The Coming Lawsuit Onslaught

By DirectorCorps

April 29, 2020 All Industries Risk

Cruise lines were on the front line of the Covid-19 outbreak as it first moved out of mainland China. Despite reports of the coronavirus hitting cruises, some liners continued to operate. As passengers reported illnesses, cruise companies were forced to issue shelter-in-place orders, sending customers from the buffet tables to their rooms. The cruises became petri dishes for the virus.

Now, predictably, passengers have started filing lawsuits against Carnival Corp. and other ships due to their response.

It’s the next stage in company’s crisis management against the virus: Protecting itself from lawsuits. How companies managed their response in the early days of the virus’s spread could come under the microscope.

Experts warn that few industries could escape this lawsuit onslaught. Front-line workers like doctors, nurses and hospitals could face litigation, writes USA Today, as will any organization that’s considered critical and remains open. Lawsuits may also come from investors, angry that the company’s insurance didn’t include pandemics or the company has delayed restarting.

“This early litigation is really, from our vantage point, the tip of the iceberg,” says Harold Kim, president of the U.S. Chamber Institute for Legal Reform told USA Today. “The level of litigation could really go into so many different directions.”

Many of these lawsuits could prove frivolous, but that doesn’t mean it’s something a board can ignore.

The insurance industry has expressed concern over the movement.

Evan Greenberg, the CEO of Chubb Limited, argues that small businesses face losses in the range of $250 billion to $430 billion a month. The entire insurance industry has only $800 billion in capital and surplus, which covers all types of claims.

“Insurers don’t need — and aren’t asking for — special treatment,” wrote Greenberg in an op-ed in The Wall Street Journal. “But these challenges could turn existential if the insurance industry is compelled to cover business interruptions it didn’t insure.”

The U.S. has shown a willingness to consider protecting companies.

White House economic advisor Larry Kudlow has signaled he supports some shield against this onslaught of legal activity. “You’ve got to give the businesses some confidence here that if something happens, and it may not be their fault — the disease is an infectious disease — if something happens, you can’t take them out of business,” Kudlow said on CNBC’s Squawk Box.

Either way, law firms could become a business that bounces back fast after shelter-in-place orders lift.