear mentioning, and there will be many more to come.

In class action David v. Vi-Jon, Inc.¸ 20-CV0424, S.D. Cal. March 5, 2020 , a putative class alleges that Germ-X, a Vi-Jon product, is “advertised, marketed and sold as a Product that will prevent or reduce infection from the flu and other viruses, including the coronavirus.”

The David Complaint notes that on January 17, 2020, the Food and Drug Administration issued a warning letter to Purell regarding advertising that its hand sanitizer could prevent infection from flu and other viruses. The FDA letter says nothing about coronavirus, which given its date is not surprising. But it does chastise the maker of Purell for its advertising and social media posts that “clearly indicate your suggestion that PURELL® Healthcare Advanced Hand Sanitizers are intended for reducing or preventing disease from the Ebola virus, norovirus, and influenza.” Because Germ-X’s formula is nearly identical to Purell, the David Complaint states that the FDA letter applies equally to Vi-Jon.

Vi-Jon was already the subject of a class action suit filed a month earlier alleging similar promises that its product would prevent the transmission of flu also were misleading. The putative class in Sibley et al v. Vi-Jon, Inc., Case No. 20-cv951, N.D. Cal., February 7, 2020 also alleges the FDA letter to Purell should apply to Vi-Jon.

David alleges (¶ 50) that—by stating that Germ-X kills 99.9 percent of germs—Vi-Jon implies that Germ-X kills 99.9 percent of viruses and bacteria, preventing and reducing illness. Sibley, in turn, alleges that consumers were misled about the effectiveness of alcohol-based hand sanitizer and that Vi-Jon duped consumers into thinking their product (Germ-X) would fight the flu virus despite no clinical studies showing alcohol-based sanitizers reducing instances of the flu. Similarly, the January 17 FDA letter states that the agency “is currently not aware of any adequate and well-controlled studies demonstrating that killing or decreasing the number of bacteria or viruses on the skin by a certain magnitude produces a corresponding clinical reduction in infection or disease caused by such bacteria or virus.”

Both lawsuits allege claims under California consumer protection laws prohibiting false advertising and unfair competition. The David lawsuit adds common law claims for negligent misrepresentation and intentional misrepresentation.

False advertising may raise issues under Coverage B (“Personal and Advertising Injury”) under the standard Commercial General Liability Policy. Under the CGL definitions “Personal and Advertising Injury” only occurs if an enumerated “offense” is alleged or proved. In the ISO form those offenses are:

  • False arrest, detention or imprisonment;
  • Malicious prosecution;
  • The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a  room,  dwelling  or  premises  that  a  person occupies,  committed  by  or  on  behalf  of  its owner, landlord or lessor;
  • Oral or  written  publication,  in  any  manner, of material  that  slanders  or  libels  a  person  or organization   or   disparages a person’s  or organization’s goods, products or services;
  • Oral or  written  publication, in any manner, of material that violates a person’s right of privacy;
  • The use  of  another’s  advertising  idea  in  your “advertisement”; or
  • Infringing upon another’s copyright, trade dress or slogan in your “advertisement”.

None of these enumerated offenses expressly include false advertising or misrepresentations to consumers.

Coverage A is triggered by allegations of “Bodily Injury” to a third person or “Property Damage” suffered by a third person. The Complaints do not appear to allege bodily injury. In fact, the only specific damage claimed is that the class would not have bought Germ-X but for the advertising or representations of Vi-Jon. Thus, they allege, Vi-Jon holds money that should belong to the class. But the taking of money without right does not constitute “property damage” in many states, including California.

Another case worth reading is Welch Foods, Inc. v. Nat’l Union Fire Ins. Co., No. 09-12087-RWZ, 2010 U.S. Dist. LEXIS 110004 (D. Mass. Oct. 1, 2010) where a competitor alleged that Welch’s pomegranate juice was made mostly from apples. The court found no coverage for false and misleading advertising under three different policies and four different coverages:

  • There was no coverage under the GL for advertising injury.
  • A “Media Wrongful Act” coverage did not apply because (among other reasons) it covered “errors or omissions” in publications or broadcasts, and the complaint alleged intentionally false advertising.
  • “Professional Services Wrongful Act” coverage did not apply because there were no allegations that the advertiser was engaged in professional services, or that such coverage applies to claims from competitors.
  • A policy providing coverage for claims arising from an alleged “Wrongful Act” defined wrongful act to include a “misleading statement.” While the allegations may have fallen within that insuring agreement, the policy contained an exclusion for claims arising out of unfair competition or deceptive trade practices, among other business practices. Because the Complaint alleged such practices the exclusion applied.

Both Germ-X lawsuits, as well as any further actions that may be filed in the coming weeks and months, merit continued monitoring to see if coverage issues arise under these kinds of policies or others.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

UPDATE: City of Atlanta’s COVID-19 Shut-Down Order Revised to Allow All Construction to Proceed

Posted on: March 25th, 2020

By: Jake Carroll

The Associated General Contractors of Georgia, Inc. reports that a corrected executive order has been issued by The Office of Mayor Keisha Lance Bottoms designating all construction as “Essential Infrastructure.” The original executive order limited “Essential Infrastructure” to public works construction projects . The revision allows all construction projects to move forward within the jurisdictional limits of the City of Atlanta.

 Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

 

City of Atlanta’s COVID-19 Shut-Down Order Impacts Certain Construction Projects

Posted on: March 24th, 2020

By: Jake Carroll

Executive Order Number 2020-21 (“Shut-Down Order”) was issued by Kiesha Lance Bottoms, the Mayor of Atlanta, on March 23, 2020 at 8:49PM. Atlanta’s Shut-Down Order is more restrictive than similar orders seen in Florida (with broader exceptions for construction) and  California (allowed some construction to proceed).

Key Terms:

  • Jurisdiction: Order only applies to projects within the jurisdictional limits of Atlanta.
  • Date and Time of Effect: March 24, 2020 at Midnight.

Impact on Construction Projects: shutters construction projects that are not deemed “Essential Infrastructure” or “Essential Business” as defined by or enumerated in the Order.

  • Essential Infrastructure” is limited to projects for public works construction, airport operations, public transportation, utilities, and telecommunications, etc.  It generally does not capture more commercial construction, like warehousing or housing.
  • Essential Businesses” provides additional categories related to construction, including:
    • Healthcare operations and infrastructure;
    • Businesses that provide shelter for economically disadvantaged individuals (affordable housing projects may qualify);
    • Educational facilities; and
    • Residential facilities and shelters for seniors, adults or children.
  • General commercial construction projects like hotels, apartments and warehouses likely do not qualify.

Further Considerations:

  • Construction Industry Stakeholders should review FMG’s COVID-19: Commons Issues in Construction Contracts
  • Contractors should evaluate all existing construction contracts within the City’s jurisdiction, to determine what their rights and obligations are, including notice requirements.
  • Developers should evaluate whether they have any recourse under existing insurance policies, including business interruption and builder’s risk. Typically these policies are not implicated absent direct physical damage to property, but the results depend on the specifics of each policy.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Facing Increased Cyber Threats Against Legal and Accounting Professionals During the COVID-19 Pandemic

Posted on: March 24th, 2020

By: Renata Hoddinott

Millions around the world have had their daily routines disrupted and a wide variety of companies are participating in the largest “work from home” mobilization in history. While the ability for professionals to work remotely is key to business continuity in the midst of this pandemic, in doing so, firms and professionals have open their networks to unprecedented exposure.

Bad actors are capitalizing on the intense focus on COVID-19 panic and fear and security professionals have already noted an increase in malicious schemes. Those include phishing emails framed as alerts regarding the coronavirus outbreak containing attachments purportedly with information about COVID-19 and how to protect against the virus. When people are already stressed, fearful, and desperate for the most up-to-date information to protect themselves and loved ones, there is a significant risk to the security of any network.

Another prevalent threat for professionals, and particularly for CPAs, is in the realm of wire transfer requests. These types of scams are on the rise and can be very convincing, duping even the most cyber-savvy of professionals. Bad actors often begin well in advance of an attack by laying in wait and collecting information over an extended period. When the opportunity presents itself, such as now, these criminals use that information to launch convincing wire transfer requests. They can be framed as emails from “clients” requesting emergency funding and providing fraudulent wire instructions. CPAs often find themselves on the front lines against these malicious schemes and need to remain diligent and exercise extreme caution when responding to any requests. With professionals working remotely it can be more difficult to ensure a request is valid, but it is vital for requests to be double and triple checked and validated directly by phone or video to ensure accuracy before a single dollar is transferred.

Now is the time for all professionals to be vigilant about the cyber dangers. An unprecedented number of professionals are accessing company networks remotely and continuing to service clients including handling sensitive and confidential client data. In an office environment, when a threat is detected, IT can immediately quarantine and disconnect the compromised device and conduct an investigation of the company network. Now, however, employees may be connecting to firms’ servers from their own perhaps less secure networks and IT professionals are not on-site in those locations to troubleshoot issues and contain threats more easily. Failure to appropriately protect the sensitive and confidential data of clients may be the cause of malpractice claims in certain circumstances.

Firms should ensure IT security professionals are accessible to remote working professionals and able to isolate remote devices when necessary and limit the potential damage to the firm’s network through that compromised device. Now more than ever firms and professionals must remain diligent and prepared against new risks of fraud and cyber-attacks. Keeping mindful of cyber threats in the midst of this crisis is critical to ensuring ongoing success.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

IRS and DOL Announce Employers Can Take Immediate Advantage of Tax Credit Offsets Under the Families First Coronavirus Response Act

Posted on: March 23rd, 2020

By: Jeffrey A. Hord

On Friday, the Internal Revenue Service and U.S. Department of Labor issued an announcement regarding the timing of reimbursement by the federal government to employers for paid emergency leave and expanded FMLA leave required under the new Families First Coronavirus Response Act (“FFCRA”). This guidance (available here) represents an important step towards providing employers with greater clarity as to how and when their businesses can obtain tax relief relating to the cost of providing Coronavirus-related leave to employees.

As we covered in this Blog last week, the FFCRA requires private employers with fewer than 500 employees to provide paid sick leave and paid family leave for certain individuals impacted by the COVID-19 pandemic. Understandably, small businesses have been extremely anxious about the financial burden of complying with these new requirements, particularly during this time of economic uncertainty and unrest. For this reason, the FFCRA created a series of refundable tax credits for employers providing paid emergency sick leave or paid FMLA leave.  As written, however, the FFCRA left unanswered many key questions regarding the process for obtaining these credits, the timing of subsequent reimbursement, and so on.

In Friday’s announcement, the DOL and IRS made clear that employers can begin to “take immediate advantage” of these tax credits by retaining and accessing funds that they would otherwise pay to the IRS in payroll taxes. Here are some of the “key takeaways” highlighted in the announcement:

  • Complete Coverage
    • The tax relief provisions of the FFCRA are intended to provide “dollar-for-dollar,” 100% reimbursement for Coronavirus-related employee leave.
      • Health insurance costs are also included in the credit: the amount of the credit is increased by the employer’s “Qualified Health Plan Expenses” that are allocable to the qualified sick leave wages.
    • Employers face no payroll tax liability.
  • Prompt Recoupment of Employer Costs
    • Employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
      • Payroll taxes available for retention include withheld federal income taxes and both the employer and employee shares of Social Security and Medicare taxes.
    • In other words, any taxes held in escrow for payment on FICA, Social Security and Medicare taxes now could be used to pay employees taking paid leave under the new law.
    • If these retained payroll taxes are not enough to cover the cost of leave paid out to employees, employers will be able file a request for an accelerated payment from the IRS.
      • The turnaround time for such requests is expected to be “two weeks or less.”
  • Relaxed Compliance
    • The Department of Labor is issuing a “temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act.”
      • Under this policy, DOL will not bring an enforcement action against any employer for violations of the FFCRA until May 2, 2020—thirty (30) days after its effective date—so long as the employer has “acted reasonably and in good faith” to comply.
        • According to DOL, “good faith” exists when: (i) violations are remedied and the employee is made whole as soon as practicable by the employer, (ii) the violations were not willful, and (iii) the employer submits a written commitment to comply in the future.
  • Small Business Protection
    • Businesses with fewer than 50 employees are eligible for an exemption from the leave requirements relating to school closings and/or unavailable child care.
      • As with the exemptions set forth in Sections 3102 and 5111 of the FFCRA, the employer must show that compliance would “jeopardize the viability of the business as a going concern”; i.e., the ability of the business to remain open and continue operating.
      • DOL will be providing emergency guidance establishing simple and clear criteria defining the circumstances that will meet the standard of “jeopardy to the viability of an employer’s business as a going concern.”
    • While not referenced in Friday’s announcement, small business (with fewer than 50 employees) are already exempt from civil liability in an FMLA lawsuit relating to the FFCRA’s expanded family leave provisions.[1]

This announcement is sure to give some comfort to employers worried about how they would cover paid leave mandates without knowing when they might be reimbursed for those substantial costs. Cash flow concerns have already caused many businesses to make difficult furlough and termination decisions; hopefully, this guidance will help employers navigate through this unprecedented time.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Labor & Employment, Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

 **DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

[1] See Emergency Family and Medical Leave Expansion Act, Section 3104.

