Reopening Economy Requires Liability Shield For Businesses

By Samuel Olens
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Law360 (May 12, 2020, 7:49 PM EDT) --
Samuel Olens
Samuel Olens
The near-total closure of brick-and-mortar businesses across the country has caused America's historic bull market to contract 4.8% in the first quarter, the first dip in nearly six years. Unemployment stands at 14.7%.

At the same time, the nation's coronavirus death toll has soared above 80,000, the highest of anywhere in the world.

These dueling statistics, the latest in a series of grim economic and public health indicators, highlight the urgent tension between reopening a halted economy and preventing further spread of a lethal disease — a grisly sort of calculus that asks policymakers to balance life and death with shuttered storefronts and empty fridges.

With the second-round tranche of emergency government loans used just as quickly as they became available, it's clear that many businesses won't have the capital to survive this. For many of those lucky enough to make it to the other side, the result will be the same: continued closure amid anxiety over pandemic legal liability.

Many are eager to see businesses reopen, but none are more excited than trial lawyers, who see this once-in-a-century pathogen as a once-in-a-century paycheck. That's why lifting the prohibitions on economic activity alone isn't enough to turn the lights back on on Main Street.

For many struggling businesses, the risk of substantial litigation from employees or customers who allege liability in their contraction of the coronavirus is just too great.

Symptom checks and infrared thermometers can't assure small and medium-sized businesses that pandemic-related lawsuits won't break their backs — or banks. Only the law can.

A handful of crucial liability limits have been adopted already through state executive action and the recent Coronavirus Aid, Relief and Economic Security, or CARES, Act, but these have primarily been limited in scope to health care. To be sure, those assurances were productive guardrails for an essential industry, but not sufficient to give whole-of-economy guarantees that it's safe to resume operations.

Instead, a safe and considered reopening of the economy will require shielding all businesses from frivolous litigation.

Safe harbor legislation that adopts a standard of willful misconduct or gross negligence will give needed confidence to the marketplace amid historic uncertainty. Without it, no amount of encouragement to reopen will get the country back to work.

Revenue-hungry states, too, will likely need to adopt compromise standards of liability to stimulate economic activity lest schools and roads suffer for a generation.

This carveout wouldn't drape businesses in total and perpetual immunity but would define narrow conditions, such as those created by a pandemic and its fallout, where limited liability shields would apply. That's not greedy. It's just common sense, and it's urgent.

The economy has already taken a nosedive deeper than at any point since the financial crisis, but this contraction is far from over.

Reopening the economy, even cautiously, will demand trade-offs: Some people will be exposed to the virus as stay-at-home orders are lifted. That's just the nature of this pathogen.

The Senate Judiciary Committee met on May 12 to consider responsibly limiting liability for the business community. Twenty-one Republican state attorneys general have similarly encouraged Congress to enact COVID-19 liability protections. Past examples of such legislation include the SAFETY Act of 2002, which limited liability for companies providing anti-terrorism technologies, and the Public Readiness and Emergency Preparedness, or PREP, Act.

Similar action has been initiated in state legislatures wanting to provide the business community with protection against such litigation.

But while all life is precious, no single life — not yours, not mine — is worth permanently upending the national economy, destroying millions of small businesses, or displacing tens of millions of workers from payrolls.

In good times and bad, small business has always been the engine of America's economic vitality. But the new economy and the many risks it entails will require Congress and state legislatures to act thoughtfully if that ignition is ever going to turn over again.

Samuel S. Olens is counsel at Dentons and the former attorney general of Georgia.

The opinions expressed herein are those of the author and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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