In our 240+ year history as a country, we have endured numerous tribulations that have in some way, threatened our way of life. The COVID-19 outbreak has forced us to engage in new behaviors, including social distancing and the consistent use of face masks outside of our homes. Moreover, several companies are working tirelessly to develop potential treatments for a virus that has infected approximately 1.25 million Americans and killed approximately 75,670.[1] Among other efforts, entities are repurposing equipment and physicians are prescribing medication for “off-label use.” Surgeon General Jerome Adams has even gone so far as to compare the COVID-19 outbreak to national emergencies like Pearl Harbor and the September 11, 2001 attack on the World Trade Center.

Indispensable to facing these challenges are private-sector entities. World War II is an excellent example, during which President Franklin Roosevelt declared, “[p]owerful enemies must be out-fought and out-produced.” Shortly after the attack on Pearl Harbor, many manufacturers were repurposed to manufacture war items such as aircraft, aircraft engines, trucks, and tanks. Though a pandemic is certainly different than a war, several companies have altered their normal courses of business to help contribute towards the collective fight against COVID-19. Today, the businesses supporting efforts to curb COVID-19 include pharmaceutical companies, medical device companies, medical technology companies, and more. Despite their good faith contributions, which include activities such as repurposing equipment and medication for “off-label” use, these companies will almost certainly face litigation related to the products they have manufactured in an effort to combat the crisis we face today. Nonetheless, companies may be insulated from liability pursuant to the Public Readiness and Emergency Preparedness Act (“PREP”), if they meet certain criteria.

PREP, signed into law in 2005, authorizes the Department of Health and Human Services (“HHS”) to issue a declaration that provides immunity from liability for entities and/or individuals involved in the development of “countermeasures” meant to fight a public health emergency. On March 10, 2020, the HHS issued a declaration providing “liability immunity for activities related to medical countermeasures against COVID-19,” absent willful misconduct (“COVID-19 Declaration”). Entities/individuals covered under the COVID-19 Declaration (“Covered Persons”) include those involved in the following activities: manufacturing, testing, development, distribution, administration, prescription and/or use of “Covered Countermeasures.”[2]

“Covered Countermeasures” under the COVID-19 Declaration

Certain products fall under the “Covered Countermeasures” category. Covered Countermeasures include:

  1. Qualified pandemic or epidemic products;
  2. Security countermeasures[3]; or
  3. Drugs/products authorized for emergency use by the Food and Drug Administration (“FDA”).

Qualified Pandemic or Epidemic Products

To qualify as a qualified pandemic or epidemic product, the drug, device, or biological product must be approved or cleared by the FDA, licensed under Section 351 (42 U.S.C. § 262) of the Public Health Services Act (“PHS Act”) as a biological product, or authorized for emergency use by the FDA.

In addition to the one of the foregoing prerequisites, the drug, device, or biological product must be:

  1. Manufactured, used, designed, developed, modified, licensed or procured to diagnose, mitigate, prevent, treat, or cure a pandemic or epidemic or limit the harm such a pandemic or epidemic might otherwise cause;
  2. Manufactured, used, designed, developed, modified, licensed, or procured to diagnose, mitigate, prevent, treat, or cure a serious life-threatening disease or condition caused by such a drug, biological product, or device; or
  3. A product or technology intended to enhance the use or effect of such a drug, biological product, or device.

Under the PREP Act, drugs, devices, and biological products are defined as follows:

Drug: articles intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man or other animals, and articles (other than food) intended to affect the structure or function of the body of man or other animals.

Biological product: virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic or analogous product, arsphenamine or its derivative (or any other trivalent arsenic compound) applicable to the prevention, treatment, or cure of a disease or condition of human beings.

Device: instrument, apparatus, implement, machine, contrivance, implant, in vitro agent, or other similar or related article intended for use in the diagnosis, cure mitigation, treatment or prevention of disease in man or other animals or intended to affect the structure or function of the body of man or other animals and which is not dependent upon being metabolized for the achievement of its primary intended purposes.

The COVID-19 Declaration further specifies what qualifies as a Covered Countermeasure as “any antiviral, any other drug, any biologic, any diagnostic, any other device, or any vaccine, used to treat, diagnose, cure, prevent, or mitigate COVID-19, or the transmission of SARS-CoV-2 or a virus mutating therefrom, or any device used in the administration of any such product, and all components and constituent materials of any such products.”

A qualified pandemic or epidemic product may also be a Covered Countermeasure if the product is subject to an FDA exemption. The FDA requires products to meet certain criteria prior to interstate shipment and administration of the product. However, the FDA can approve applications for an Investigational New Drug (“IND”) or Investigational Device Exemption (“IDE”) which would allow the use of the unapproved product for purposes of collecting safety and effectiveness data. A commonly discussed investigational product is convalescent plasma, which the FDA is regulating as an unapproved investigational treatment for COVID-19.