FCC Confirms COVID-19 Pandemic Constitutes Emergency Under TCPA

Posted on: March 23rd, 2020

By: Matthew Foree

The Federal Communications Commission (“FCC”) has just issued a Declaratory Ruling confirming that the coronavirus pandemic constitutes an emergency under the Telephone Consumer Protection Act (“TCPA”). The Declaratory Ruling can be found here. Consequently, “hospitals, healthcare providers, state and local health officials, and other government officials may lawfully communicate information about the novel coronavirus as well as mitigation measures without violating federal law.”

The TCPA prohibits autodialed, pre-recorded, or artificial voice calls to wireless telephone numbers, with certain exceptions. The TCPA expressly exempts calls made for emergency purposes. The FCC’s rules define “emergency purposes” to mean “calls made necessary in any situation affecting the health and safety of consumers.” The exception is intended for “instances [that] pose significant risks to public health and safety, and [where] the use of prerecorded message calls could speed the dissemination of information regarding . . . potentially hazardous conditions to the public.”

The FCC recognized that a critical component of the nation’s efforts to address and contain the pandemic is the ability of healthcare and public safety organizations to communicate effectively with the public.  Therefore, it found that the current pandemic constitutes an imminent health risk to the public.  The FCC found that in determining whether a call relating to the pandemic qualifies as a call made for an emergency purpose, it looks to (1) the identity of the caller and (2) the content of the call. Under the first prong, “the caller must be from a hospital, or be a healthcare provider, state or local health official, or other government official as well as a person under the express direction a such an organization and acting on its behalf.” Under the second prong, “the content of the call must be solely informational, made necessary because of the COVID-19 outbreak, and directly related to the imminent health or safety risk arising out of the COFIC-19 outbreak.”

The FCC gave multiple examples of calls that would fall within the emergency exception. For example, “a call originating from a hospital that provides vital and time-sensitive health and safety information that citizens welcome, expect, and rely upon to make decisions to slow the spread of the COVID-19 disease would fall squarely within an emergency purpose.” The FCC also recognized that calls that contain advertising or telemarketing of services do not constitute calls for an emergency purpose. Furthermore, calls made to collect a debt, even if it arises from related healthcare treatment, are not made for an emergency purpose. Such calls still require the prior express consent of called party.

Finally, the FCC recognized that consumers have already received telemarketing and fraudulent robocalls related to the pandemic, including scam text messages and calls offering home testing kits and promoting bogus cures. The FCC stated that it would be vigilant in monitoring complaints about these calls and would not hesitate to enforce its rules when appropriate.

If you have any questions about the FCC’s Declaratory Ruling, or any obligations under the TCPA during this time, please do not hesitate to contact Matt Foree at [email protected].

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Business Continuity Plans in the Age of Coronavirus

Posted on: March 23rd, 2020

By: Jennifer Weatherup

As the Coronavirus, or COVID-19, has caused unprecedented disruptions, including a precipitous decline in the stock market, it is increasingly important for broker-dealers to prepare plans which will allow them to fulfill their responsibilities to customers and continue operations under difficult circumstances. More specifically, broker-dealers should ensure that their business continuity plans allow their businesses to persist in the event of a pandemic such as the Coronavirus. To this end, the Financial Industry Regulatory Authority requires its members to plan ahead in order to meet customer needs in the event of an emergency.  Specifically, FINRA mandates that all broker-dealers “ must create and maintain a written business continuity plan identifying procedures relating to an emergency or significant business disruption… reasonably designed to enable the member to meet its existing obligations to customers [and] address the member’s existing relationships with other broker-dealers and counter-parties.” (FINRA Rule 4370(a).) FINRA further requires that members update their continuity plans in the event of material changes to their operation, and conduct an annual review to identify whether the plan must be modified. (FINRA Rule 4370(b).)

In response to the Coronavirus crisis, FINRA released Regulatory Notice 20-08, “Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief” on March 9, 2020. This Notice reiterates broker-dealers’ responsibilities under Rule 4370, and recommends that members include pandemic preparedness in their business continuity plans, and evaluate whether their current plans “are sufficiently flexible to address a wide range of possible effects in the event of a pandemic in the United States [including] staff absenteeism, use of remote offices or telework arrangements, travel or transportation limitations and technology interruptions or slowdowns.”  Notably, FINRA recommends that member firms’ business continuity plans include plans to employ remote offices or telework arrangements during a pandemic. In order to ensure that the use of remote work arrangements does not undermine firms’ abilities to satisfy their other professional duties, FINRA also recommends that firms which permit remote work arrangements consider strategies for exercising sufficient supervision over employees who are working remotely, and test the extensive use of telework arrangements by employees before remote work arrangements are broadly implemented at a member firm. FINRA identified other potential issues which could arise in the event of a pandemic, and which should be addressed in a business continuity plan, including the following: increased risk of cybersecurity breaches, emergency office relocations, increased customer call volumes, and challenges in making timely regulatory filings.

As the Coronavirus pandemic has already affected operations, member firms should make it a priority to carefully review their business continuity plans to ensure that they adequately address the potential effects of the Coronavirus; without adequate plans in place, member firms may not only find themselves unable to satisfy obligations to customers, but may face regulatory scrutiny once this crisis is behind us.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

COVID-19: Common Issues in Construction Contracts.

Posted on: March 23rd, 2020

By: Catherine Bednar, Jake Carroll and Ben Dunlap

On March 17, 2020, Boston became the first U.S city to order a halt to work on all construction sites due to the coronavirus, shutting down work two weeks. Since then, other states and cities have issued shutdown orders due to the pandemic, varying significantly in their scope and impact on the construction industry.  Pennsylvania’s governor ordered a shutdown of all “non-life sustaining business”, including both residential and nonresidential building construction in that list.  In contrast, California issued a statewide “stay-home” order which initially appeared to encompass the construction industry, but a day later issued a list of “Essential Critical Infrastructure Workers” which exempted construction workers from the order, including housing construction. Georgia’s governor lifted certain time restrictions for owners to retain private inspectors to approve plats and perform building inspections for code compliance. In some areas, it is anticipated that construction workers may be moved from their previous assignments to new priority projects, such as temporary hospitals.

Regardless of jurisdiction, it is inevitable that the construction industry will be significantly impacted by the current pandemic, whether due to government-ordered shutdowns, supply chain delays, the absence of sick or quarantined employees, or other business interruptions. The legal consequences and available remedies will depend upon the individual contracts governing a particular construction project.  The following is an overview of some relevant contract provisions and remedies which may come into play on construction projects affected by the present crisis.  In particular, parties to a construction contract may benefit from invoking contract remedies that preserve their ability to successfully complete the project in the future, rather than unilaterally terminating the agreement when performance is impeded due to difficult and unforeseen circumstances.

Potential Claims for Delay Damages and Liquidated Damages:  An immediate concern of owners, contractors and subcontractors is the potential for delay-related claims, including those based on liquidated damages clauses in construction contracts triggered by delays in project completion. A liquidated damages clause specifies the amount of money that must be paid as damages for failure to perform under a contract. Some construction contracts contain “no damage for delay” provisions which can prevent a party from recovering time-related costs when the project is delayed. The potential for delay damages or liquidated damages depends upon the contract language.

As discussed below, some contracts contain force majeure clauses that may excuse delays based on a construction ban or generally caused by the coronavirus pandemic. Others contain extension of time clauses that govern whether and how delay damages will be calculated.  Alternatively, parties to a construction contract may be able to suspend work, terminate the contract for convenience, or enter into a forbearance agreement to avoid or mitigate these damages.

Overhead and Mobilization Costs: Aside from direct delay damages, state and local government bans and other impacts of the pandemic will likely result in increased project costs as leased equipment sits idle and crews eventually have to be remobilized to continue their work when the bans are lifted. Contractual parties may dispute who should bear the added cost of extending equipment leases through the period of the moratorium or remobilizing crews and equipment to sites. The costs of securing construction sites at the beginning of the ban and of preparing sites for continuation of work at the end of the moratorium – as well as maintenance of skeleton crews – may also be substantial, and parties should consider how such costs should be allocated under the contract.

Force Majeure Clauses: Some construction contracts contain a force majeure clause, which serves as a defense against non-performance due to factors beyond the breaching party’s control. A force majeure clause may excuse performance altogether or may provide for an extension of time to perform. Force majeure clauses may specifically reference emergencies declared by the state or federal government, prolonged shortages of supplies, or may more generally refer to extreme and unusual events amounting to an Act of God. Whether the coronavirus pandemic triggers a force majeure clause depends on the contract language and applicable law.

Extension and Suspension of Work Clauses: Many construction contracts provide for parties to request extensions of time to complete performance, while other contracts permit suspension of work or production for a defined or indefinite time. The contract should dictate the procedures for the schedule change: many contracts require that the contractor notify the owner of a delay beyond the contractor’s control and make a written request for an extension of time, while others provide that additional time may be requested through change orders. Both extensions and suspensions of work allow the Project schedule to be revised once the parties determine an extension or suspension is warranted. Still, the language of the contract would determine what, if any remedies are available to the contracting parties, such as recovery of re-mobilization and extended duration costs.

Termination for Convenience Clauses: Typically, a general contractor or owner can terminate the contract “for convenience”—for any reason. In these scenarios, the general contractor or owner would likely be required to pay for work completed or produced before the termination, but typically not unearned profits on work not performed. Such clause would result in an orderly and fairer termination of the contract. Termination of a contract is a drastic remedy, and should not be undertaken lightly. Should a termination be deemed as “wrongful,” the terminating party could be liable for additional damages, including attorneys’ fees, lost profits, and interest of any amounts outstanding.

Forbearance Agreements: a forbearance agreement is a contractual agreement that can address delays or non-performance without resorting to termination or default. In the commercial lending industry, forbearance agreements can extend the time for a borrower to make payments on a construction loan. Construction companies should keep in mind that forbearance agreements are not limited to financing contracts, and can also be used to postpone termination of a construction contract. Under such an agreement, for example, an owner might refrain from declaring the contractor in default or terminating the construction contract, provided that the contractor meet certain agreed-upon milestones. Or, the owner might simply agree to toll any claims of breach against the contractor for non-performance during the construction ban and for a period of time thereafter.

Insurance and Financing: In addition, project-related insurance policies may need to be extended, resulting in higher costs. For project owners and developers, construction delays caused by COVID-19 may lead to added financing and carrying costs. Parties to construction contracts should work to ensure they continue to meet the contract’s insurance requirements.  Parties to construction costs will also be well-served by identifying added costs and seeking solutions early.

