The COVID-19 pandemic has wreaked havoc on businesses across the country, and many business owners, frustrated with government orders limiting their operations for public health reasons, have sought relief through the courts.
One Hattiesburg business, Updown Trampoline Park, has already filed suit against the city and Mayor Toby Barker. The owners, Charles Bradford Ramey and Hebert Taylor Ramey, claim their constitutional rights were violated when the business was shut down under state and local executive orders.
Local attorney Clark Hicks, who is representing the city in the trampoline park case, said similar lawsuits are being filed around the United States, and he expects that trend to continue for the near future and even after the pandemic subsides.
“There are businesses who have been shut down by state and local governments, and they are seeking injunctive relief in the courts,” said Hicks. “I expect there will be continued litigation against local, state and maybe even national authorities regarding these various executive orders.”
Hicks has filed a motion to dismiss the trampoline park case, and his brief quotes a 1905 U.S. Supreme Court case. The case, Jacobson v. Massachusetts, stemmed from a 1902 smallpox outbreak in Cambridge, Massachusetts. The city adopted a regulation ordering the vaccination or revaccination of all of its residents, and a local pastor, Henning Jacobson, refused, which led to his prosecution. He sued the city and eventually lost the case.
The court upheld the authority of states to enforce compulsory vaccination laws, and justices also declared that all constitutional rights may be reasonably restricted to combat a public health emergency. The 115-year-old ruling was recently used by the nation’s highest court to dismiss a request from a California church to remove restrictions on large church gatherings during the pandemic.
“The 1905 case allows governors and other local executives to enact and pass executive orders that put restrictions on businesses and the movement of people during serious health emergencies,” said Hicks. “I’m confident that the courts, both here in Mississippi and around the country, generally are going to approve these executive orders as necessary to protect the health, safety and welfare of the public.”
Hicks said there is a constant conflict between businesses that want to operate freely in a democratic society and government that wants to protect its people.
“There’s a very serious, contagious disease, but that inner conflict is going to cause dispute and litigation in the courts for the next few years to come,” he added.
The attorney said he anticipates a number of other lawsuits to arise from the pandemic, including businesses suing their insurance companies.
“Businesses are already suing their insurance companies for loss of business income,” said Hicks. “That’s going to be a big topic for years to come ... whether or not they’re entitled to recovery of business income.”
Hicks said most insurance companies are denying these claims.
“There are a handful of insurance companies that provide coverage for pandemic losses, but the vast majority of them have exclusions, and many of them don’t specifically address pandemics,” he said. “That’s where the litigation will become a bit more interesting. There’s at least a debate about whether or not the policies will cover those losses.”
Hicks said the cases are largely in uncharted territory, but he expects insurance companies to take a beating in the court of public opinion for refusing to pay claims.
“The decisions I’m familiar with have found that there is no coverage for losses that result from a pandemic, but because the losses are so catastrophic, there’s going to be a lot of pressure on people in the insurance industry to provide coverage for policyholders,” he added.
Legislation to compel insurance companies to pay these claims has been introduced in the U.S. House of Representatives, and the U.S. Treasury Department recently weighed in on the matter.
In a May 8 letter to lawmakers, Frederick Vaughan, a treasury official, said the department agrees that insurers should “pay valid claims” but that proposals to force insurers to pay all claims “fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry.”
Insurance companies have said that paying out these claims will – in a matter of months – wipe out the insurance industry’s $800 billion surplus.