Products authorized for emergency use by the FDA – Emergency Use Authorization (“EUA”)[4]

Pursuant to Section 564 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), the FDA can authorize the use of unapproved products and/or unapproved use of products for purposes of mitigating diseases or conditions when there are no adequate alternatives.

As a result of the COVID-19 outbreak, the FDA has authorized numerous EUAs. The following products, among others, have been approved for emergency use:

  • In Vitro Diagnostic Products (testing kits)
  • High Complexity Molecular-Based Laboratory Developed Tests
  • Personal Protective Equipment (“PPE”)
  • Devices for decontamination of PPE
  • Ventilators
  • Products modified for use as ventilators
  • Extracorporeal Blood Purification Devices
  • Infusion Pump System
  • Diaphragm Pacing System
  • Chloroquine phosphate and Hydroxchloroquine sulfate supplied from the Strategic National Stockpile

The FDA will consider four criteria in its issuance for emergency use. These criteria include:

  1. SARS-CoV-2 (COVID-19) can cause a serious or life-threatening disease or condition;
  2. The product may be effective in its intended purpose;
  3. The benefits of the product outweigh the potential risks; and
  4. There is no adequate, approved, and available alternative to the emergency use of the product.

Limitations of PREP Act and the COVID-19 Declaration

A company/individual will not be insulated from liability for losses caused by willful misconduct. The PREP Act defines willful misconduct as “an act or failure to act that is taken:

  1. Intentionally to achieve a wrongful purpose;
  2. Knowingly without legal or factual justification; and
  3. In disregard of a known or obvious risk that is so great as to make it highly probable that the harm will outweigh the benefit.”

Furthermore, liability immunity is only available for activities involving Covered Countermeasures that are related to:

  1. “Present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, or memoranda of understanding or other federal agreements; or
  2. “Activities authorized in accordance with the public health and medical response of” federal, state, local, and tribal authorities “acting on behalf of those governmental entities.”[5]

Additionally, liability immunity lapses in October 2024. However, the declaration provides an additional 12 months of protection “to allow for the manufacture(s) to arrange for disposition of Covered Countermeasure, including return of the Covered Countermeasures to the manufacturer…” Thus, entities/individuals should take measures now to ensure the timely return and disposition of Covered Countermeasures when they are no longer required.

Department of Health & Human Services Guidance on Coverage under the PREP Act

On April 14, 2020, the HHS issued an advisory opinion concerning the PREP Act and the COVID-19 Declaration that provides guidance on potential application and recommended steps individuals/entities may take to ensure compliance. Though the HHS advisory opinion may not be binding in Court in the event of resulting litigation, it is nonetheless instructive. The HHS states that immunity is broad under the PREP Act and it advises that an individual/entity may qualify for the protections under the Act and Declaration, even if it is not a Covered Person or its product is not a Covered Countermeasure so long as the individual/entity: 1) complies with all other requirements of the PREP Act; and 2) reasonably could have believed that the product was a Covered Countermeasure” or the entity was a Covered Person. The HHS’s advisory opinion is significant in that the PREP Act could provide immunity to entities/individuals that are not covered by the plain language of the PREP Act or the COVID-19 Declaration. In addition, to demonstrate that products are Covered Countermeasures and qualify for immunity under the PREP Act, the HHS advises that entities/individuals “should take, and document, reasonable precautions under the current emergent circumstances to facilitate the safe use or administration of Covered Countermeasures and to make those documents publicly and easily available.”


The essential role of manufacturers and private-sector entities during World War II is irrefutable. COVID-19 presents an unprecedented crisis that requires not only the participation of individuals through measures such as social distancing, but also the participation of entities capable of producing drugs and devices vital to the urgent fight against COVID-19. Well-intentioned entities/individuals contributing to the fight should be protected and not punished for their work. The PREP Act exists to extend such safeguards, and individuals and entities engaged in covered activities should be aware of the parameters of the Act to ensure that their essential and necessary work is protected under the PREP Act.


[1] COVID-19 cases and deaths as of April 29, 2020 on COVID-19 Dashboard by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU);

[2] The Department of Health & Human Services interprets “Covered Person” broadly in its April 14, 2020 Advisory Opinion on the PREP Act and the March 10, 2020 Declaration under the Act.

[3] This article does not discuss Security countermeasures as they are not relevant to COVID-19.

[4] A more comprehensive list of EUA’s can be found at the following links: (1) and (2)

[5] The HHS interpreted these conditions broadly stating that they include “(1) any arrangement with the federal government, or (2) any activity that is part of an authorized emergency response at the federal, regional, state, or local level. Such activities can be authorized through, among other things, guidance, requests for assistance, agreements, or other arrangements.”

Partner Jeff McLucas explores Employment Issues in the Age of Coronavirus. For more information, we encourage you to contact Jeff and visit the Employment Litigation section of the MG+M website. 