Surety Bonds: Keep in mind that many surety bonds require that notice of a change to a Project’s costs or duration must be timely given to the obligated surety. Failure to comply with such requirements could serve as a defense to payment or performance by the Surety at a later date.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

 **DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

COVID-19 Prompts Georgia to Adopt Emergency Rules on Unemployment that Penalize Employer Non-Compliance

Posted on: March 23rd, 2020

By: Andrew Kim

In response to COVID-19, on March 16, 2020, the Georgia Department of Labor adopted emergency rules making it a requirement for employers affected by COVID-19 to file partial unemployment claims on behalf of their employees. Barring subsequent action from the Georgia Department of Labor, these emergency rules will remain in effect for 120 days.

Emergency Rule: Mandatory Filing for Employers

Emergency Rule 300-2-4-0.5, containing Rule 300-2-4-.09(1), requires employers affected by COVID-19 to file partial unemployment claims on behalf of their employees.  For Partial Unemployment Claims filed on or after March 15, 2020, Employers must do the following:

  • File all partial unemployment claims online via the Georgia Department of Labor’s Employer Portal;
  • File partial claims with respect to any week during which an employee works less than full-time due to a partial or total company shutdown caused by the COVID-19 public health emergency.

For any violation of these requirements, the employer must pay the Commissioner the full amount of benefits paid to the employee.

Excluded Employees

Based on the Georgia Department of Labor’s guidance, employers do not need to submit partial claims for employees who:

  • Will be paid for the temporary layoff period (e.g., paid salary, paid sick leave, paid vacation or paid family leave);
  • Are or were on scheduled leave prior to the layoff period (e.g., leave of absence or medical leave);
  • Were employed a temporary agency and are currently working at your place of business;
  • Were employed in another state in the last 18 months (those employees should be directed to apply for unemployment benefits online);
  • Were employed with the federal government or on active military service in the last 18 months (those employees should be directed to apply for unemployment benefits online).

Filing Partial Claims Online

 

To file a partial claim online, an Employer must be a registered user that has administrator or user privileges permitting them to submit partial claims through the Employer Portal.  Employers who are registered but are not permitted to file partial claims are directed to contact their Employer Portal administrator for assistance. Employers that are not registered on the Employer Portal must establish an Employer Administrator Account.

Steps to file partial claim on the Employer Portal:

  • Log into the Employer Portal
  • Select the employer account number under Registered Account
  • Select the File Partial Claims link under Common Links
  • Follow the on-screen instructions

Considerations When Filing:

The Georgia Department of Labor provides several points to consider when filing:

  • Employers must file a partial claim for each pay period. A week of partial unemployment consists of an employer’s established pay period week.
  • Once a pay period is established, it should remain the same.
  • Accurately report the employee’s name, social security number (SSN), and date of birth. They must match the Social Security Administration’s records.
  • There must be seven (7) days between payment week ending dates.
  • Do NOT submit claims until after the week ending date on the claim. The Georgia Department of Labor (GDOL) cannot accept claims filed prior to the week ending date on the claim.
  • Report any vacation pay, holiday pay, and/or earnings during the week in which it was earned, NOT during the week it was paid to the employee.
  • Report any additional income employees are receiving to the GDOL, except Social Security benefits, jury duty income, and pay for weekend military reserve duty.

Emergency Rule: Waiver of Work Search Requirements

Emergency rule 300-2-0.4, containing Rule 300-2-4-02., has waived all work search requirements for claims filed on or after March 14, 2020. This rule remains in effect until either the Governor declares the Public Health State of Emergency over or 120 days from the adoption of the emergency rule.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Coronavirus Paid Leave Laws Pass, Set To Become Effective Within 15 Days

Posted on: March 23rd, 2020

Coronavirus Paid Leave Laws Pass, Set To Become Effective Within 15 Days

By: Justin Boron

The President yesterday evening signed The Families First Coronavirus Response Act into law after Congress passed it with overwhelming bipartisan support. The legislation drastically alters medical and sick leave requirements by requiring employers to pay employees during certain kinds of absences related to the Coronavirus crisis.

The House’s March 16, 2020 version of the bill cleared the Senate without amendment. You can find the bill here and our initial analysis here. In this update, we are providing an outline of issues that could come up for an employer considering a leave request under these new laws. The law is set to take effect within 15 days, and the Secretary of Labor is required to issue guidelines to assist employers in calculating the amount of paid sick time during that time period. We will update you when the Secretary provides further guidance.

  1. Emergency Family and Medical Leave Expansion Act.

The Emergency Family Medical Leave Expansion Act adds a basis for FMLA leave related to employees whose children’s schools closed due to an emergency order. At the outset, it is important to note that the pre-existing, FMLA leave bases remain in place, so employers will need to apply their pre-existing FMLA policies to leave requests and consider whether the employee would qualify under the non-Coronavirus bases for FMLA leave, which can be found here.

The following issues are likely to arise when an employer receives an emergency family medical leave request:

  1. Have you employed less than 500 employees? (See 29 CFR 825.105 for the FMLA’s general rules on counting employees for coverage, available here). If so, the employer is covered under the FML Expansion Act.[1]

Exception: If you employ fewer than 50 employees, the FML Expansion Act requires your compliance, but you are immune from civil liability for violations of it.[2]

  1. Is the employee eligible? The employee has been employed 30 days by the employer,[3] and the employee cannot work or telework; the employee has a childcare need; and the child’s school or daycare is closed due to an emergency declared by federal, state, or local authority for Coronavirus (or childcare provider is unavailable).[4] If so, then the eligibility requirements for employees will be met.

Exception: If you are an employer of a “health care provider,” then you may elect to exclude an employee from application of the new emergency FMLA leave provisions.[5] For the definition of health care provider, see 29 CFR 825.102 available here.

  1. The FML Expansion Act does not address certification but the definition of “qualifying need related to a public health emergency” makes the request verifiable based on publicly available information.
  1. If each element above is met, then the employer must provide:
  • An initial 10 days of unpaid leave during which the employee may elect to use PTO or sick pay provided under the Emergency Paid Sick Leave Act.
  • After the initial 10 days, 10 weeks and four days of paid leave at 2/3 of employee’s regular rate of pay and the number of hours the employee is regularly scheduled to work, but this paid leave will be no more than $200 per day and $10,000 in the aggregate.[6] See section 110 (b)(2)(C) for employee’s with variable schedules.

Exception: Employers that have multi-employer collective bargaining agreements are addressed specially in Section 3103 of the FML Expansion Act.

  1. At the end of the 12-week FMLA emergency leave, the employee’s right to be restored to the employee’s position is the same as under pre-existing FMLA rules unless the employer has less than 25 employees and meets certain economic hardship requirements in section 110(d) of the FMLA, as amended.
  1. Emergency Paid Sick Leave Act

The Emergency Paid Sick Leave Act requires emergency paid sick leave for certain Coronavirus related absences that is in addition to any PTO that the employer already provides. It is important to note that the FML Expansion Act is not co-extensive with the Emergency Sick Leave Act, so sick pay requests will need to be evaluated separately from emergency family leave requests.

The following issues are likely to arise when an employer considers an emergency sick leave request:

  1. Is the employer subject to the Emergency Paid Sick Leave Act? A private employer is a “covered employer” if it is engaged in commerce and employs less than 500 employees. A public agency or entity other than a private employer is a “covered employer” if it employs one or more employees. It includes an employer acting directly or indirectly in the interest of employer and any successor-in-interest companies.[7]
  1. Is the employee eligible? An employee is unable to work or telework because the employee:
  • is subject to a Federal, State, or local quarantine or isolation order related to COVID–19;
  • has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
  • is experiencing symptoms of COVID–19 and seeking a medical diagnosis;
  • is caring for an individual who is subject to a governmental quarantine order or who has been advised by a health care provider to self-quarantine;
  • is caring for a son or daughter of the employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID–19 precautions; OR
  • is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.[8]

Note that the definition of an employee of a public agency has special requirements under 29 U.S.C. 203(e)(2). The definition also includes other types of government employees specified in Section 5110 of the Emergency Sick Leave Act.

Exception: If you are an employer of a “health care provider,” then you may elect to exclude an employee from application of the Emergency Paid Sick Leave provisions.[9] For the definition of health care provider, see 29 CFR 825.102 available here.

Exception: Employers that have multi-employer collective bargaining agreements are addressed specially in Section 5106 of the Emergency Paid Sick Leave Act.

  1. If the first two elements are met, the employer must provide paid sick time in addition to paid leave provided by the employer as follows:
  • For full-time employees, 80 hours
  • For part-time employees, a number of hours equal to the number of hours that such employee works, on average, over a 2-week period,

The sick leave must be paid in the following amounts:

  • The highest amount based on (i) the regular rate of pay as defined by the FLSA or (ii) minimum wage in effect for the federal, state, and locality for an employee who is
    • is subject to a Federal, State, or local quarantine or isolation order related to COVID–19;
    • has been advised by a health care provider to self-quarantine due to concerns related to COVID–19; OR
    • is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
But the amount cannot exceed $511 per day and $5,110 in the aggregate for an employee using paid leave for these reasons.
  • Two-thirds of the highest amount based on (i) the regular rate of pay as defined by the FLSA or (ii) minimum wage in effect for the federal, state, and locality for an employee who is
    • is caring for an individual who is subject to a governmental quarantine order or who has been advised by a health care provider to self-quarantine;
    • is caring for a son or daughter of the employee if the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable, due to COVID–19 precautions; OR
    • is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
But the amount cannot exceed $200 per day and $2,000 in the aggregate for an employee using leave for these reasons.[10]
Note that an employee may elect to use this sick time before other PTO and sick leave provided by the employer. Also, the employer may not require the employee to use other PTO and sick leave before the emergency sick leave under the new law.[11]
  1. Paid sick time terminates beginning with the employee’s next scheduled workshift immediately following the termination of the need for emergency paid sick time under the new law.[12]

Note that the employee must use paid sick time during 2020, and it does not carry over to next year. Additionally, the employer is not required to pay the employee for unused emergency sick time if employment ends.[13]

If an employer fails to provide the emergency sick leave required by the new law or who terminates an employee for taking the emergency sick leave, the employer is subject to civil liability and penalties under the FLSA.[14]

  1. Tax Credits For Paid Emergency Leave Under The FML Expansion Act And The Emergency Sick Leave Act

For each calendar quarter, an employer is entitled to a tax credit against the employer-paid excise taxes on payroll in Section 3111(a) or Section 3221(a) of the Internal Revenue Code of 1986 for the full amount of the amounts required to be paid under the FML Expansion Act or the Emergency Paid Sick Leave Act.

But there are caveats to how and the amount of the credits that may be taken that could result in the full value of the credit not being applied until the employer files its tax return. The new tax credit law requires the Secretary of Labor to issue regulations for implementation of the tax credits.

 **DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  
We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

[1] Sections 101(4)(A)(i), 110(a)(1)(B) of the FMLA.
[2] Section 3104 of the FML Expansion Act.
[3] Sections 101(4)(A)(i), 110(a)(1)(A) of the FMLA.
[4] Section 3102 of the FML Expansion Act.
[5] Section 3105 of FML Expansion Act.
[6] Section 110(b) of the FMLA, as amended.
[7] Section 5110(2) of the Emergency Paid Sick Leave Act.
[8] Section 5102(a) of the Emergency Paid Sick Leave Act.
[9] Section 5102(a) of the Emergency Paid Sick Leave Act.
[10] Section 5110(5) of the Emergency Paid Sick Leave Act.
[11] Section 5102(e) of the Emergency Paid Sick Leave Act.
[12] Section 5102(c) of the Emergency Paid Sick Leave Act.
[13] Section 5102(b) of the Emergency Paid Sick Leave Act.
[14] Section 5105) of the Emergency Paid Sick Leave Act.

