COVID-19 and Litigation Risk: How can businesses reduce the risk of future litigation?

Summary: In the second instalment of our three-part series covering litigation and COVID-19, we consider steps businesses can take now and going forward to reduce their risk of being sued as a result of circumstances arising from COVID-19.

Introduction

When the COVID-19 crisis began for most businesses in March 2020, the immediate focus was on crisis management. Businesses were concerned about many issues, including employment matters, supply chain issues and the need for rapid adjustments to alternative ways of working or putting work on hold altogether. As the crisis proceeded through April and May, other issues emerged, including such things as insurance, government assistance and, of course, the potential for return to a more “normal” business environment.

Moving forward, it appears that the disruptions from the spring of 2020 may result in a wave of legal actions in all sectors of the economy. Businesses that are currently operating and those that hope to re-open soon could face claims of varying kinds. We covered some of the potential litigation risks facing businesses as a result of the COVID-19 crisis in our blog post here.

What motivates litigation?

Broadly speaking, civil litigation is a claim for compensation between private actors. The idea of “harm” is central to litigation. Understanding the idea of “harm” can help businesses understand plaintiffs’ motives for bringing litigation, which in turn can help those same businesses take steps to mitigate the risk that “harm” and concomitant litigation will arise.

In the COVID-19 context, “harm” might be health-related or it might be economic. The alleged harm might be the result of business operations or the lack thereof. It might be the result of promises unfulfilled. In any case, claimants will argue that there has been conduct that has caused harm in some way. In the simplest terms, there is no legal action if you do not breach any obligations and do not cause harm.

In our experience, the motivation to start a legal action is usually very personal. In particular, when someone has suffered harm, the existence of someone to blame often helps. The harm itself is sometimes less important than the narrative that accompanies it, and a blameworthy target can change that narrative for a potential litigant. Thus, while it is obviously important to adhere to public guidelines and other obligations, including the general obligation not to cause harm, ensuring your business is not seen as a target can be an equally important tool for reducing the risk of litigation in the future.

We anticipate that causation—i.e., whether the conduct at issue caused the complainant’s harm—will also be a central issue in litigation related to COVID-19. Causation is an extremely complicated part of most legal cases, but thinking about “apparent causation” can help with mitigating risk of litigation before it arises. Does it seem like the conduct is or could be a link in the chain of causation leading to harm? As a potential claimant, if that connection seems likely, it is time to launch an action. As a business, breaking that connection is important for managing the risk of both potential and actual litigation.

Mitigating the risk of future litigation

During this period of re-opening and operating businesses in the “new normal”, it is important to have a specific, tailored plan for your business in place to mitigate risks arising from COVID-19. Creating that plan may require individualized legal advice, which is not the purpose of this blog post. However, at a general level, businesses may consider the following points:

  • Behave reasonably: Many causes of action are rooted in whether a defendant met a certain standard, which almost invariably involves consideration of whether they acted reasonably. Following government and industry guidelines and directives may help your business appear reasonable now—thereby mitigating the risk of future litigation—and may also assist with defending allegations of negligence on the merits if litigation actually arises. Follow government and industry updates closely, and be prepared to change your plan as necessary to comply with them. Think about the impression your policies and procedures would give an impartial judge hearing your case. Were they cobbled together in a haphazard way? Or do they paint the picture of a diligent and responsible corporate citizen that takes its legal responsibilities seriously, even in a rapidly changing environment?

  • Try not to look like a target: Communicate how your business is following relevant guidelines to employees and customers so people are aware that you are behaving reasonably. At the same time, ensure what you are communicating to others is reflected in the execution of your COVID-19 policies and procedures; what you are doing and what you say you are doing should match.

  • Stay updated on your industry: As legal actions resulting from COVID-19 do arise, stay up-to-date on actions brought against competitors in your industry. These will give you an indication of the types of claims to which your business may be exposed. Consider whether your policies, procedures, and plans for re-opening address the kinds of problems that led to these claims.

  • Have a litigation plan: Think about how you would respond to litigation before it occurs, including how you could mitigate any damage arising from new litigation. Assemble a team of people who will be responsible for handling litigation, including individuals with knowledge of your COVID-19 policies and procedures and how they were implemented. Ideally, management, public relations, and legal defence teams will all be coordinated well in advance of any potential crisis that may arise. To maximize this coordination, consider who your external legal counsel is. The day you are served with a multimillion dollar claim should not be the first day you consider your external legal counsel.

Conclusion

Even the most prepared business cannot completely avoid the risk of litigation. The future is uncertain and may still result in claims and class actions against your business, despite the best of intentions and preparation. Stay tuned for our third and final instalment, which will discuss what businesses can do in the event the potential litigation considered in this post becomes real.

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