COVID-19 has impacted the entire planet and the daily lives of all. The pandemic has turned our valued first responders into heroic warriors on the front lines of the battle against the virus. COVID-19 has wreaked a tragic toll upon the population, taking lives and destroying families. At the micro-level, the Coronavirus has turned the incidents of daily life into a herculean task. Social distancing requirements, stay-at-home orders, the closures of schools, businesses and places of social gathering and recreation, restricted travel and limited public transportation have completely disrupted the daily routines and habits of everyone.

Beyond the obvious health related issues, the initial impact of COVID-19 was widely felt through the closures of schools and the closure or severe operational limitations on government and private businesses. Closures, layoffs, furloughs and other austerity measures have become the rule and not the exception. The closures or limited operations of courts both state and federal as well as the disruption to the functioning of law firms may have slowed or delayed various civil employment actions ranging from unemployment claims to discrimination charges to cases under the federal Worker Adjustment and Retraining Notification Act (“WARN”). However, the litigation of such claims by employees is inevitable through individual suits and class actions.

Multiple complaints relating to Coronavirus workplace exposure have been filed with the United States Occupational Safety and Health Administration (“OSHA”). OSHA has issued advisory guidance with recommendations for the workplace and descriptions of health and safety standards including how existing regulations apply to the circumstances created by the COVID-19 pandemic. OSHA issued an interim enforcement response plan for OSHA Area Offices and compliance safety and health officers for handling complaints and reports of Coronavirus. An array of OSHA guidance is available at

Like OSHA, the United States Equal Employment Opportunity Commission (“EEOC”) has issued a variety of publications relating to COVID-19, available on its website: The EEOC emphasizes that despite the closure of its physical offices to the public, the agency remains “virtually” open and accessible by phone and through the EEOC’s website.

The remote work environment fashioned by private and public employers alike in response to the Coronavirus does not mean a suspension of discrimination and equal opportunity laws. There are large, multi-state employers actively seeking to hire tens of thousands of workers to adjust to the overwhelming increase in e-commerce demands. Equal opportunity laws that apply to the hiring process remain in effect. Physical workplace environments already complicated by the internet and smartphones have evolved into virtual workspaces where electronic harassment and discrimination remain a constant issue for employers to monitor.

With reports of new infection rates slowing and evidence of some states of “flattening of the curve,” plans for and initial steps of easing back of restrictions are now evolving and taking place. Following measures taken in countries such as New Zealand and various European nations, some U.S. states are easing lockdown rules and announcing plans to re-open of businesses. In apparent anticipation of the re-opening of vast sectors of the American economy and a corresponding increase in travel, airlines are announcing protective measures ranging from heightened sanitation measures in airports and planes to the wearing of masks by flight attendants and crews to distributing masks to passengers for mandatory or recommended use.

The inconsistencies and contradictions of executive orders, governmental guidelines and regulations from state-to-state and even from one city or town to the next in the U.S. for the “closure” already created a patchwork of ad hoc laws. As a result, the easing of practices going forward creates uncertainty for employers and employees alike for the “opening.”

Georgia has already eased restrictions for certain types of business, some of which are now open, although schools will remain closed through the end of the academic year. At the same time, Massachusetts has extended the Commonwealth’s limits on gatherings and closures of non-essential businesses through May 18th with a stay-at-home advisory remaining in effect. A Massachusetts municipality (Somerville, the most densely populated city in New England) announced a mandatory facial covering order for all public places that becomes effective April 29th that will permit the issuance of a $300 fine for willful non-compliance after a week-long grace period for community adjustment.

Employers with operations in multiple states will face the initial challenge of developing a consistent and coherent plan for returning to operation or full operation while still respecting the divergent guidelines of various states and even adjacent municipalities. Smaller employers and those operating in a single state will still face the challenges of complying with state-wide and local rules as well as the impact created by differing regulations impacting suppliers in other states and other countries.

Irrespective of the size and scope of a particular business, all employers are facing a number of common issues. The multitude of problems encountered by businesses that have continued to operate throughout the COVID-19 crisis with employees physically present in the workplace are instructive and include:

  • workplace rules & guidelines on safety, personal protective equipment (“PPE”), social distancing and enhanced sanitary practices
  • training and internal education on sanitary practices and proper wearing of PPE
  • job and risk classification for possible exposure to individual employee and co-workers
  • adequate supplies of personal protective equipment
  • mandated PPE versus optional PPE
  • employer issued PPE versus privately owned PPE
  • standards for PPE used in the workplace including the question of re-use
  • procedures for donning & doffing of PPE
  • proper storage of PPE
  • proper handling and disposal of used PPE
  • adequate sanitary supplies in the workplace including anti-bacterial soap
  • sanitation practices including disinfecting of the workplace
  • enhanced training where required for handling of cleaning chemicals
  • preventing sick workers from entering or re-entering the workplace
  • screening and testing of workers
  • contact tracing to eliminate the spread or further spreading of the virus
  • reconfiguring the work environment
  • installing barriers and partitions
  • guidelines and training on safe interaction practices between employees and customers or members of the public
  • protocol for common areas and shared spaces including parking areas, entrances & exits, time-clocks, locker rooms and restrooms
  • modifying or eliminating timekeeping procedures such the use of biometric fingerprinting time-clocks