California Department of Insurance Orders All California Health Insurers to Submit Filing and to Ensure Services to Insureds Displaced by COVID-19

Posted on: March 20th, 2020

By: Kristin Ingulsrud

California Insurance Code section 10112.95(a) provides that insureds displaced by a declared state of emergency shall have access to medically necessary health care services.  In light of Governor Gavin Newsom’s state of emergency proclamation and the continued escalation of the COVID-19 outbreak, California’s Department of Insurance (DOI) issued its “COVID-19 State of Emergency Notification Filing Requirements” on March 18.

Given that the COVID-19 outbreak has the immediate potential to inhibit insureds’ ability to access medical care, all health insurers operating in California must submit a notification describing the insurer’s communication with potentially impacted insureds and summarizing how the insurer will ensure that the health care needs of its insureds are met.

Under the DOI’s order the required notification must address numerous items, including removing barriers to access prescription drugs by home delivery, waiving refill limitations, and other similar measures.

Insurers must also have a plan to maximize the use of telehealth where appropriate.  Insurers must provide a toll-free telephone number to facilitate communication with insureds regarding care options.

Moreover, insurers must also demonstrate their contingency plan to continue operations should its staff be subject to shelter-in-place orders.

The order also requires insurers to detail how they are complying with the Department’s March 5 order concerning waiving co-pays for COVID-19 screening and testing.

The required notification must be filed by close of business Friday, March 20.

The complete order can be found on the Insurance Department’s website at http://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/CDI-Emergency-Notification-Filing-Requirements-COVID-19-3-18-2020.pdf.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

California Department of Insurance Issues COVID-19 Bulletins Addressing (i) 60-Day Grace Period for Premiums; Expiration of Drivers Licenses; (ii) Alternative Payment Methods; and (iii) Accounting for Extraordinary Circumstances in Evaluating Claims Handling

Posted on: March 20th, 2020

By: Zach Moura

California Insurance Commissioner Ricardo Lara issued three notices to insurers on March 18, 2020 related to the novel coronavirus disease (COVID-19), all aimed at ameliorating the pandemic’s impact on the both insurers and insureds.

The first notice is addressed to all insurance companies and other licensees. The Commissioner recognizes that the COVID-19 outbreak is creating extraordinary circumstances that impact the ability of insurers to conduct insurance-related business. The Department of Insurance (DOI) intends to take those extraordinary circumstances, and resulting business disruptions, into account when evaluating insurer compliance with legal and commercial obligations during the COVID-19 outbreak. The Commissioner also encourages all companies to take steps to maintain their ability to process and pay insurance claims, and to provide other requisite consumer services, in “a reasonable and timely manner.”

The Commissioner’s second notice addresses a request that “all admitted and nonadmitted insurance companies that provide any insurance coverage in California including, life, health, auto, property, casualty, and other types of insurance” provide their insureds with at least a 60-day grace period to pay insurance premiums. The Commissioner wants to avoid cancellation of policies for “nonpayment of premium during this challenging time due to circumstances beyond the control of the insured.”

The Commissioner also requests that agents, brokers, and any other licensees who accept premium payments on behalf of insurers take steps to ensure that customers have the ability to make prompt insurance payments, including through arranging for online payment to eliminate in-person payment methods, to protect the safety of both workers and customers.

Commissioner Lara’s third COVID-19 notice follows on the California Department of Motor Vehicles’ request to California law enforcement that it exercise discretion in the enforcement of driver’s license and vehicle registration expirations for 60 days beginning March 16, 2020. The Commissioner encourages insurers to refrain from using the expiration of policyholders’ driver’s licenses or vehicle registrations during those same 60 days for any of the following reasons:

  • To affect a driver’s ability to secure and maintain auto insurance coverage;
  • To affect a driver’s eligibility for a Good Driver discount;
  • To determine eligibility for a California Low Cost Automobile policy;
  • To impact the rates charged to any driver.

The notice will be reevaluated at the end of the 60-day period, or May 15, 2020.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

HHS Waives Some HIPAA Sanctions During the Coronavirus Pandemic

Posted on: March 20th, 2020

By: David Cole

The HHS Office for Civil Rights (OCR) issued two important bulletins this week in response to the coronavirus pandemic. Each one announced that OCR will temporarily waive certain sanctions and penalties for noncompliance with HIPAA Rules to help deliver care to people in need.

Limited Waiver for Privacy Rule Requirements

First, OCR issued a Limited Waiver of HIPAA Sanctions and Penalties for not complying with certain parts of the Privacy Rule. Specifically, the Waiver says that healthcare providers will not be sanctioned or penalized for not complying with the following usual requirements:

  • The requirement to obtain a patient’s consent before speaking with family members or friends involved in the patient’s care;
  • The requirement to honor a request to opt-out of the facility directory;
  • The requirement to distribute a Notice of Privacy Practices;
  • The patient’s right to request privacy restrictions; and
  • The patient’s right to request confidential communications.

The Waiver became effective on March 15, 2020, but currently only applies (1) in the emergency area identified in the public health emergency declaration; (2) to hospitals that have instituted a disaster protocol; and (3) for up to 72 hours from the time the hospital implements its disaster protocol. It is unclear if OCR will extend the time for this Waiver given the widespread and potentially prolonged nature of the coronavirus outbreak. A copy of the bulletin is available here.

Video Technology Allowed for Telemedicine

Second, OCR issued a Notification of Enforcement Discretion allowing healthcare providers to use “any non-public facing remote communication product that is available” to communicate with patients to provide telehealth during the coronavirus national emergency. As examples, OCR said it will allow healthcare providers to use video chat application like Apple FaceTime, Facebook Messenger, Google Hangouts, or Skype, to provide telehealth without risk of penalty for noncompliance with HIPAA Rules. However, Facebook Live, Twitch, TikTok, and other similar public-facing video applications are not allowed. Healthcare providers are still expected to enter into Business Associate Agreements with the technology companies providing the video communication services, but OCR says it will not impose penalties for failing to do so during the time of the national emergency. A copy of the Notice is available here.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

U.S. Department of Labor Issues COVID-19 Guidance on FLSA and FMLA

Posted on: March 20th, 2020

By: Catherine Scott

As the federal government continues to grapple with questions from employers regarding COVID-19, the federal agencies have begun to roll out new guidance. The latest comes from the U.S. Department of Labor (DOL), which has issued guidance for employers seeking answers concerning their obligations pursuant to the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA).

DOL Guidance for FLSA

The FLSA provides rules and regulations concerning how employees must be paid, including the payment of wages and overtime. Employers around the country have wrestled with whether they can reduce salary and/or hours or furlough or lay off employees as the economy slows down due to COVID-19 and whether employees are required to be paid and in what manner.

The DOL has answered several frequently asked questions concerning these issues. The latest guidance provides as follows:

  • For non-exempt, hourly employees, employers can reduce their hours and/or pay, so long as minimum wage and overtime requirements are met. Non-exempt, hourly employees also can be placed on an unpaid leave of absence or furlough or be laid off due to an economic slowdown;
  • For exempt employees, employers are generally required to pay these employees their full weekly salary if any work is done during the workweek (subject to exceptions, such as when the employer is open for business and an employee, who has no PTO remaining or hasn’t qualified, misses an entire day of work).  Of course, exempt employees can be required to use any accrued, unused vacation or paid time off under the FLSA for any missed time so long as they are still being paid their salary.
  • All employees must generally be paid for telework performed at home, subject to the limitations described above;
  • Employees of private organizations are generally not allowed to volunteer their normal services without pay, subject to a few limited exceptions. Employees may volunteer for public organizations without pay if they (a) perform such services for civic, charitable or humanitarian reasons without promise, expectation, or receipt of compensation; (b) offer their services freely and without coercion, direct or implied; and, (c) are not otherwise employed by the same public agency to perform the same services as those for which they propose to volunteer.

Pay issues can be complicated and very fact-specific (and state-specific) so if you have a question about furloughs, layoffs, or schedule or compensation reductions (whether temporarily or permanently), please contact us so we can assess the individual factual and legal circumstances of your situation.

DOL Guidance for FMLA

Similarly, employers have wrestled with their obligations under the FMLA and whether they must provide job-protected leave to employees who need time away for a qualifying reason.  Initially, it is important to understand that any employer that has between 50 – 500 employees should first familiarize itself with the Families First Coronavirus Response Act as that Act (which will be effective April 2, 2020) substantially expands some of the obligations traditional imposed on employers under the FMLA.  For those employers, however, that are below 50 or above 50 employees, you should keep the following principles in mind in dealing with the Coronavirus.

  • Employees who develop complications from COVID-19 may have a “serious health condition” that would trigger FMLA leave. The same is true of a “family member,” defined by the FMLA as a spouse, child, or parent, who develops complications from COVID-19;
  • However, leave taken by an employee to avoid exposure to COVID-19 would not be covered by the traditional principles of the FMLA;
  • The traditional FMLA does not currently cover employees who require leave to tend to healthy children or children who have been dismissed from school or childcare by their state governments;
  • The traditional FMLA provides only for unpaid leave to employees who qualify; however, the FMLA allows for employees to substitute paid leave in place of unpaid leave in certain circumstances and if the employer’s policies provide for such paid leave;
  • Employees seeking to use FMLA leave are required to provide 30-day advance notice of the need to take FMLA leave when the need is foreseeable and such notice is practicable.  In addition, employers may require employees to provide:
    • medical certification supporting the need for leave due to a serious health condition affecting the employee or a spouse, son, daughter or parent, including periodic recertification;
    • second or third medical opinions (at the employer’s expense);
    • periodic reports during FMLA leave regarding the employee’s status and intent to return to work; and
    • consistent with a uniformly-applied policy or practice for similarly-situated employees, a fitness for duty certification. (Employers should be aware that fitness-for-duty certifications may be difficult to obtain during a pandemic.)

The Department of Labor is generally encouraging employers to be flexible in dealing with situations involving employees affected by COVID-19, including re-examining both paid and unpaid leave policies in place at the employer and allowing paid telecommuting to occur.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

What Rhode Island Employers Should Know About COVID-19

Posted on: March 19th, 2020

By: Jennifer Markowski and Catherine Scott

Governor Gina Raimondo has declared a state of emergency in the state of Rhode Island and implemented certain measures, such as the closing of public schools through April 3, that have a direct effect on Rhode Island employers. The Rhode Island Department of Labor and Training (RIDLT) continues to issue guidance to Rhode Island employers to help with these issues.

Unemployment Benefits

In light of the impact of COVID-19, many employers have needed to consider layoffs, furloughs, salary and time reductions, and other options for reducing costs.  Many affected employees are entitled to unemployment benefits.  To facilitate the receipt of benefits, RIDLT announced it would suspend the seven-day waiting period for unemployment claims related to layoffs or involuntary furlough due to COVID-19. Employers who are considering furloughs or layoffs due to COVID-19 can contact our office with any questions about these measures.

Paid Leave Benefits

Many employees in Rhode Island will be eligible to use their paid time off and/or sick leave if their offices remain open but they are unable to work due to an illness and/or childcare issues. The Healthy and Safe Families and Workplace Act provides most employees in Rhode Island with one hour of paid sick leave for every 35 hours worked up to 40 hours per year. The size of the employer will impact how the law is applied, and the waiting period will be determined by the class of the employee.

Additionally, the Coronavirus Response Act has been executed by President Trump. The federal legislation mandates that certain employers provide additional paid leave to their employers.  You can read here to find out more about the provisions and whether it applies to your business.

Temporary Disability Insurance (TDI) and Temporary Caregiver Insurance (TCI) Benefits

For employees whose offices are open but do not have access to paid leave benefits, Rhode Island offers both TDI and TCI insurance benefits. Similar to unemployment benefits, RIDLT announced it would waive the seven-day out-of-work period required before a claimant can receive TDI and/or TCI benefits. Claimants for such benefits will be allowed to temporarily qualify for benefits via self-attestation of quarantine due to COVID-19, rather than being required to supply medical certification. Moreover, employees who are required to stay home due to issues with childcare may be temporarily eligible for TCI benefits.

