As disruptions continue along the global supply chain as a result of the coronavirus, Charles Reynolds authored the July 16, 2020 article in Food Logistics addressing the key areas that will be most susceptible to litigation for those who manage and oversee supply logistics, including contracts with suppliers and customers, insurance coverage disputes and employment issues.
Unanticipated delays and shortages brought on by COVID-19 could lead to problems for businesses unable to meet their contractual obligations, but as owners and managers review agreements for clauses that address unforeseen delays, answers may be found under the theory of “force majeure.” While the term “pandemic” is seldom contained in these provisions to excuse delay or non-performance, Reynolds noted that “contracts should be closely reviewed as many also allow for other unforeseen factors including ‘legal prohibitions’ preventing performance, or when a party is ‘by force of law’ compelled to comply with orders from civil authorities. Thus, if a distributor’s warehouse or its workers were on lockdown due to a Coronavirus-related order and unable to process inventory, that may excuse performance.” And when there is no mention of force majeure in a contract, there may also be relief in the state’s common law under the doctrine of “Frustration of Purpose,” which means that fulfilling an agreement may become pointless due to unforeseen circumstances (i.e. no workers are at a dock to offload a perishable food shipment).
Insurance contracts will also be the subject of disputes, particularly related to business interruption coverage in commercial policies. Carriers are already in the debating whether coronavirus is an “occurrence” under business interruption policies, which would be a “direct physical loss or damage to property” that in turn results in lost profit. Policies should be reviewed to determine how “occurrence” is defined.
Finally, worker and employment issues are a prime area of risk. These issues will relate to adequate measures to keep employees safe, worker privacy related to testing or infection disclosure, workers’ compensation claims and more.” Much like coming insurance disputes, legislators in some states are seeking to either shield employers from pandemic-related suits by employees or amend workers’ compensation statutes to deal with the problem,” Reynolds said. “Regardless of the outcome in your state, a COVID-19 program now and a pandemic virus program for the future is a necessity.”
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