For employers contemplating and planning for the return to a physical work environment amid plans to “re-open” the U.S., the above-listed concerns must be part of a cogent and comprehensive plan tailored to the unique circumstances of each business and work environment with guidelines issued to all employees in advance of any return to work or return to a common work space.

There is a brewing political storm that may have far-reaching consequences for potential liability issues. Concerns over the U.S. food chain triggered a Presidential Executive Order under the Defense Production Act mandating that meat processing plants remain open. In an industry that has seen infections and deaths significant enough to close numerous facilities, the question arises as to the legal and financial responsibility for illness, medical care, death and even potential contamination of the food chain stemming from such orders in accordance with guidance governmental agencies such as OSHA and the Centers for Disease Control (“CDC”).

The U.S. Chamber of Commerce and other business groups are calling for a comprehensive liability shield covering businesses from virus related claims and lawsuits. In March, Congress agreed to a liability shield for the makers of face-masks in order to encourage increased production. Some states have already passed legislation proving healthcare workers with immunity. Whether broader legislation at the state or national level will address the potential immunity from liability businesses beyond healthcare is unclear.

COVID-19 raises both new unique concerns and variations of evolving employment issues. For example, the EEOC issued updated guidelines for the Americans with Disabilities Act (“ADA”), the Rehabilitation Act and other related laws indicating that employers may make inquiry of employees to inquire if they are suffering from COVID-19 symptoms, but this information must be treated as a confidential medical record. The EEOC guidance makes a number of recommendations, observations and cautionary comments, including:

  • The list of associated symptoms concerning which an employer may make inquiry includes fever, chills, cough, shortness of breath, newly developed loss of smell or taste, gastrointestinal issues, nausea, diarrhea, vomiting and sore throat; a list which may be expanded based upon public health authorities such as the CDC and reputable medical sources.
  • Employers may take the temperature of employees during the pandemic, but the information must be treated as confidential and such a measurement is considered a form of a medical examination.
  • Employers can require employees with symptoms of COVID-19 to leave the workplace or to stay home.
  • Employers can request some form of medical clearance for employees to return to work.
  • An employer is permitted to administer COVID-19 testing to employees before they enter the workplace. Positive results can be disclosed (including the name of the employee) to a public health agency.
  • Employers may keep and maintain a log of daily temperature checks of employees entering the workplace as long as the log is maintained as confidential.
  • New hires may be subject to inquiry and screening regarding symptoms of COVID-19 as long as it does so for all new employees in the same type of job. This may include taking a potential employee’s temperature as part of a post-offer, pre-employment medical examination.
  • If an employer requires an employee to start immediately, but the new employee as a positive test result or discloses symptoms of COVID-19 then the employer may withdraw a job offer. However, an employer may not withdraw a job offer because an individual is in a high-risk category but without symptoms of the virus.
  • Employers are recommended to require that employees observe “infection control practices” such as social distancing and regular handwashing in the workplace.
  • The reasonable accommodation requirements of the ADA remain in full force and effect during the pandemic. The mandatory dialogue between employer and employee and flexibility by both employer and employee remain crucial factors in assessing whether accommodation is possible under the current circumstances including temporary job restructuring, temporary transfer to a different position or modified work schedules. At the same time, the case-by-case of reasonable accommodation for an employee and undue hardship upon an employer remain in place but must be treated as flexible in concept and application.
  • The designation of employees as “critical infrastructure workers” or “essential critical workers” as defined by the CDC, does not eliminate the coverage and protections of the ADA or the Rehabilitation Act or any other equal employment opportunity law.
  • Employers should reiterate to their workforce that workplace harassment on the basis of national origin, race and other prohibited bases stemming from the COVID-19 pandemic are unlawful. Reinforcement of these principles to the employer’s supervisors and managers as part of their prevention and monitoring roles is recommended.
  • Employers may require employees to wear PPE in the workplace and observe infection control practices. However, reasonable accommodations under the ADA and religious accommodation under Title VII are still applicable to these rules and requirements.
  • An employer may exclude employees from the workplace with a medical condition that poses a “direct threat” to health or safety of co-workers in the workplace. Employers are required to follow the advice and implement steps that are consistent with the advice of the CDC and public health authorities for the workplace environment at issue.
  • Employers should not engage in unlawful disparate treatment based upon protected characteristics when making decisions relating to screening processes and exclusion of workers from the workplace.