Unpaid Leave

We note many Rhode Island workers are likely entitled to job-protected unpaid leave under the Rhode Island Parental and Family Medical Leave Act and/or the federal Family and Medical Leave Act as it stands.

If you have questions about these laws or how they apply to your business, feel free to contact Jen Markowski at [email protected] or Cat Scott at [email protected].

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

COVID-19 Closes Schools Across the United States: United States Department of Education Releases New Guidance for Schools During Coronavirus Outbreak

Posted on: March 19th, 2020

By: Tia J. Combs

Many schools across the county have closed or are operating virtually due to the COVID-19 outbreak.  On March 12, 2020, the US Department of Education released two documents with new guidance for schools and educators faced these unprecedented problems.

First, the Student Privacy Policy Office released its FERPA & Coronavirus Disease 2019 (COVID-19) Frequently Asked Questions (FAQs) March 2020.  This document details how schools should handle confidential information covered by the Family Educational Rights and Privacy Act (FERPA) during the outbreak.  Most importantly, the document addresses how the health or safety emergency exception to FERPA’s consent requirements (20 U.S.C. § 1232g(b)(1)(I); 34 C.F.R. §§ 99.31(a)(10) and 99.36) might permit an educational agency or institution to disclose personally identifiable information (“PII”) about particular students.  The document reiterates that agencies and institutions are responsible for making a determination, on a case-by-case- basis, concerning disclosure.  It also notes that disclosure, without prior written consent, is permitted under law if there is, based on the totality of the circumstances, an articulable and significant threat to the health of safety of a student.

The document specifically addresses the question of whether schools may disclose, without prior written consent, to other students and parents that a student is out sick due to COVID-19.  The document states that such disclosure is generally going to be permissible if it is released in a form that cannot be traced back to a specific student.

Second, the Department released its Questions and Answers on Providing Services to Children with Disabilities During the Coronavirus Disease 2019 Outbreak. This document outlines how local educational agencies (“LEA”) can provide a free appropriate public education to students with disabilities during a school closure caused by the COVID-19 outbreak.  The document explains that if LEAs are continuing to provide educational services to the general student population during a closure, LEAs must also continue to provide educational opportunities to special education students consistent with their IEP or 504 Plan to the greatest extent possible.  Schools must also provide specialized instruction to children with disabilities who are infected with COVID-19 and miss school for an extended period of time, possibly via homebound services if the student qualifies. The document emphasizes that special education students who are not provided with services could be owed compensatory education.

The US Department of Education has also launched a website with general information for schools faced with complications from COVID-19 at https://www.ed.gov/coronavirus.

More Information Can be Found at:

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

Coronavirus Lawsuit Seeking Coverage is Filed in Louisiana

Posted on: March 18th, 2020

By: Philip W. Savrin and Erin Lamb

The first in what is bound to be a virtual tsunami of coverage lawsuits arising from the spread of the Coronavirus was filed in New Orleans this week by a restaurant in the famed French Quarter. In its complaint, Oceana Grill seeks a declaration that the government’s orders to close down the business will trigger coverage for losses it anticipates it will sustain as a result of a government-mandated suspension of its operations. As in many policies, coverage is provided for the loss of net income that results from a “direct physical loss” to the insured’s property. In the lawsuit, the restaurant alleges that “any effort … to deny that the virus causes physical damage and loss would constitute a false and potentially fraudulent misrepresentation that could endanger policyholders and the public.”

This argument, which we predict will become central to insurance coverage disputes throughout the country, was supported by the Mayor of New Orleans who publicly stated that she will be “very aggressive” when it comes to business interruption claims.  Indeed, in her emergency declaration, Mayor Cantrell stated explicitly that Covid-19 “causes property loss and damage in certain circumstances.”

Whether interruptions to business operations are covered by policies that require a direct physical loss to property will depend on the particular language of each policy and the application of the terms may vary as well depending on the jurisdiction. In addition, policyholder advocates are turning to state legislatures for assistance in mandating insurers to cover losses particularly where closures are mandated by local governments. The only thing that is certain at this point is Covid-19 is going to impact virtually every industry and on a global scale, with many lawsuits being filed by businesses asserting novel arguments to cover their mounting losses.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

State and Federal Motor Vehicle Exemptions related to COVID-19

Posted on: March 18th, 2020

By: Josh Ferguson

The Federal Motor Carrier Safety Administration (FMCSA) issued a national emergency declaration and in doing so provided a limited exemption from driver safety regulatory requirements.  The exemption applies “for motor carriers and drivers engaged in the transport of essential supplies, equipment and persons” that provide “direct assistance in support of relief efforts related to the COVID-19 outbreaks.”  The Emergency Declaration was effective March 13, 2020 and remain in effect until the end of the emergency or until 11:59 p.m. (ET) on April 12, 2020, whichever comes sooner.

The declaration defines “Direct assistance” as transportation and other relief services provided by a motor carrier or its driver(s) incident to the immediate restoration of essential services, such as medical care, or essential supplies such as food, related to COVID-19 outbreaks during the emergency.  These include transportation of the following:

  • Medical supplies and equipment related to the testing, diagnosis and treatment of COVID-19;
  • Supplies and equipment necessary for community safety, sanitation, and prevention of community transmission of COVID-19, such as masks, gloves, hand sanitizer, soap and disinfectants;
  • Food for emergency restocking of stores;
  • Equipment, supplies and persons necessary to establish and manage temporary housing, quarantine, and isolation facilities related to COVID-19;
  • Persons designated by federal, state or local authorities for medical, isolation, or quarantine purposes; and
  • Persons necessary to provide other medical or emergency services, the supply of which may be affected by the COVID-19 response.

Direct assistance does not include routine commercial deliveries or transportation of mixed loads that include essential supplies, equipment and persons, along with supplies, equipment and persons that are not being transported in support of emergency relief efforts related to the COVID-19 outbreaks.  Another important aspect is the exemption terminates when a driver or commercial motor vehicle is used to transport cargo or provide services not identified on the list.

Many states have issued public emergencies, and ultimately those emergency powers may include other exemptions for operators of commercial vehicles.  For example, in Georgia, in declaring a public health emergency Governor Kemp stated that the declaration would immediately be used to help some nurses from other states get temporary licenses to practice in Georgia and lift restrictions on commercial truck drivers to let them continue stocking stores with supplies.  Just how these emergency declarations and exemptions factor into tort and employment-related claims will be seen months and years down the road.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

Webinar series- Business Issues & Coronavirus

Posted on: March 18th, 2020

Choose your program and register here.

House Amends Coronavirus Bill to Ease Burdens on Small Businesses

Posted on: March 17th, 2020

HOUSE AMENDS CORONAVIRUS BILL TO EASE BURDENS ON SMALL BUSINESSES

By Bill Buechner and Justin Boron

The U.S House of Representatives, by unanimous consent, amended the Families First Coronavirus Response Act last evening. Although the amendments were characterized as technical in nature, there were several significant substantive changes made to the legislation in an attempt to respond to concerns that it imposes too substantial of a burden on small businesses.

Particularly, the amended act formalizes exemption of employers with 50 or fewer employees from liability. The amended act makes clear that paid leave requirements are not triggered when the employee still can perform his  job by teleworking from home. Also, the amended act will allow employers to construct compliant paid leave policies so that amounts they pay employees are subject to tax credits so they effectively will be paid for by pass-through credits from the federal government.

Our summary of the initial legislation passed by the House on March 14, 2020 can be reviewed here.

With respect to the Emergency Family and Medical Leave Expansion Act, the most significant changes are as follows:

  • The bill now exempts employers with fewer than 50 employees from civil liability for any violations
  • Employers who are health care providers or emergency responders may elect to exclude their employees from coverage
  • The bill now limits “qualifying need related to a public health emergency” to mean “the employee is unable to work or telework due to a need for leave to care for the son or daughter under age 18 years of such employee if the school or place of care has been closed or the child care provider of such son or daughter is unavailable due to a public health emergency.” (emphasis added)
  • The amended bill reduces the amount of initial unpaid leave from 14 days to 10 days
  • The amended bill limits the amount of new Coronavirus paid FMLA leave for each employee to $200 per day and $10,000 in total for the duration of the leave. This critical change means that employers can structure their paid leave obligation under FMLA leave so that they will receive payroll tax credits by the government for providing the paid leave required by this new law.

Previously, employers were faced with the prospect of being required to pay 2/3 of compensation to highly paid employees. This meant that employees making more than $80,000 would have received 2/3 of their compensation paid for exclusively by the employer. This provision was a focus of concern from US Chamber and the national Federation of Independent Businesses, as well as many other employer groups.

With respect to the Emergency Paid Sick Leave Act, the most significant changes are as follows:

  • Clarifies that employee must be unable to work or telework
  • The amended bill specifies six grounds for emergency paid sick leave, which generally fall into two categories: (1) sick leave needed for the employee’s own Coronavirus diagnosis/symptoms or quarantine/isolation order; and (2) sick leave needed to care for others because of their Coronavirus diagnoses/symptoms or quarantine/isolation order
  • Employers who are health care providers or emergency responders may elect to exclude their employees from coverage
  • Similar to the analogous FMLA leave provisions, the amended bill limits the amount of paid leave to $511 per day and $5,110 total for leave required due to the employee’s own Coronavirus diagnosis/symptoms or quarantine order. There were no limits in the original version.
  • The amended bill limits the amount of paid sick leave to $200 per day and $2,000 total for leave required due to the employee’s need to care for others.  There were no limits in the original version.

In addition, the amended bill expands employers’ tax credits to include health insurance contributions to employees who take the Coronavirus-related leave, as well as the 1.45% Medicare tax for such employees.

Whether these changes will be sufficient to earn passage in the U.S. Senate later this week remains to be seen. FMG will keep you posted on the latest legislative developments.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

Cyber Attack on HHS is a Reminder for Businesses to Remain Vigilant About Cybersecurity During the COVID-19 Pandemic

Posted on: March 17th, 2020

By: Renata Hoddinott

Amidst all the information and news flooding the internet regarding COVID-19, another troubling headline emerged this morning: an unknown actor launched a cyber attack on the Department of Health and Human Services (HHS) on Sunday. The attack was not a hack in the traditional sense, and no data was stolen from HHS’s systems. Rather it was an attempt to slow down HHS’s COVID-19 response by flooding the site with millions of requests over the course of several hours. It was a distributed denial of service – or DDOS – attack. The distinction is important because there was no apparent breach of the system of the lead agency responding to the coronavirus pandemic, and none of HHS’s critical functions were interrupted. HHS’s system was largely able to repel the intrusion, the agency was fully functioning at all times, and its site never crashed. But while the attack was unsuccessful, it is a harbinger of things to come and businesses should take note.

Most corporations and firms with the capability to do so have permitted, encouraged, or even mandated their employees to work from home for an extended amount of time to limit the spread of the virus. All of that remote access may be on potentially less secure networks should raise some concerns for those businesses. Bad actors will no doubt use the opportunity to gain access to less secure devices and networks to penetrate systems they may not have had access to previously due to the security in place for devices “in-house.”

Now is the time to remind remote employees to practice basic sense and security in ensuring they are only accessing company systems on private, password-protected networks. Employees also need to be watching for social engineering and phishing attacks. It may seem as though the email from the boss asking for password information or the firm’s credit card number is legitimate because employees do not have the ability to walk down the hall and ask.

And, for some smaller enterprises who may be new to remote-access, some systems may have been rolled out untested in certain circumstances to ensure business continuity. In those cases, it will be important to ensure that when restrictions are lifted and employees are able to return to work that those remote system are analyzed and secured from future threats.

This pandemic has unexpectedly and almost immediately changed the way business is conduct day-to-day around the globe. It remains to be seen whether those changes will be permanent. While most people are pulling together in this outbreak, malicious actors will always be looking for every opportunity to take advantage of the situation. During the period of social distancing and self-quarantining, individuals are desperate for up to the minute information on the crisis. Businesses need to be aware that attackers will attempt to exploit the human element now more than ever. And, as we all know, there is almost always a human element – whether an honest mistake or negligence – in most cybersecurity incidents.

