Although commerce in the United States has largely reopened since the initial waves of COVID-19, both individuals and businesses continue to suffer from the effects of the pandemic. Some of this impact is directly related to the health effects of the virus. Much of the impact is related to the economic consequences of the pandemic, including government-imposed shutdowns, gathering restrictions and other mitigation measures, and the ambient fear of contagion that led people to restrict their interactions outside the home. COVID-19 has been, in short, a public health and economic catastrophe, the recovery from which has been steady, but still very slow and much incomplete. It is also likely that this pandemic will not be the last we encounter.
As with other damaging substances and events, the law typically handles these kinds of crises with a mix of regulation and tort liability. For many reasons fundamental to tort law, including problems of causation and proof and of the nexus between economic impact and the precise community and individual effects of the virus, tort law has not been an adequate tool to address the fallout of the pandemic. Indeed, despite predictions to the contrary, we have seen relatively few tort claims and fewer successful suits. Consequently, the liability effects of the pandemic on businesses, including on insurance companies, have been more limited than what one might have imagined in the very early stages of the COVID-19 pandemic.
Nonetheless, it would be misleading to draw as a lesson that the pandemic’s economic impacts on individuals and small businesses have been only moderately consequential. At base, individuals and businesses have not been compensated adequately either by private industry or by the government. (And, as to governmental compensation, even the eye-popping numbers reflected in major federal legislation from 2020 to 2022 has left so much of the population, particularly the most societally vulnerable, exposed economically (to go along with their illness exposure). As new variants continue to prolong the pandemic, this vulnerability will expectedly grow and the law should be ready to respond.
The basic argument of this chapter is that the current structure of American tort law cannot effectively address the significant economic consequences on individuals and businesses, at least those consequences that have traditionally been seen as calling for redress through private law structures such as liability law. However, there are other mechanisms – tort alternatives – have been applied successfully in other extraordinary and consequential episodes that, likewise, could not be addressed effectively through tort law. Such schemes span the spectrum from no-fault insurance mechanisms to compensation programs, of the sort that we saw in the aftermath of the events of 9/11 (and in other periods of American history). We do not think that the answer to this pandemic predicament is a “cut-and-paste” arrangement whereby compensation schemes should simply be used to displace tort law. We appreciate that this complex situation calls for nuance and balance. Nonetheless, we initiate this important conversation about what to do about the unaddressed impacts of COVID-19 on individuals and businesses (especially smaller ones) and, as well, what to do about what so many tort law scholars working in the law and economics paradigm usually call the ex ante incentive problem, that is, how to ensure that appropriate precautions are taken to minimize exposure and damage.
We suggest in this chapter that serious consideration should be given to replacing tort in this context with an administrative compensation scheme, one that is better equipped than tort law to deal with both ex post compensation and ex ante incentives. We suggest that the COVID-19 liability dilemma bears the key hallmarks of other mass emergencies that have galvanized state and federal governments to adopt tort-replacement schemes in the past. Namely, we identify four such hallmarks: (1) harms to the judicial system caused by a vast number of claims arriving over a short period, because of the widespread, systemic nature of the harm; (2) harms to potential plaintiffs faced at once with great need and substantial obstacles to recovery; (3) harms to a defendant-industry (namely retail businesses in this case); and (4) harms to the economy and society more generally. While the presence of these characteristics does not necessarily mean that tort replacement is warranted, it is enough to suggest that it should be considered.
After surveying various examples in which the state has replaced tort in response to one or more of these four categories of harms, we argue that replacing tort in this context is sensible and normatively desirable. We respond to likely objections and conclude with a preliminary discussion of the process by which we might replace tort, the transition to such a replacement, and how we might measure or evaluate our progress.