There are a myriad of statutory rights that come into play as a result of the complex regulatory scheme created by federal and state legislation in addition to the ADA and the Rehabilitation Act that have a bearing on an employer’s obligations. These include, but are not limited to, the Family and Medical Leave Act (“FMLA”) and the newly enacted Families First Coronavirus Response Act (“FFCRA”). Many states have legislation that parallel or supplement the FMLA, for example, further complicating decisions by employers.

The FFCRA covers private employers with fewer than 500 employees and is enforced by the federal Department of Labor. The FFCRA, for example, provides a qualified employee with paid sick time if an employee is unable to work at the employer’s place of business or remotely because the employee:

  • is subject to a federal, state or local quarantine or isolation order related to COVID-19;
  • has been advised by a healthcare provider to self-quarantine due to COVID-19;
  • is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  • is caring for an individual subject to a quarantine order or has been advised to self-quarantine;
  • is caring for a child whose school or place of care is closed for reasons related to COVID-19; or
  • is experiencing any substantially similar condition specified by the Secretary of Health and Human Services.

Employers contemplating the return to a physical office environment, for example, where the employer is one of many tenants sharing certain common space will be impacted by the decisions of property owners and managers concerning protective measures that may further complicate the employer-employee relationship. These factors may include:

  • policies and procedures for social distancing in common areas as well as entrances/exits to buildings
  • mandatory wearing of face shielding or masks in common areas
  • closure of restrooms or limitations with respect to restrooms in common areas
  • enhanced PPE including disposable gloves for certain common service areas such as mail centers located within common areas of the building
  • modification of delivery services
  • modification of janitorial services

The same or similar issues will arise within the confines of the employer’s tenant space and must be contemplated by any employer planning for a return to work. Such issues should be part of the employer’s guidelines looking ahead to this process and due consideration should be given to:

  • provision and supply of PPE by employers to employees where mandated
  • storage, handling, use and disposal of PPE
  • common area policies within the employer’s space including restrooms and kitchens
  • provision of sanitary supplies within the workplace including anti-bacterial hand wash and soap and wipes
  • mandatory handwashing policies and procedures

Any employer that has transitioned to a remote work platform and now faces the return to a physical work environment should contemplate additional issues beyond benefits and safety including:

  • which employees or class/categories of employees to recall to the physical workspace and which can/should continue to work remotely
  • staggered or layered return to work plans using objective criteria
  • notification to employees regarding return to work including instructions as to conditions or requirements for physical presence in the workplace as a result of COVID-19
  • clear communication to employees regarding returning to work and a response plan for handling refusals to return to the workplace
  • health screening questionnaires or inquiries including disclosure of infection or exposure to infected individuals
  • modified work schedules including rotation of employees between the physical work environment and virtual or remote work platform
  • possible accommodations of employees who refuse or object to returning to the physical work environment
  • internal reporting mechanisms for reporting health and safety concerns including actual or alleged violations of governmental regulations and/or employer policy
  • recognition of and accommodation for modified availability of public transportation in terms of work hours and attendance policies
  • modified policies and procedures for employee travel

Employers must also be cognizant of potential retaliation and whistleblower actions stemming from employee complaints about an employer’s handling of COVID-19 related situations ranging from unsafe sanitary practices, hazardous workplace environments, failure to enforce health measures and retaliatory employment action based employee internal complaints, reporting of violations or concerns to governmental agencies and even social media postings. Retaliation and whistleblower cases are predominantly based on statutes containing anti-retaliation provisions. There are such provisions contained in most employment civil rights statutes for employees who engage in so-called “protected activity” including filing internal complaints of unlawful workplace discrimination and harassment. In addition, actions can be filed in many jurisdictions for common law wrongful termination on the basis of a clearly articulated public policy.

Worker complaints to OSHA about safety issues will garner employee protection against retaliation through the ability to file a claim based on adverse retaliatory employment action. Some states have existing laws providing similar protections such as Massachusetts General Laws Chapter 149 §187 which makes unlawful any retaliatory employment action against healthcare workers by their employers including hospitals, clinics and nursing homes for an employee’s reporting of public health concerns internally or to a public agency.  New Jersey specifically enacted legislation in March of this year barring employers from taking adverse employment action against employees taking or requesting time off from work as a result of an infectious disease (i.e., COVID-19) that could affect others in the workplace based on a written recommendation of a licensed medical professional.

The employer-employee relationship has grown increasingly complicated over the last half-century. The COVID-19 pandemic has magnified and multiplied the levels of complexity already inherent in these relations. The uncertain path of the pandemic and the constantly evolving response and guidance on the attendant issues from federal, state and local government and agencies create substantial uncertainty for employers in the management of risk already incurred as a result of austerity measures, in the present environment and moving forward into the future. Comprehensive legal advice based upon the best available information is a necessity for all employers now more than ever.