In addition, FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

New Jersey and New York Signal Intent to Force Coverage for COVID-19 Business Losses; Other States Will Follow Suit

Posted on: March 16th, 2020

By: Erin Lamb and Marc Shrake

Both New Jersey and New York have taken steps toward attempting to force coverage of business losses related to COVID-19. In New Jersey, Assembly Majority Leader Louis Greenwald and Assemblyman Roy Reiman have introduced Assembly Bill 3844. As written, the bill would force insurers to provide coverage for claimed business losses alleged to be caused by COVID-19, under policies that were in effect on March 9, 2020 (the date that New Jersey declared a state of emergency). If successful, these state governments would be taking an extraordinary step that not only changes the terms and conditions of an existing contract, but also creates coverage ex nihilo for virus-related losses expressly bargained between the contracting parties, and underwritten, to be excluded from coverage.

Back in 2006, ISO adopted a mandatory exclusion for such losses that specifically referenced the SARS (also a coronavirus) epidemic. Obviously, then, since at least that time purchasers of insurance, and agents, were on notice of such risks — which include damage and loss caused by COVID-19 — and the fact that they are not covered under the bargained-for terms and conditions of the insurance coverage.

The New Jersey bill seeks to wipe all of this out. The bill would apply to insureds with fewer than 100 eligible employees in New Jersey. (It defines “eligible” as “full-time employees who work more than 25 hours or more in a normal workweek.”) It is unclear whether the new bill would eliminate the requirement that there be direct physical loss of damage to covered property, or on an arguably more limited basis, void application of the 2006 Virus exclusion. The New Jersey bill is up for discussion on the floor of the Assembly today, March 16, 2020.

In New York, the Department of Financial Services ordered all authorized Property/Casualty Insurers to provide them with details on business interruption coverage for all business owner policies, commercial multiple peril policies, and specialized multiple peril policies. The letter instructed insurers that DFS considered their obligations to policyholders under business interruption policies a “heightened priority.” The letter demanded that every insurer provide DFS with its volume of business interruption coverage, civil authority coverage, contingent business interruption coverage, and supply chain coverage, including direct premium amounts, policy types, and numbers of each type of policy written. Each insurer is additionally instructed to prepare information regarding COVID-19 coverage not only as of today but “as the situation could develop to change the policyholders’ status.” Insurers were instructed to consider whether there was any potential for COVID-19 coverage.

It is notable that these steps are being taken in two states with major industries (including all shipping through the East Coast’s largest port) that have already suffered COVID-19 losses from the shutdowns in China, Asia, and now Europe. They have filed claims for those losses under some of these policies and have been denied. Policyholders have been marshaling their own resources and lobbying organizations to push to transfer their business risks, including having their losses paid for by insurance companies for reasons other than an arm’s-length, bargained-for agreement in place that would obligate the insurers to do so in exchange for a policy premium tied to the risk of loss being transferred.

Other states impacted by the COVID-19 outbreak, especially California and Washington, are also likely to try to spread the costs of the COVID-19 business losses to other businesses and entities who did not cause the loss and who did not contract to, were not paid to, did not expect to, and are not obligated to take on such risks.

In addition, FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

COVID-19: What Medical Inquiries Can Employers Make?

Posted on: March 16th, 2020

By: Jennifer Markowski

Last week, Brad Adler, addressed FAQ’s (and Answers) for Employers Dealing with the Coronavirus, COVID-19. Subsequent to that article, on March 11, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic. Consequently, employers should follow the Equal Employment Opportunity Commission’s (“EEOC”) pandemic guidance “Pandemic Preparedness in the Workplace and the ADA,” which details what medical inquiries and testing are permissible in the workplace in light of the existing pandemic.

The Americans with Disabilities Act (“ADA”) prohibits employers from making disability-related inquiries and/or requiring employees to submit to medical examinations unless they are job-related and consistent with business necessity.  Now that COVID-19 has been declared a pandemic, according to the EEOC guidance, employers can do the following without running afoul of the ADA:

  • Send employees home who are exhibiting COVID-19 symptoms;
  • Ask employees who call-in sick whether they are experiencing fever or chills and a cough or sore throat (symptoms of COVID-19);
  • Measure employee temperatures, if COVID-19 is widespread in the community as defined by state or local health ordinances or the CDC;
  • Ask where employees have traveled;
  • Ask why employees have not reported to work (this is always permissible);
  • Implement measures to prevent infection, such as wearing masks or requiring teleworking.

As always, information obtained about an employee’s medical illness must be kept confidential and separate from the employee’s personnel file and can only be shared with individuals on a need to know basis.  Additionally, if an employee receives ADA accommodations in the workplace and is then required to telework, those same accommodations should be provided for in the telework space, unless doing so would create an undue hardship.

The Occupational Safety and Health Organization (“OSHA”) has also issued guidance for pandemic preparedness. Those guidelines are accessible here.

In addition, FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

House Passes Coronavirus Bill with Major Implications for Employers

Posted on: March 15th, 2020

By: Jeffrey A. Hord and David A. Cole,

Shortly past midnight on Saturday morning, the House of Representatives passed the Families First Coronavirus Response Act (the “Act”) on a bipartisan 363-40 vote, bringing the nation one step closer to implementing a sweeping financial aid package designed to address the Coronavirus outbreak. A copy of the entire bill, as amended, is available here.

The legislation comes on the heels of last week’s bipartisan emergency Coronavirus response initiative providing $8.3 billion in research and vaccine development funds. The bill will now head to the Senate for final approval, where it is expected to pass in substantially similar form due to President Trump’s vocal support for the legislation.

In addition to guaranteeing free Coronavirus testing by requiring private health insurers — and government programs such as Medicaid — to cover the cost of tests and doctor visits, while strengthening food security initiatives like TEFAP, SNAP and WIC, the Act also includes several employment-related provisions that are likely to have major implications for employers.

Amendments To The Family And Medical Leave Act:

If enacted into law, the Act would create a new type of leave under the Family and Medical Leave Act (“FMLA”) allowing for leave in cases of a “public health emergency.”

Answers to questions about the key parts of this potential change to the FMLA are below:

  • When Does Law Go Into Effect – If passed, it would stay in effect until December 31, 2020 (unless renewed by Congress).
  • When Is Leave Allowed – From now until the end of 2020, the Act would allow eligible employees to take FMLA leave to: (a) comply with a recommendation or order by a health care provider or public official to not attend work because of exposure to or symptoms exhibiting Coronavirus; (b) care for a family member being quarantined because of exposure to or symptoms exhibiting Coronavirus; or (c) care for a son or daughter whose school or place of care has been closed due to Coronavirus.
  • Which Employers Are Covered – While traditional FMLA leave requirements only apply to employers with 50 or more employees, the new FMLA leave for Coronavirus would apply to all employers with fewer than 500 employees. However, the Act does give the U.S. Department of Labor authority to issue regulations for good cause that could exempt small businesses with fewer than 50 employees if imposing the new requirements would “jeopardize the viability of the business as a going concern.” As of right now, we are unaware of the Department of Labor working on such regulations.
  • Which Employees Are Eligible – While traditional FMLA leave is only available to employees who have worked for 12 months and for 1,250 hours in the immediate preceding 12 months prior to taking the leave, the new FMLA leave for Coronavirus would apply to any employee (full or part-time) who has been employed for at least 30 calendar days.
  • Does The Employer Have To Pay The Employee While Out On Leave – The first 14 days of FMLA leave for Coronavirus may be unpaid. An employee may choose to substitute available paid leave during those 14 days, but the employer may not require it. After 14 days, the employer must provide paid leave for the remainder of the FMLA leave for Coronavirus in an amount that is no less than two-thirds of the employee’s regular rate of pay for the number of hours the employee would otherwise normally be scheduled to work.
  • What Is The Definition Of Family Member – an individual who is: (i) a pregnant woman, senior citizen, individual with a disability, or has access or functional needs; and (ii) who is a son or daughter of the employee, a next of kin of the employee or a person for whom the employee is next of kin; or a grandparent or grandchild of the employee.
  • Is The Employee Guaranteed The Employee’s Position Upon Return – Just like traditional FMLA leave, the employee is entitled to his/her job position upon return from this leave, except employees with less than 25 employees may be exempted if the employee’s position does not exist anymore because of the public health emergency.
Emergency Paid Sick Leave Act

The Act would also require any government or public agency with 1 or more employees and any private employer with fewer than 500 employees to give their employees paid sick leave for the following reasons: (a) to self-isolate because a diagnosis with Coronavirus; (b) to obtain medical diagnosis or care if experiencing symptoms of Coronavirus; (c) to comply with a recommendation or order by a public health official to not report to work because of a diagnosis of Coronavirus or symptoms exhibiting Coronavirus; (d) to care for a family member with Coronavirus or symptoms exhibiting Coronavirus; and (e) to care for a child whose school or place of care is closed due to Coronavirus.

  • When Does Law Go Into Effect – If passed, it would stay in effect until December 31, 2020 (unless renewed by Congress).
  • Which Employees Are Eligible – Emergency paid sick leave under the Act must be available to all employees for immediate use regardless of how long they have been employed.
  • How Much Paid Sick Leave Does An Employee Receive – Full-time employees must be given up to 80 hours of paid sick leave and part-time employees must receive a number of hours equal to the average hours they work over a 2-week period.
  • How Much Is The Employee Paid While Out – Employees who take leave to self-quarantine or to seek diagnosis or care must be paid at their regular rate. Employees who use the leave to care for an afflicted family member or to care for a child whose school has closed must be paid at two-thirds their regular rate.
  • What If An Employer Already Provides Paid Sick Leave – Employers with existing paid leave policies must provide this emergency paid sick leave in addition to the existing paid leave, and they may not change existing policies after the date of the Act to avoid these requirements.
  • Can An Employer Require Substitution Of This Leave For The New Paid FMLA Leave – An employee may use this emergency sick leave to cover the first 14 days of unpaid FMLA leave for Coronavirus (see above). However, an employer may not require an employee to use other paid leave before using this emergency sick leave.
Reimbursement for Employers:

The Act provides tax credits to reimburse employers for the costs of the paid FMLA leave and emergency sick leave discussed above. Specifically, the Act creates both: (1) a payroll credit for paid sick leave, and (2) a payroll credit for required family leave, allowed against the employer’s portion of Social Security taxes.

  • For paid emergency sick leave, the amount of the credit, on a per-employee basis, is limited to $511/day for employees that self-isolate, have Coronavirus symptoms, or are ordered to stay home; otherwise, the credit is capped at $200 per day. There is effectively a two-week cap on this credit, after which the new FMLA tax credit would kick in.
  • The amount of the FMLA leave credit, on a per-employee basis, is limited to $200/day and $10,000 total for all calendar quarters. These tax credits would cover one year, and could not be used in combination with the existing credit(s) for employers that provide paid family and medical leave to their employees.
State Unemployment Insurance:
  • The Act would also direct $2 billion to state unemployment insurance programs as emergency grants for processing and paying unemployment insurance (UI) benefits, and to provide immediate funding for staffing, technology, systems, and other administrative costs of state unemployment agencies.
  • Standard screening measures, such as “job seeker” requirements and mandatory waiting periods, would be waived for anyone applying for UI benefits who has either been diagnosed with COVID-19 or who has lost their job due to the spread of the virus.
  • The Act provides for full federal funding of extended unemployment compensation for any state that experiences and increase of ten percent (10%) or more in its unemployment rate over the previous year.
Additional Information
An earlier version of the bill (which can still be viewed here) included a permanent paid leave program that House Democrats said would help deter infected workers from returning to work too quickly and spreading the illness unintentionally. That feature (among others) was ultimately removed from the version that passed early Saturday morning; the amended H.R. 6201 is a more limited, temporary response to the specific public health emergency created by the coronavirus.

