Potential Claims Resulting from COVID-19

Without a doubt, in the coming months and years, we will see case law result from COVID-19. We anticipate a number of legal issues arising out of the pandemic. These include:

1.  Issues relating to business interruption insurance. Insureds should take this occasion to review their policies to determine whether or not they are applicable in the circumstances. Likewise, insurers may wish to review and consider their existing policies as well as consider whether or not such policies warrant changes or amendments on a go-forward basis.

2.  Issues relating to force majeure clauses in contracts. These clauses, also known as “act of God” clauses serve as an out in some contracts where unforeseeable events have occurred and serve to either postpone or repudiate the contract. Whether or not COVID-19 will trigger a specific force majeure clause depends on the specific wording of that clause and the interpretation of events. While the government has recommended against non-urgent travel, it remains to be seen whether or not that would suffice to trigger a force majeure clause in any travel or supply contract. It should also be noted that where a contract doesn’t have a force majeure clause, the court will not imply one. The corollary to that is that the court may determine that the contract has been frustrated in light of the pandemic. There is a higher threshold for the court to determine that a contract is so fundamentally changed by an unforeseeable risk that the contract is now frustrated, but depending on the nature of the contract, it may well be possible to argue frustration in these circumstances.

3.  Issues relating to occupiers’ liability. The duty of an occupier remains to act reasonably to ensure visitors’ safety while on their premises. It does not allow a level of perfection and what is reasonable often depends on the circumstances. One can imagine that if people contract COVID-19 because a bar or restaurant has not taken appropriate precautions either in terms of cleaning or by not reducing capacity, then that may well be actionable. That being said, the issue of causation, the ability to prove that the negligence of the occupier caused the spread to that particular plaintiff may prove difficult given the ubiquitous nature of pandemics.  

We can also look back at litigation which arose out of previous outbreaks for an understanding of what we may expect in the future.

In Williams v Ontario, 2009 ONCA 378, the Ontario Court of Appeal dealt with a case arising out of the SARS outbreak of 2003. The issue in that case was whether the Province of Ontario could be held liable for damages suffered by individuals who contracted SARS during the outbreak.

The Plaintiff alleged that Ontario learned of the SARS outbreak in China in mid-February 2003 and the first case in Toronto was identified in late February. Throughout the month of March 2003, the outbreak became much more serious, with the Premier of Ontario declaring SARS a provincial emergency by the end of the month. This involved the imposition of regulations on hospitals to limit non-urgent care, wear protective gear, and create isolation areas for SARS patients.

In late April 2003, Ontario began to relax the infection control measures imposed on hospitals. The Plaintiff alleged that Ontario knew or ought to have known that failure to eradicate SARS completely could result in a recurrence of the disease. The Plaintiff alleged that the relaxing of infection control was premature and led to the second outbreak of SARS on or about April 20, 2003. This is when the Plaintiff herself contracted SARS, while she was a surgery patient at North York General Hospital. Shortly thereafter, all hospitals in Toronto were ordered to reinstate heightened infection-control procedures.

The Plaintiff argued that Ontario was negligent for the following reasons:
    •  Ontario failed to control the first outbreak of SARS, which lead to a second outbreak;
    •  Ontario failed to properly manage the prevention measures for SARS, which lead to a second outbreak;
    •  Ontario failed to have in place a proper public health system to adequately deal with outbreaks such as SARS;
    •  Ontario failed to issue proper directives to hospitals to control or limit the spread of SARS; and
    •  Ontario prematurely lifted the state of emergency before the first outbreak of SARS was eradicated.

The central issue to be determined by the Court was whether it was arguable that Ontario owed a private law duty of care to the plaintiff, sufficient to ground an action in negligence for damages. The Court held that such a duty did not exist.

The Court found that when assessing how best to deal with the SARS outbreak, Ontario was required to address the interests of the public at large, rather than focus on the particular interests of the Plaintiff. The decisions made to impose, lift or re-introduce measures to combat SARS were decisions that were made on the basis of the general public interest, rather than on the basis of the interests of a narrow class of individuals. While restrictions limiting access to hospitals may help combat the spread of disease, such restrictions would also have an impact on the interests of those who required access to the hospital for other needs. Ontario was tasked with balancing the advantages and disadvantages when determining whether to impose certain restrictions, and had to act in a manner that met the best interests of the public at large.