For more information, we encourage you to contact Jeff and visit the Employment Litigation section of the MG+M website. 

Massachusetts General Laws Chapter 93A and 176D have long provided the plaintiffs’ personal injury bar with an exceptionally sharp check on insurance carriers’ settlement practices. While many claims under Chapter 93A/176D appear from the outset to be pro forma, a recent Massachusetts Appeals Court in Chiulli v. Liberty Mutual Insurance, Inc., 97 Mass. App. Ct. 248 (2020) illustrates the perils of Chapter 93A/176D violations in settlement practices and the substantial penalties that may be imposed in the event of a finding of willful and/or knowing violation of good faith and equitable settlement practices.


Factual Background

Chiulli arose from a physical altercation at a prominent Boston restaurant in 2008. Shortly before the altercation, restaurant staff separated two groups of individuals involved in a spirited argument over the occupancy of a certain barstool but allowed both groups to remain on the premises. Unfortunately, the argument soon turned violent. Chiulli was knocked unconscious and sustained a traumatic brain injury. 


Chiulli, in turn, filed suit against the Restaurant, its parent company, and the opposing combatant seeking medical damages in excess of $600,000. He asserted a negligent security claim against the Restaurant and its operating group claiming they failed to reasonably address the initial altercation by not removing the respective parties from the premises and failing to ensure that the factions did not leave the premises together which was bolstered by expert testimony. The Restaurant did not offer its own expert and instead argued that it conducted itself in a reasonable manner in addressing the argument and altercation.


The case went to trial in 2012. The only settlement offer extended prior to or during trial was an offer for $150,000 made by the Restaurant’s primary insurance carrier. The three-week trial ended in a plaintiff’s verdict finding that both the Restaurant and its operating company were each 45% at fault for the altercation. The jury awarded Chiulli approximately $4.5 Million in damages.


Post-Verdict Claims Handling

After confirming that the primary carrier did not tender its policy limits of $1 Million to the Restaurant’s excess carrier, Chiulli served Chapter 93A demand letters on both carriers 16 days after the verdict. There, Chiulli alleged that both insurers failed to effectuate a fair and prompt settlement of the underlying tort action despite the fact liability was reasonably clear vis-à-vis the jury verdict. Chiulli sought $5.7 Million “to resolve the [underlying tort] case, and to avoid further litigation” wherein he would seek multiple damages under Chapter 93A.


Twenty-two days after the underlying verdict, the Restaurant’s primary carrier still had not tendered its policy limits, which resulted in the excess carrier serving its own demand upon the primary carrier. The primary carrier soon acquiesced and tendered its $1 Million policy limit to the excess carrier. During this timeframe, Chiulli served a second Chapter 93A demand on both carriers. This time, he sought $5.7 Million to resolve the tort case and an additional $10 Million demand to resolve putative bad faith settlement claims against both insurers.


The excess carrier, taking the lead in efforts to resolve the claim, responded to the 93A demand letter and tendered a settlement offer to Chiulli for $5.7 Million to resolve only the underlying tort claim against the Restaurant defendants. Chiulli accepted that offer and executed a release that expressly preserved his 93A/176D claims against both insurance carriers. After the underlying tort matter was resolved the primary carrier then responded to Chiulli’s 93A demand wherein it denied all liability for the putative bad faith settlement claim.


Chapter 93A Litigation

Chiulli initiated a Chapter 93A claim against the primary carrier alleging that it failed to engage in reasonable settlement practices. During a jury-waived trial, the court made numerous findings of fact including: (1) liability was reasonably clear after closing arguments in the underlying case; (2) Chiulli prepared a strong case which the primary insurer and defense were not prepared to rebut; (3) defense counsel and the carrier did not realistically assess the case and overestimated the likelihood of a defense verdict; (4) after the verdict, the carrier “by its own assessment” knew that success of post-trial motions or an appeal was unlikely; and (5) the carrier utilized Chiulli’s dire financial condition as leverage in hoping that it would lead to a more favorable settlement.


Based upon those determinations, the court found that while the primary carrier failed to effectuate a prompt and fair settlement, its failure was not knowing or willful. This ruling entitled Chiulli to a portion of his attorneys’ fees and litigation costs in pursuing the Chapter 93A/176D claim, however, absent a finding that the violations were willful and knowing, Chiulli’s damages were limited to the minimum nominal damages available under the statute – $25 – as opposed to multiple damages on the underlying jury verdict.


The Appeal

Chiulli and the primary carrier appealed the trial court’s order. The crux of the carrier’s appeal centered on its claim that the trial court erred in not applying the safe harbor provision of Chapter 93A, § 9 referred to as the “settlement-offer” defense. In turn, Chiulli appealed on the basis that the trial court erred in finding that the primary carrier’s violation of Chapter 93A was not willful or knowing and, thus, the award of $25 was improper.