Even so, the bill’s protections are a major change in U.S. policy, particularly with respect to paid sick leave. It will be interesting to see whether the Act passes the Senate in its current form and, if so, whether it will be replaced by more permanent legislation for mandatory paid sick leave once it expires on December 31, 2020.

The FMG Employment team will be conducting a webinar on coronavirus issues on Tuesday, March 17, at 12:00 noon EST. To register, please click here.

In addition, FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

Predicting the Sources of Claims arising from Coronavirus and COVID-19

Posted on: March 13th, 2020

By: Erin Lamb

The worldwide spread of COVID-19 is creating financial difficulties for individuals and businesses affected by illness and cancellations. Based on the evolving data, predictions are being made about the sources of claims under various insurance coverages.

The disease caused by the virus disproportionately kills people over 70-80 years old. In China, the estimated fatality rate for people over 80 is roughly 21.9%. The virus seems to spread relatively easily, and people can be asymptomatic for 5-14 days, during which time the affected person is a carrier of the virus itself.

These numbers seem to indicate nursing homes, assisted living facilities, and rehabilitation centers are at high risk of fatalities and at increased risk of infections. Workers’ compensation claims from nurses, doctors, health aides, and the myriad non-health care related workers at such facilities are expected to rise. Patients, families, contract employees, and other third parties may complain about inadequate warnings and failure to prevent the spread of infection.

Some commercial liability policies exclude coverage for damages arising from bodily injury caused by exposure to viruses, bacteria, or pollutants. The parties will need to determine when and where the infections occurred, how they were transmitted, and whether transmission was in the course and scope of employment as the virus moves outside healthcare facilities and into the community.

Health care facilities and other large communities of people, such as schools, universities, and houses of worship, where a coronavirus patient will be discovered to have traveled are going to require disinfection and cleaning. Not every policy provides coverage for such measures relating to COVID-19, and those that do may have terms and conditions such as written notification to both the insurance company and the local department of public health, high deductibles, or sublimits.

Businesses that do not encounter infected people will also be reviewing their insurance coverage. Some travel cancellation and travel interruption insurance policies do not cover cancellations of travel due to a disinclination to travel due to fear or concern about traveling to a place with an outbreak. Event cancellation and business interruption coverages also may contain exclusions.

Most people and entities will be checking to see whether and, if so, the extent to which they have successfully transferred their risk of loss due to the worldwide effects of COVID-19. It is important to understand the facts as well as the terms and conditions of each insurance policy that may apply.

If you have questions or would like more information, please contact Erin Lamb at [email protected].

FAQ’s (and Answers) For Employers Dealing With The Coronavirus (Updated March 11, 2020)

Posted on: March 11th, 2020

By: Brad Adler

As I’m sure many of you have heard or read, a new virus (COVID-19 aka “Coronavirus”) first found in Wuhan, China in late 2019 has been spreading across the world and is now emerging in the United States on an increasing scale.  As employment issues surrounding the Coronavirus continue to arise, below are some answers to commonly-asked questions that employers may be asking in addressing Coronavirus-related issues.

In addition, employers should read and be familiar with the Guidance the CDC issued for employers in handling Coronavirus-related issues.  https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

What Is It?

Based on what health officials know right now, the Coronavirus is not a flu, but a pneumonia-like infection.  The virus symptoms manifest as a mild to severe respiratory illness with fever, cough, and difficulty breathing. The Centers for Disease Control (CDC) believes at this time that symptoms may appear in as few as two days or as long as 14 days after exposure.

How Does It Spread? 

The disease can spread from person to person through small droplets from the nose or mouth, which are spread when a person with the Coronavirus coughs or exhales. These droplets also then land on surfaces around the person and others can catch the Coronavirus when they touch these same surfaces, particularly if they then touch their mouth, nose or eyes.

What If An Employee Tests Positive For The Coronavirus?

Ask the employee to stay out of work until 14 days after the employee was diagnosed with the Coronavirus, unless a doctor certifies that it is safe for the employee to return to work earlier.  Further, you should promptly notify colleagues who work with that employee that they may have been exposed to a person with the Coronavirus and request that they visit their doctor to confirm that they did not contract the virus.  In the absence of a confirmed diagnosis of an employee, we suggest that you do not issue a blanket instruction that all employees have to get tested as such a directive could run afoul of the Americans with Disabilities Act’s general prohibition against medical examinations for employees unless “job-related and consistent with business necessity.”

Further, employers should ensure the confidentiality of all employees’ medical information to prevent harassment or a violation of the ADA’s medical privacy rules.  If an employer believes it is necessary for the safety of other employees to identify a confirmed Coronavirus victim to others in the workplace so the employer can determine who may have been exposed to that individual, it is important to first discuss the issue with employment counsel (and possibly governmental officials) due to the privacy implications, both under the ADA and state law.

What Should An Employer Do If An Employee’s Household Member Tests Positive For The Coronavirus Symptoms?

We believe it is appropriate to ask employees to notify your designated Coronavirus-response person (typically someone in Human Resources) if a member of an employee’s household is diagnosed with Coronavirus.  Once notified, the employer should request the employee stay out of work until the employee visits his/her doctor to confirm that the employee did not contract the virus or they also can self-quarantine themselves for 14 days.

What Should An Employer Do If An Employee Presents Coronavirus Symptoms, But Is Not Confirmed With The Coronavirus?

If you have an employee who presents Coronavirus symptoms at work (but not yet diagnosed with the Coronavirus), we suggest that you send the employee home and request that they get tested and cleared from having the Coronavirus before returning to work or they also can self-quarantine themselves for 14 days.  If the employee exhibits the symptoms at home, ask them to stay out of work until they get tested and cleared from having the Coronavirus or they also can self-quarantine themselves for 14 days.  It is important that your Human Resources representative is involved in these situations so you can navigate any unique issues.

Further, you should try and determine who the employee interacted in close proximity with at work (typically six feet or less) in the previous 14 days, including by asking the employee for help in identifying those individuals.   After those individuals are identified, you should notify them of their potential exposure to an individual with the Coronavirus.

Employers, however, should avoid identifying the infected employee to other employees (or customers or vendors) to prevent harassment or a violation of the ADA’s medical privacy rules.  If an employer believes it is absolutely necessary for the safety of other employees (or customers or vendors) to identify a confirmed Coronavirus victim to others in the workplace (or customers or vendors) so the employer can determine who may have been exposed to that individual, it is important to first discuss the issue with employment counsel (and possibly governmental officials) due to the privacy implications, both under the ADA and state law.

What Should An Employer Do If An Employee Reports That He/She Interacted With Somebody Who Has Been Diagnosed With The Coronavirus?

Once notified, the employer should request the employee stay out of work until the employee visits his/her doctor to confirm that the employee did not contract the virus or they also can self-quarantine themselves for 14 days.  Further, you should try and determine who the employee interacted in close proximity with at work (typically six feet or less) in the previous 14 days, including by asking the employee for help in identifying those individuals.   After those individuals are identified, you should notify them of their potential exposure to an individual with the Coronavirus.

Employers, however, should avoid identifying the infected employee to other employees (or customers or vendors) to prevent harassment or a violation of the ADA’s medical privacy rules.  If an employer believes it is absolutely necessary for the safety of other employees (or customers or vendors) to identify a confirmed Coronavirus victim to others in the workplace (or customers or vendors) so the employer can determine who may have been exposed to that individual, it is important to first discuss the issue with employment counsel (and possibly governmental officials) due to the privacy implications, both under the ADA and state law.

What Should An Employer Do If An Employee (Or An Employee’s Household Member) Returns From An International Trip, But Has Not Exhibited Any Coronavirus Symptoms

This is tricky so you have to make sure you are watchful in dealing with this type of situation.  As of March 3, 2020, the State Department has advised travelers to avoid all non-essential travel to China, Italy, South Korea, Azerbaijan, Mongolia, Turkmenistan and Iran https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories.html/.  The CDC also has advised identified Japan (Level 2) and Hong Kong (Level 1) as areas of heightened risk for the coronavirus.  https://www.cdc.gov/coronavirus/2019-ncov/travelers/index.html.

As a result, if an employee does travel internationally to China, Italy, South Korea, Azerbaijan, Mongolia, Turkmenistan and Iran, even if they present no symptoms, it is advisable to require that employee to either wait 14 days or visit their doctor to confirm that they did not contract the virus before returning to the workplace.  If an employee travels to Japan or Hong Kong, but exhibits no symptoms, you can require the employee to wait 14 days before returning to the workplace, but you should typically avoid requiring an employee to present any type of clearance from a doctor.  If an employee travels internationally to a location that is not on the CDC or the State Department’s coronavirus travel advisory list and exhibits no symptoms, then we do not advise imposing any type of return to work condition.

Do I Have To Pay The Employee While Out Of Work?

Under the Fair Labor Standards Act (federal wage/hour law), you do not have to pay non-exempt hourly employees while they are out sick.  If, however, they perform work while at home, you must pay them for those hours (so it is critical that the employees keep a record of their hours worked).  If a non-exempt hourly employee wants to use PTO while the employee is out sick and not being paid, that is permissible.  For exempt employees, unless they are out for an entire workweek, you should pay them their normal salary for the workweek in which they miss time because of your “stay out of work” instruction.  Of course, many states and some cities and counties have their own wage and hour, leave and paid time off laws that you will need to consider when assessing how you handle Coronavirus-related absences.

Can I Restrict Employees From Traveling Internationally?

If the travel is work-related, then an employer can ban an employee from traveling internationally.  If the travel is not work-related, then you typically will be permitted to restrict travel to international destinations, but it is prudent to limit the travel to areas designated as at least a heightened-risk of coronavirus by the White House, CDC or the World Health Organization as several states have laws that prohibit an employer from taking action against an employee for “lawful off-duty” activities.  These types of restrictions could prove important both to protect employees from exposure to the Coronavirus and to limit the risk of travelers becoming stranded by travel limitations or quarantines overseas.

How Do I Avoid National Origin Discrimination?

This one is pretty simple.  Don’t make judgments on how to treat an employee based upon the national origin (or race) of the employee.  Rather, your decisions should be based upon reasonably objective information that you have received from both the employee and the U.S. Government (or World Health Organization) on where the employee is going and whether he has interacted with an individual diagnosed with the virus.  Remember that an employer may deny time off for an employee’s personal travel, but it should be based on the employee’s travel destination, the business cost of any potential resulting quarantine, or other legitimate business-driven interest.

What If An Employee Wants To Wear A Respirator Or Mask At Work Or Requests Not To Come To Work?

At this time, there is no general requirement for non-healthcare employees to wear respirators or other types of personal protective equipment and the CDC is not recommending use of facemasks or any other protective equipment by the general public.  As a result, employers have a wide amount of discretion to determine whether to allow the use of a respirator or a facemask.  For any employee who requests to not come to work out of fear of being around others and contracting the virus, unless that employee has a reasonable objective belief that someone at the workplace has the virus, you can deny the request.  If an employee still refuses to come in, you are permitted to discipline the employee.  If the employee is exempt, you also likely can choose not to pay them for the all-day absence.  Of course, if the employee is non-exempt, you don’t need to pay the employee for any hours unless the employee is working.

What Can We Do To Help Reduce Potential Exposure To The Coronavirus?

Providing employees with a written reminder about effective steps for reducing the risk of exposure to Coronavirus is a great way to let employees know you are paying attention to the issue and looking out for their safety.  A few things to include:

  • Remind employees to cover their mouths and noses when they cough or sneeze, and to immediately throw used tissues in the garbage.
  • Remind employees of the importance of regularly washing their hands (for at least 20 seconds with soap and water) and/or using an alcohol-based hand sanitizer containing at least 60 percent alcohol.
  • Avoiding touching your eyes, nose, and mouth with unwashed hands.
  • Avoiding close contact with people who are sick.
  • Ensure you have enough relevant supplies, including soap, hand sanitizer, tissues, paper towels, disinfectant, and trash receptacles.
  • Encourage the regular cleaning of frequently-touched surfaces in the workplace, such as workstations, countertops, and doorknobs.
  • Practice social distancing
  • Consider the use of tele-conferencing options instead of in-person meetings
  • Consider the feasibility of implementing a remote work policy

We know this is a new area for many employers so, if you have questions or need a sample “notice” to employees or a remote work policy, please do not hesitate to contact Brad Adler ([email protected]) or 770.818.1413.