The Court further commented that to impose a private law duty of care in these circumstances would create an unreasonable and undesirable burden on Ontario that would interfere with decision-making in the realm of public health. The claim as against Ontario was dismissed, however the Plaintiff was still within her right to claim against the hospital.

Albarquez v Ontario, 2009 ONCA 374

The Plaintiffs in this case were nurses who had contracted SARS during the 2003 outbreak in Ontario. The Plaintiffs sued Ontario for damages in negligence, submitting that as front-line health care workers who had daily contact with patients, they were particularly vulnerable to the disease, but had no choice but to follow the mandatory directives issued by Ontario to hospitals.

The Plaintiffs argued that Ontario’s direct intervention into their workplace gave rise to a relationship of proximity which was sufficient to ground a duty of care and a claim for negligence. The Plaintiffs further claimed that Ontario breached their rights under section 7 of the Canadian Charter of Rights and Freedoms, alleging that Ontario exercised its discretion regarding the content of the directives in bad faith and for improper motives. Specifically, the Plaintiffs alleged that Ontario prematurely reduced the requirements for wearing protective equipment in order to minimize SARS for purposes such as tourism and other economic concerns.

Once again, the Court held that while Ontario was obliged to protect the public at large form the spread of communicable diseases, it did not owe a private law duty of care to individual residents of the province who contracted the disease. Nurses and other health care workers had no higher claim to have their health protected by Ontario than any other resident of the province, as they incurred the greater risk of contracting diseases by virtue of their calling.

The Court further held that Ontario was too far removed from the day-to-day operation of the hospitals and working conditions of the nurses for a private law duty of care to be implied.

Fitzgerald v Southmedic Incorporated, 2012 ONSC 4472

In this case, the Plaintiff was the exclusive sales representative of the Defendant. The Plaintiff’s commission agreement with the Defendant provided that the Plaintiff would be paid a commission based on: “a percent of revenue earned for both base of business equal to your fiscal 2009 top end sales and growth”. The agreement provided that the Plaintiff would have exclusive distribution of selling rights for all of the Defendant’s products in Manitoba. The agreement further provided that the Plaintiff would “earn accelerated commissions for growth with no cap”.

In 2009, the H1N1 pandemic occurred, which created an unprecedented demand for eye shields, products that were manufactured and sold by the Defendant. Significantly large orders were being placed with the defendant, including an order by Health Sciences Centre in Winnipeg for a total cost of $9,391,200. Shortly before that order was placed, the defendant provided the following notice to its sales representatives:

    “Orders for H1N1 below a total value to one customer of 250k will be paid at our regular commission’s rate. Any tier 1 order that exceeds 250k will be negotiated on an order by order basis…”

After the large order from Health Sciences Centre was made, the Defendant offered the Plaintiff a bonus of $74,250, which was to settle the amount of his commission. The Plaintiff initially signed the agreement, but then repudiated it after he had a chance to consult with a lawyer. The Plaintiff filed a claim shortly thereafter, arguing that the defendant had not paid him the 22% commission provided for by the original agreement, or the sum of $74,250 provided for in the bonus agreement.

The Court found that the above-cited notice sent out on behalf of the Defendant was an attempt to limit commissions on larger unprecedented orders. The Court held that the Plaintiff should have been compensated in accordance with his original commission agreement at the rate of 22%. With that being said, the Plaintiff signed the bonus agreement for the lower amount of $74,250. While the Plaintiff attempted to repudiate the agreement shortly thereafter, the Court found that he was nonetheless bound by this agreement. While the conduct of the defendant may have been harsh and unfair, it did not reach the level of misconduct that would support a finding of coercion or unconscionability, so as to render the agreement void. As such, the bonus agreement stood, and the Plaintiff was entitled to be paid the sum of $74,250.

 

Please do not hesitate to contact your relationship partner or lawyer if you have any questions or if we can be of assistance in guiding you through these new challenges.

This article was prepared by:

MATTHEW T. DUFFY
PARTNER
204.956.3564
[email protected]

KAREN POETKER
PARTNER
204.956.3571
[email protected]

ERIC BLOUW
LAWYER
204.956.3512
[email protected]

KARA MOORE
LAWYER
204.956.3554
[email protected]

This article represents general information and is not legal advice. Please contact us if you would like legal advice that is tailored to your particular circumstances. We would be happy to help.

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