The Appeals Court rejected the primary carrier’s argument regarding the application of the safe-harbor provision. In the ordinary course, Chapter 93A, § 9 (3) and (4) permit a defendant to introduce evidence of a prior reasonable settlement offer that, if rejected by a claimant, can serve to limit the potential scope of damages otherwise available under Chapter 93A. Here, the primary carrier argued that it was entitled to this safe harbor defense because the excess carrier had tendered a written settlement offer to Chiulli within 30 days of the first demand. This argument, according to the Appeals Court, “conflate[d] the settlement of two different claims: Chiulli’s underlying [tort] claim … and the Chapter 93A claim … asserted directly against [the primary carrier].”


Indeed, the excess carrier’s settlement offer to Chiulli following the underlying verdict served to resolve only the underlying tort claim as evidenced by the fact the settlement agreement expressly reserved Chiulli’s Chapter 93A claims against both carriers. The Appeals Court clarified that its ruling does “not suggest that when an insurer receives a [Chapter] 93A demand alleging the failure to effectuate a prompt, fair, and equitable settlement, it may not make a written settlement offer to resolve both the underlying insurance claims and any associated [Chapter] 93A claims, or that a reasonable universal settlement offer would not entitle the insurer to the settlement-offer defense.” However, based on facts of this case, the Appeals Court determined that the primary carrier did not make any settlement offers and, thus, was not entitled to the safe harbor provision of the “settlement-offer” defense.


In contrast, Chiulli’s appeal focused squarely upon whether the trial court erred in determining that the primary carrier’s violation of Chapter 93A was neither willful or knowing. Chiulli did not challenge any of the trial court’s subsidiary findings, but instead argued that the totality of those findings necessitated a different conclusion. The Appeals Court agreed with Chiulli and ruled that the carrier’s conduct – i.e., knowing its marginal chance of success on appeal, using Chiulli’s financial state to leverage a settlement, delaying settlement, and virtually compelling him to litigate to recover his verdict – “require[d] the conclusion that [the primary carrier]’s violation was willful or knowing.” The Appeals Court found that on the whole, these findings demonstrated that the tactics utilized by the primary carrier were tantamount to “intentionally gainful” strategy and, as noted by the Appeals Court, “[n]othing about this conduct could be described as anything short of willful or knowing.” 


The Appeals Court vacated the trial court’s ruling on this matter and remanded the case for a determination as to whether the underlying $4.5 Million judgment should be doubled or tripled under Chapter 93A, § 9(3).



Chiulli marks the most recent award wherein seven figure judgments in underlying tort cases were doubled or trebled for bad faith settlement practices under Chapter 93A. See e.g., Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486 (2012) (awarding $22 Million in Chapter 93A damages for willful violations of Chapter 93A/176D) and Capitol Specialty Insurance Co. v. Higgins., 953 F.3d 95 (1st Cir. 2020) (affirming trebled damages of $5.4 Million). Though Chiulli offers yet another cautionary tale of the high value potential of a bad faith settlement claim under Chapter 93A/176D, the case also offers significant guidance in establishing defensible positions in similar litigation.

The COVID-19 crisis has had an impact on every court across the nation, both at the state and federal levels, postponing and delaying countless civil litigation hearings and trials. There is still a great deal of uncertainty as to when social distancing guidelines will be relaxed and when states will begin to resume normal business activities. The continued postponement of hearings and trials will result in a tremendous backlog of cases vying for the attention of the courts, as litigators across the nation do their best to zealously advocate for their clients.

As this country battles the continued wave of COVID-19 cases and prepares for the possibility of a second wave of COVID-19 infections in the United States at some point in the not so distant future, litigation has already commenced as a result of the COVID-19 pandemic.

Princess Cruise Lines

At least a dozen lawsuits have been filed against Princess Cruise Lines as a result of passengers affected by the COVID-19 outbreak, and that number continues to climb.

On March 7, 2020, Plaintiffs Ronald Weissberger and Eva Weissberger filed suit in the United States District Court for the Central District of California, alleging negligence and gross negligence by the Defendant, Princess Cruise Lines Ltd., for its “lackadaisical approach” to the COVID-19 pandemic. The Complaint detailed that one of Princess Cruise Lines’ ships, the Grand Princess, departed out of San Francisco on February 21, 2020, and returned to Oakland on March 4, 2020, where it was forced to dock until all passengers could be moved to military bases for quarantine.

On March 13, 2020, Plaintiffs Brian Sheedy and Melanie Sheedy filed an identical complaint against Princess Cruise Lines Ltd., also in the United States District Court for the Central District of California.

