A Public Health Framework for COVID-19 Business Liability

Abstract

Businesses that reopen amid the COVID-19 pandemic face potential legal liability to customers and workers who contract the coronavirus through those enterprises’ operations. Federal and state lawmakers are actively considering proposals to narrow or expand such liability. These proposals have important economic and public-health implications. This article presents an analytical framework for evaluating liability regimes in the context of a communicable disease. The framework highlights the contrasting public-health consequences of liability before and after a customer or worker is exposed to the virus. Ex ante (before exposure), potential liability generates incentives for businesses to take precautions that reduce the risk of virus transmission. Ex post (after exposure), liability fears may deter businesses from proactively informing customers and workers that they have been exposed to the virus through the business’s operations. To minimize the potentially perverse ex-post consequences of liability without sacrificing significant ex-ante benefits, we propose a limited safe harbor from liability for businesses that promptly contact customers and workers after learning about a possible exposure. The article also suggests changes to workers’ compensation rules that seek a balance between ex-ante benefits and ex-post costs.

Keywords: COVID-19, SARS-CoV-2, coronavirus, liability, tort, workers' compensation, safe harbor

JEL Classification: I12, K13