Inoculating Businesses Against Liability: What Works for Arizona?

By Sean Krieg.

Businesses’ liability protection from corona virus related claims has been a major point of contention in federal stimulus package debates. Firms point out—rightly so—that many small- and mid-sized businesses cannot afford to weather a large influx of claims during a pandemic-battered economy. Spurred to action by federal gridlock, at least sixteen states have enacted some form of COVID liability shield

House Bill 2912 sought to do the same for Arizona. Approved in the House of Representatives, the bill died in the Senate during the 2020 legislative session. Even so, with the pandemic still raging and Governor Ducey supporting the issue in his recent State of the State Address, the bill may well be revived. However, despite the superficial appeal, Arizonans have little to gain from limiting the right to recover damages for COVID-related injuries—and much to lose. 

The State of our Neighbor States

Most state-level liability protections share two features. First, they generally do not apply to willful, reckless, intentional, or grossly negligent misconduct. Second, they do not interfere with an employee’s ability to file a worker’s compensation claim related to COVID exposure. Two of Arizona’s neighboring states have enacted these protections legislatively: Nevada, and Utah. They differ slightly on how they propose to reduce liability.

Nevada’s liability shield, signed into law in August of 2020, requires plaintiffs to establish that businesses were not in “substantial compliance” with health standards before the case can proceed to trial, unless they plead gross negligence with particularity. Interestingly, schools and hospitals, arguably some of the most important enterprises to shield from COVID liability, are specifically excluded from protection.

Utah focuses on premises liability in their liability shield. Since May of 2020, owners and operators have enjoyed immunity from civil liability for any damages or injury resulting from COVID exposure on their premises, unless the owner or operator acted recklessly, willfully, or intentionally.

Is a Liability Shield Right for Arizona?

National consumer advocacy groups argue immunizing businesses from liability is unnecessary. Employee suits are often precluded by workers’ compensation laws, and patrons’ negligence claims face a dual barrier of causation and assumption of risk. Patrons would have to demonstrate that a particular business was more likely than not the source of their infection. A long incubation period coupled with community spread makes this difficult to establish. Further, if business practices are so obviously risky that they are the likely cause of infection, the plaintiff’s choice to patronize the business despite these obvious risks will drastically reduce any recovery available.

Of course, there are circumstances where these dual barriers will not apply. For example: nursing home residents who are exposed solely to professional caretakers. However, the merit of providing a liability shield in those circumstances is questionable. Moreover, those circumstances present an unusual exception to the dual barriers that generally render a liability shield unnecessary.

Still, businesses incur costs during litigation, even if they are likely to prevail in their defense. Nevada and Utah mitigate these costs by using a judicial gatekeeper to limit trial access. Their liability shields permit a judge to dismiss a case before a costly trial is required. In Arizona, experienced attorneys have warned that failing to limit liability could result in “endless” lawsuits, many of which may go to trial. However, as of December tenth, there has been only one COVID-related complaint filed in Arizona regarding employment conditions, and there have only been sixty-six COVID-19 related complaints filed in total—with more claims related to insurance disputes than anything else. Liability shields may be attempting to address a problem that Arizona simply isn’t suffering from.

The Impact of COVID-Related Lawsuits

Aside from compensating those injured by irresponsible business practices, there is substantial societal value in allowing these cases to proceed to trial. Suits can bring injustices to the public’s attention that might otherwise be ignored, and motivate companies to alter their behavior. Amazon altering its COVID policies in response to a lawsuit is just one example of the power litigation has to change behaviors, even without a judicial mandate. Additionally, broad immunity penalizes businesses who incur costs protecting stakeholders from coronavirus exposure by rendering them less competitive in relation to negligent actors in the same market. Forcing these negligent actors to assume the costs of litigation provides a strong incentive to take preventative measures to keep the public safe.

However, unfettered litigation may also produce some negative outcomes. A business who finds out they may have inadvertently exposed patrons to infected workers may be incentivized to conceal this exposure due to liability concerns. A liability “safe harbor” encouraging exposure notification would mitigate this effect but, at the time of this writing, has not been adopted by any state.

Arizona in 2021

Ultimately, a liability shield may not even be possible in Arizona. HB2912 sought to increase the threshold for proving negligence in COVID-related cases to “clear and convincing.” This very likely runs afoul of The Arizona State Constitution, which prevents any abrogation of the “right of action to recover damages for injuries.” Constitutional concerns aside, Arizonans would not be well served by a broad liability shield. The overall impact on the economy and public health would likely be marginal, but when marginal public health costs are measured in lives, the cost is clearly too high.

By Thomas Cizauskas is licensed under CC BY-NC-ND 2.0