A Shield For Negligent Business

Weekly WastebasketA Shield For Negligent BusinessWhy a blanket liability shield is a bad deal for taxpayers

Budget & Tax,  | Weekly Wastebasket
Aug 28, 2020  | 5 min read | Print Article

A few weeks ago, we wrote about the perilous state of negotiations between the White House, Senate Republicans, and House Democrats to cobble together another COVID-19 relief bill. As we noted at the time, President Trump was threatening to go it alone with several Executive Orders if things fell apart, and – unfortunately – they did. Rumors are circling that congressional leaders are now discussing a “skinny” relief package, as the legality and ultimate efficacy of the president’s Executive Orders are murky at best.

Besides the overall cost, the biggest sticking point in a new relief bill is the demand from Sen. Majority Leader Mitch McConnell that any package include a “liability shield” to protect employers who are negligent in protecting workers and customers from COVID-19. The shaky justification for the “shield” – potential frivolous COVID-related lawsuits. The latest relief package passed by the Senate includes the SAFE to WORK Act, which would discourage “insubstantial lawsuits relating to COVID-19 while preserving the ability of individuals and businesses that have suffered real injury to obtain complete relief.”

Unfortunately, even if a COVID-19 liability shield doesn’t create any new spending, it still carries substantial unseen costs for taxpayers that won’t be reflected in the bill’s official price tag.

The Senate proposal would move any personal injury cases related to COVID-19 from state to federal court, while also creating a new “cause of action” allowing businesses to countersue anyone who makes a claim against them. The Attorney General would also be allowed to sue anyone – service workers, nursing home patients, etc. – involved in a claim deemed “meritless,” a term that is not defined. (By the way, courts already have rules and penalties which deter frivolous lawsuits). In a truly Orwellian twist, allowing for suits against “meritless” claims would by default increase the volume of litigation, not decrease it. The other costs that will not show up in the official score of a liability shield is any increase in federal Medicaid payments or unemployment insurance claims. The proposal sets unprecedented legal requirements for employees seeking compensation from their employer if infected on the job. An employee would need proof of their employer’s “particular state of mind” and show “by clear and convincing evidence” the business’ “conscious, voluntary act or omission in reckless disregard of a legal duty; the consequences to another party; and applicable government standards and guidance.” Conversely, a business would only need to show it was “exploring options” to minimize risks in order to receive immunity.

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Even if a plaintiff were able to prove all of this, the proposed liability shield would limit any compensation to “economic” damages (e.g. lost wages) and explicitly excludes compensation for hospitalization or permanent disability unless a plaintiff can prove “willful misconduct,” or that a business intentionally infected them. The majority of all personal bankruptcies result from medical bills. And the combination of COVID-19 related medical bills and record unemployment is sure to result in increased personal bankruptcies, which we know from experience can ripple through the economy.

While the substance of the liability shield is problematic on its own, the precedent it would set would be equally if not more troubling. As drafted, the liability shields are the most far reaching tort reform proposal in recent history. Moreover, the industries lobbying in favor of these provisions – meat producers, oil and gas companies, manufacturers – are among the most able to implement appropriate precautions by virtue of their size. Meanwhile, there is no evidence to support the often-repeated claim that litigation will be the next pandemic to slow the economy. As a starting point, widespread community transmission of the virus will make establishing a causal relationship difficult for any would-be plaintiff. And by removing the economic incentive to provide safety measures for employees and customers, the liability shield could lead to more cases of COVID-19 and more community spread and increased taxpayer costs and negative economic impact. In fact, a business that invests in safety measures will put at a disadvantage to competitors who cut corners.

This proposal is a solution in search of problem, and it could have massive federal costs down the road for taxpayers that are not reflected in the bill’s price tag.

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