COVID-19 Impact On Business – But Will Insurance Cover the Loss? Issue 3: Legal Reform

Aug 20, 2020 | Blog

August 2020 In prior articles, we discussed the impact of COVID-19 on insurance in context of 1) coverage for claims for lost business income and 2) legislation in several states attempting to shift the risk for loss of business income to insurers from insureds. Tennessee has now passed legislation due to the COVID-19 pandemic also affecting indemnity issues. The Tennessee law impacts potential legal liability for negligence claims made against businesses and others.

On August 18, 2020, the Tennessee Governor signed into law the Tennessee COVID-19 Recovery Act. The bill had been overwhelmingly passed on August 12, 2020, by both the Tennessee House and Senate. The legislation is significant and exemplifies options available to government to address issues created by COVID-19.

The intent of the Tennessee legislation is straightforward: “Notwithstanding any law to the contrary, there is no claim against any person for loss, damage, injury, or death arising from COVID-19, unless the claimant proves by clear and convincing evidence that the person caused the loss, damage, injury, or death by an act or omission constituting gross negligence or willful misconduct.”

As defined by the legislation, “person” means “an individual, healthcare provider, sole proprietorship, corporation, limited liability company, partnership, trust, religious organization, association, nonprofit organization described in §501(c) of the Internal Revenue Code that is exempt from federal taxation under §501(a) of the Internal Revenue Code, 26 U.S.C. § 501(a), or any other legal entity whether formed as a for-profit or not-for-profit entity.” 

That an injured party in a tort case must prove that a defendant’s acts or omissions constitute gross negligence or willful misconduct and must also make such showing by clear and convincing evidence significantly limits liability exposure to restaurants, hotels, retailers, health care providers, manufacturers, not-for-profits, governmental bodies, and many additional sectors of Tennessee’s economy. As is apparent from the law’s language, those for whom COVID-19 relief is intended constitute: 1) a very large segment of Tennessee business; 2) their insurance companies which might otherwise have indemnity obligations under policies of insurance issued to the insureds; and 3) those employees whose jobs are made more secure because their employers have no liability exposure to third parties unless the employer commits gross and willful misconduct. In short, there are a lot of interest groups in Tennessee that benefit by this law. Obviously, those not benefitted are those injured by COVID-19 acquired from those who might otherwise have liability.

Under the legislation, potential COVID-19 claims include both those arising from the actual, alleged, or possible exposure to or contraction of COVID-19 as well as those resulting from services, treatment, or other actions in response to COVID-19. These can include testing, monitoring, reporting, investigating, disclosing such exposure, and the implementation of policies and procedures to prevent or minimize the spread of COVID-19. Inarguably, the legislation is business, government, and medical-provider friendly. The law’s impact should be substantial in constraining litigation and monetary awards associated with COVID-19 claims and in stabilizing uncertainty in conducting business in Tennessee due to liability exposure arising from the COVID-19 pandemic.

Not only is the legal burden made higher in order to recover for COVID-19 claims, the Act also establishes conditions precedent that must be complied with before the filing of a lawsuit. Before a lawsuit is filed, a claimant must prepare a verified complaint pleading specific facts with particularity from which a trier could reasonably conclude that the injury was caused by the defendant’s gross negligence or willful misconduct. In the case of personal injury, the claimant is also required to file a certificate of good faith stating that the claimant or claimant’s counsel consulted with a physician duly licensed to practice in Tennessee or a contiguous bordering state and obtained a signed, written expert medical opinion to the effect that the loss, damage, injury, or death was caused by an act or omission of the defendant. The failure to comply with the conditions above prior to filing of a claim makes the litigation subject to dismissal with prejudice. This means that the action may not be susceptible to refiling even if the deficiency is cured.

The Act applies to all such claims arising from COVID-19 except those in which, on or before August 3, 2020, a complaint or civil warrant was already filed or notice of a claim pertaining to medical malpractice or claims against the State was already given.

Regarding claims of employees against their employers, the legislation does not affect workers’ compensation claims filed under the Tennessee Workers’ Compensation Act for injuries arising during the course and scope of their employment.

In this case, the Tennessee legislature seemingly concluded that the certainty provided by laws limiting  liability to “persons” due to COVID-19 and the stability of the State’s economy and workforce were paramount to allowing for a recovery of damages by those acquiring COVID-19, unless a clear and convincing showing is made of a defendant’s  gross negligence or willful misconduct. Lawmakers took action in effort to redress another of the many impacts caused by the COVID-19 pandemic. It will be up to Tennessee voters to determine whether they agree that this action by the legislature in a matter of months was preferable to action by the courts across the State making liability determinations after years of litigation.

If you have any questions concerning insurance coverage as it relates to COVID-19, please contact Marc Dedman at or 615.340.6791.