Congress makes PPP forgiveness easier to obtain in passing the PPP Flexibility Act

Posted on: June 5th, 2020

By: Justin Boron

You just got a reprieve on your forgiveness.

In passing an amendment to the Paycheck Protection Program on Wednesday evening, Congress—among other changes it made to the PPP—extended the period to spend forgivable loan money from eight weeks to 24 weeks. 

The PPP Flexibility Act—which passed by unanimous consent in the Senate and 417-1 in the House—became law upon the president’s signature Friday and aims to resolve several of the problems that have emerged during the PPP’s implementation through the SBA and private lenders. 

In addition to the extension of time to spend the PPP loan proceeds, the PPP Flexibility Act makes several other changes that will give borrowers more flexibility to ensure 100 percent forgiveness of their PPP loans:

  • Reducing the amount of payroll costs required from 75 percent to 60 percent.  This will allow borrowers to spend more on forgivable, non-payroll costs, i.e. certain payments on rent, utilities, and mortgage interest.  However, a question remains about the consequences of failing to meet the 60 percent threshold:  Is forgiveness reduced proportionally or is it an “all-or-nothing” requirement? Based on floor speeches for the bill, we expect the SBA to issue guidance allowing for a sliding scale on forgiveness.
  • Extending the period of time to restore workforce and wage levels.  This will give employers more time to re-constitute their workforces without sustaining a reduction in forgiveness.
  • Formalizing exceptions to reductions in forgiveness.  The SBA’s guidance allowed borrowers to avoid reductions for employees who turned down good faith written offers to be re-hired or recalled.  Additionally, the bill allows borrowers to avoid forgiveness if they could not find qualified employees or were unable to restore business operations due to COVID-19 related operating restrictions.
  • Increase the payback period from 2 to 5 years.  The SBA set the maturity date on the loans for two years.  Congress elevated the minimum to five years, so PPP lenders will have to adjust the maturity date on the notes for PPP loans accordingly.  That means any unforgiven loan amount could be repaid over five years.  The interest rate remains at 1%.
  • Extending payroll tax deferral to PPP borrowers.  PPP borrowers were excluded from the payroll tax deferral under the original CARES Act legislation, but the new bill affords them that option as well.  That means PPP borrowers may also defer certain payroll taxes—i.e. the employer portion of the social security tax—from March 27, 2020 through December 31, 2020.  Fifty percent of the deferred tax would be due by December 31, 2021, and the remainder would be due by December 31, 2022.

If you have questions or would like more information, please contact Justin Boron at [email protected].

Is Rioting a Covered Cause of Loss?

Posted on: June 4th, 2020

By: Shawn Bingham

Over the past couple weeks, our screens have displayed images of anguish and anger in reaction to the tragedy in Minneapolis and the related spectrum of issues.  Some of these images show extensive damage to business property, raising concerns whether the businesses can afford to continue operating.  Various curfews and other government orders are also affecting businesses.  Some estimates anticipate property damage and business losses in the billions of dollars.  How might commercial property insurance respond to the expected flood of claims?

Most such policies cover “direct physical loss of or damage to Covered Property” at the insured premises “caused by or resulting from any Covered Cause of Loss.”  The covered causes of loss are set forth in a special “Causes of Loss” coverage form, which may provide coverage for “all risks” or name covered perils.  Even where a policy does not cover all risks, damages resulting from riot, civil commotion, or vandalism are often named perils.  But if the damage is carried out by employees or agents of the insured, it may be excluded as a “dishonest or criminal act” done by the insured.    

In addition to property damage, commercial property policies also insure against the loss of business income.  The typical form covers suspension of operations that results from “direct physical loss of or damage to” the insured property from a “Covered Cause of Loss.”  If a store window is broken during a riot and the inventory is looted, causing the store to cease operations temporarily, the resulting loss of income may be covered. 

What if a business has not sustained damage to its property, but lost income because it shut down in compliance with local government orders, such as curfews?  Such losses would not be covered under the typical policy because they do not result from direct physical loss of or damage to property.  In addition, most policies exclude loss or damage caused by compliance with a governmental “ordinance or law” that regulates the “use” of the property, which might apply to a curfew mandate.  

Under the circumstances, business owners and insurers should review the property policy’s civil authority coverage. Commercial property policies may cover business income losses that result when a civil authority prohibits access to insured premises because of damage to neighboring property that does not belong to the insured. 

This coverage is specific to the affected business and would not apply to a general curfew that affects all businesses within a municipality, or to business interruption claims where the government has blocked access to the property simply as a crowd control measure.  For example, in Syufy Enters. v. Home Ins. Co., 1995 U.S. Dist. LEXIS 3771 at *5, 1995 WL 129229 (1995), a theater chain sued its insurer under a business interruption policy for income lost due to compliance with a dusk-to-dawn curfew imposed by the cities of Los Angeles, San Francisco, and Las Vegas following the Rodney King protests.  The theater chain argued that the losses should be covered under the “civil authorities” provision of the policy because the cities had prohibited access to the theaters.  The court rejected these arguments and found no coverage because the civil authorities had merely imposed a general curfew.  They had not specifically blocked access to the business because of damage to adjacent properties. 

One of the key requirements to establish that a property insurance policy covers damage or loss is damage to property.  Physical loss or damage caused by, for example, “rioting,” would likely be covered, but business losses that result only from a general environment created by the protests, or generally applicable government action to manage the protests, are unlikely to be covered. 

In areas where the National Guard was called up, or where President Trump actually deploys military forces, policyholders and insurers (and courts) may be analyzing policy language that excludes:

  • war, including undeclared or civil war,
  • warlike action by a military force . . . by any government, sovereign or other authority, or
  • insurrection, rebellion, revolution, usurped power, or action taken by government authority in hindering or defending against any of these. 

Even where a loss is covered, other policy provisions, such as deductibles, waiting periods, and conditions, will affect the availability and extent of coverage for the loss.  For example, urban small businesses have been among the hardest hit in the recent protests.  These businesses often carry higher deductibles for property damage and longer waiting periods for business interruption coverage and are usually less able to sustain these costs than large chain retailers.    

Likewise, all insurance policies have numerous conditions to coverage.  For instance, commercial property policies may have a “Protective Safeguards” endorsement that requires the insured to maintain protective devices, such as sprinkler systems, security systems, and fire alarms.  Where a policy has such an endorsement, failure to install and properly maintain such systems is typically a condition precedent to coverage.  Thus, where a policy requires functioning safeguards, coverage for damages resulting from civil disturbance, such as property damage, vandalism, or looting might depend on whether the business met these requirements. 

If you have questions or would like more information, please contact Shawn Bingham at [email protected].

Spring Cleaning: Department Of Labor Scraps Confusing Categorizations Regarding Retail And Service Establishments

Posted on: June 4th, 2020

By: Michael Hill

As part of an ongoing effort to clarify the laws governing how employers may pay their employees, the U.S. Department of Labor (DOL) removed some outdated and confusing rules it had introduced in the 1960s and 1970s.

The law at issue is known as the “retail-sales exemption” to the Fair Labor Standards Act (FLSA). Generally, the FLSA requires employers to pay their employees time and a half for hours worked over 40 in a week. Retail and service establishments, however, may take advantage of an exemption to this rule if (1) more than half of its employee’s compensation represents commissions, and (2) the employee’s regular rate of pay is 1½ times the federal minimum wage.

But what exactly counts as a “retail or service establishment”? The DOL long has required such a business to have a “retail concept,” meaning it typically “sells goods or services to the general public,” “serves the everyday needs of the community,” “is at the very end of the stream of distribution,” disposes its products and skills “in small quantities,” and “does not take part in the manufacturing process.”

While the foregoing descriptions may sound straightforward enough, the DOL in the 1960s and 1970s introduced lists of hundreds of types of businesses that, in its view, either lacked a “retail concept” or “may be recognized as retail” (but also may not be). The “not retail” list included businesses such as dry cleaners, tax preparers, laundries, roofing companies, travel agencies, blue-printing establishments, and telegraph companies; while the “may be retail” list included coal yards, fur repair and storage shops, household refrigerator service and repair shops, massage establishments, piano-tuning establishments, and taxidermists. These lists came with little to no explanation for why any establishment was categorized as it was.

These lists now are gone. Current DOL leadership has recognized that these lists, while perhaps initially intended to offer clarification, only served to confuse people. (For example, why is a dry cleaner not retail, but a coal yard “may be” retail? Does a taxidermist “serve the everyday needs of the community” more so than a laundry?)

Going forward, businesses seeking to invoke the retail-sales exemption still have to assess whether they satisfy the “retail concept,” but they no longer will have to check whether they fall on either of the former “not retail” or “may be retail” lists.

If you have questions or would like more information, please contact Michael Hill at [email protected].

Texas Supreme Court Finds an Exception to the “Eight-Corners Rule”

Posted on: June 4th, 2020

By: Kristin Ingulsrud

In Texas, an insurer’s duty to defend is governed by the “eight-corners rule.”  Application of the eight-corners rule takes the allegations of the claim at face value, without regard to the truth or falsity of the allegations, and it necessarily excludes consideration of extrinsic evidence.

On May 1, 2020, the Texas Supreme Court found a rare exception to the eight-corners rule in Loya Ins. Co. v. Avalos, 2020 Tex. LEXIS 373 (2020). 

Loya addressed whether an insurer owed a duty to defend its insured in an automobile coverage suit.  The decision in Loya was issued less than two months after Richards v. State Farm Lloyds, 63 Tex. Sup. J. 614, 2020 Tex. LEXIS 236 (2020).  In Richards, the Texas Supreme Court rejected an insurer’s argument that, because the policy lacked a “groundless claims” provision, the eight-corners rule does not apply.

In Loya, the automobile policy expressly excluded the insured’s husband from the liability coverage.  At the time of the accident, the husband was driving, and he injured third parties.  In order to secure coverage, the parties agreed to tell the insurer and the police that the insured had been driving.  The claimant named only the insured, and not the husband, as defendant in the lawsuit.  When the insurer discovered the misrepresentation, it withdrew defense and denied coverage.  The third parties obtained a judgment against the insured, and the insured assigned her rights against her insurer to the third parties.

The third parties sued the insurer for breach of contract and breach of the implied covenant of good faith and fair dealing.  The trial court granted summary judgment for the insurer, based on the insurer’s introduction of evidence of the misrepresentation by the insured, her husband, and the underlying plaintiff.  The third parties appealed, arguing that the summary judgment violated the eight-corners rule and that notwithstanding the evidence of fraud, the insurer owed the insured a defense.  The appellate court reversed the summary judgment, and one justice, in his concurrence, urged the Texas Supreme Court to adopt the trial court’s narrow exception to the eight-corners rule.

The Texas Supreme Court reversed the appellate court and reinstated the trial court’s summary judgment, finding an exception to the eight-corners rule to admit extrinsic evidence for the limited purpose of showing collusion between the insured and a third party to commit fraud.  Under this exception, courts can consider extrinsic evidence regarding collusive fraud by the insured in determining the insured’s duty to defend.  The Court noted that the duty to defend extends to fraudulent allegations by third parties, and not to fraud committed by the insured.  The Court also noted that insurers need not seek declaratory relief before withdrawing coverage, because remedies are available to insureds who wish to challenge coverage decisions. 

If you have any questions or would like more information, please contact Kristin Ingulsrud at [email protected].