Under California law, the elements that must be met to show negligence are “(1) defendant’s obligation to conform to a certain standard of conduct for the protection of others against unreasonable risks (duty); (2) failure to conform to that standard (breach of duty); (3) a reasonably close connection between the defendant’s conduct and resulting injuries (proximate cause); and (4) actual loss (damages).” Corales v. Bennett, 567 F.3d 554, 572 (9th Cir.2009) (quoting McGarry v. Sax, 158 Cal.App.4th 983, 994, 70 Cal.Rptr.3d 519 (2008); Lawman v. City & Cty. of San Francisco, 159 F. Supp. 3d 1130, 1152 (N.D. Cal. 2016).

According to the Weissberger and Sheedy Complaints, none of these Plaintiffs have tested positive for COVID-19. The only alleged damages include exposure to the risk of immediate physical injury, emotional distress and trauma from the fear of developing COVID-19. A cause of action for negligence requires damages in the form of “detrimental physical changes to the body” and this physical injury “for the purposes of parasitic emotional distress damages required actual harm.” Macy’s California, Inc. v. Superior Court, 41 Cal. App. 4th 744 (1995). A plaintiff must prove detrimental change to his or her body to be able to recover for parasitic emotional distress damages. Id.

Without proof of a physical injury, in order to recover for emotional distress a Plaintiff must show that he/she is “more likely than not” to develop the injury or illness. Courts have held that the “more likely than not” threshold to emotional distress was appropriate for negligent exposure to human immunodeficiency virus (HIV) or acquired immune deficiency syndrome (AIDS) in absence of physical injury. Macy’s California, Inc. v. Superior Court, 41 Cal. App. 4th 744, 48 Cal. Rptr. 2d 496 (1995). Additionally, this standard has been deemed appropriate for cases where a plaintiff feared developing cancer due to toxic ingestion or exposure. Id.

Additionally, California law does not recognize a distinct cause of action for gross negligence independent of a statutory basis. Martinez v. United States, 812 F. Supp. 2d 1052 (C.D. Cal. 2010). Neither the Weissberger nor Sheedy Complaints cited to any statutory basis supporting their claim that the cruise line was grossly negligent.

The Center for Disease Control (CDC) issued a statement on February 18, 2020, before the Grand Princess set sail, detailing that the Diamond Princess, cruise ship in Yokohama, Japan, had recently suffered an outbreak of COVID-19. Before boarding the Grand Princess, all passengers were asked to sign a piece of paper confirming they were not sick. Notably, the CDC did not issue its first “No Sail Order” until March 14, 2020. By choosing to board a cruise ship at the beginning of what is now a pandemic, with warning signs that COVID-19 should be taken seriously, the Plaintiffs may also bear some liability for their alleged emotional trauma and distress.

Under California law, contributory negligence “is the conduct on the part of the plaintiff which falls below the standard to which he should conform for his own protection, and is a legally contributing cause co-operating with the negligence of the defendant in bringing about the plaintiff’s harm.” Gyerman v. U.S. Lines Co., 7 Cal.3d 488, 500, 102 Cal.Rptr. 795, 498 P.2d 1043 (1972) (quoting RESTATEMENT (SECOND) OF TORTS § 463); United States v. Sierra Pac. Indus., 879 F. Supp. 2d 1128, 1133–34 (E.D. Cal. 2012), adhered to on reconsideration, No. CIV S-09-2445 KJM, 2012 WL 2571274 (E.D. Cal. July 2, 2012).

The lawsuits against Carnival for the infamous Triumph “poop cruise”, where an engine fire left the ship with no air conditioning, over-flowing toilets, and other toxic conditions, resulted in unsuccessful lawsuits as the Plaintiffs were unable to show any serious physical injury or physical illness. Though damages were awarded to some of the Plaintiffs, after deducting attorney’s fees, costs, and expenses, the resulting reward was minimal as to some Plaintiffs and nonexistent as to others.

The lawsuits filed against Princess Cruise Lines are among the first in the country. The resulting fallout of COVID-19 infections has sparked a universal fear of a fatal infection in every person. While a jury may be able to empathize with the fear and emotional distress created by the COVID-19 pandemic, prior case law and legal precedent may not support such claims absent a physical injury or where a plaintiff’s conduct contributed to his or her alleged injuries. The addition of COVID-19 cases to the current backlog of matters before Courts will unfortunately prolong insight into how the Courts will handle these novel claims.


We are all feeling the impact that COVID-19 is having on our lives, both personally and professionally. In an effort to assist our clients as they navigate the myriad of business and legal challenges they are facing during this difficult time, MG+M has prepared a report summarizing the actions taken by state and court systems as a result of the COVID-19 pandemic. This report contains comprehensive information concerning court orders and individual state’s emergency orders from across the country.  We update this report every day to ensure that our clients have the latest information from all jurisdictions. Please click here to request a copy of this report.

We will also continue to post blog articles regarding various legal topics, including how the COVID-19 pandemic is impacting the legal system and various areas of the law.  Please watch for articles on these topics during the next few weeks as we hope they will help you better understand how this pandemic may impact legal issues related to your business.

Stay safe and healthy.