Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comCOVID-19 Alerts
Author: Scarinci Hollenbeck, LLC
Date: April 7, 2020
The Firm
201-896-4100 info@sh-law.comWith the coronavirus (COVID-19) outbreak spreading around the world, quarantines, business closures, supply shortages, and travel restrictions are becoming more commonplace. They are also starting to affect U.S. businesses, including those in New York and New Jersey.
To help minimize the impact on their operations, businesses should be actively working to secure alternate supply streams in the event of supply chain disruptions; develop remote-work plans for employees in the event of quarantines and business closures; and establish alternatives to in-person meetings in the event of widespread travel restrictions. It is also wise to examine the fine print in your contracts for a clause known as “force majeure” and determine whether your insurance policies cover “business interruption.”
As the coronavirus spreads, many New York and New Jersey businesses are taking a closer look at the force majeure clauses in their contracts. While these clauses are often overlooked as “boilerplate” provisions, they can be extremely important when disaster strikes.
A force majeure clause, meaning “superior force” in French, relieves the parties from performing their duties under the contract in certain circumstances. The circumstances include those deemed beyond their control that makes performance inadvisable, commercially impracticable, illegal, or impossible. Examples include natural disasters like hurricanes, floods, earthquakes, and other “acts of God.” They also apply to man-made disasters, such as war, terrorism, civil disorder, supply shortages, and labor strikes.
In the past, disease outbreaks have triggered force majeure clauses, although not in all cases. According to Chinese media, more than 1,600 companies in China have applied for and obtained force majeure “certificates” from the Chinese government to support claims under force majeure clauses.
When determining if a force majeure provision applies, one of the first steps is to determine whether the event qualifies under the contract. Many contracts are ambiguous as to whether an event qualifies, and the party seeking to rely on the clause may have the burden of establishing the occurrence of a force majeure event.
The next step is to determine whether the risk of nonperformance was foreseeable and able to be mitigated, as well as whether performance is truly impossible. Under the terms of most force majeure provisions, parties are obligated to mitigate any foreseeable risk of nonperformance. Accordingly, they can’t invoke force majeure where the potential nonperformance was foreseeable and could have been prevented or otherwise mitigated. While it will depend on the terms of the contract, the party seeking to invoke force majeure is typically required to establish that performance is truly impossible as opposed to merely impracticable (untimely, expensive, etc.).
The terms of the contract are likely to specify specific and detailed notice requirements that may be required. The contract should also provide a timeline for providing such notification. Parties should also carefully review the contract to determine if there are any requirements regarding evidence or information that must be submitted along with a notice of reliance on the force majeure clause.
For small businesses in New York and New Jersey, missing even one day of business can be disastrous. Therefore, businesses should verify what is covered – and what is excluded – under their insurance policies if COVID-19 forces a temporary business closure.
The most applicable coverage is business interruption insurance, which specifically provides coverage when the insured suffers a loss of income from a disruption of business operations. Losses that may be reimbursed include lost revenue, expenses like rent, and temporary relocation costs.
Generally, in order to incur a business interruption loss, an insured must suffer a loss of income from a disruption of business operations. This disruption may be from a physical loss or damage to the insured’s own property, as a result of a covered cause of loss. Contamination may not always be considered physical damage. However, some policies may also cover business interruption simply as a consequence of government action, such as an order from health officials, or as a preventative measure to alleviate concerns about the spread of coronavirus.
In the wake of prior outbreaks, such as Severe Acute Respiratory Syndrome (SARS), some insurers expressly excluded disease outbreaks in their business interruption policies. Accordingly, it is important to read your policy carefully and consult an experienced attorney with any insurance liability and recovery questions related to the COVID-19 outbreak.
If you have any questions or if you would like to discuss the matter further, please contact the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Breach of contract cases arising out of the COVID-19 pandemic are slowly making their way through the court system… Breach of contract cases arising out of the coronavirus (COVID-19) pandemic are slowly making their way through the court system. The early decisions shed light on how courts are handling force majeure provisions and contract defenses […]
Author: Dan Brecher
The USPTO recently announced a new COVID-19 prioritized examination program for certain trademark and service mark applications… The U.S. Patent and Trademark Office (USPTO) recently announced a new COVID-19 prioritized examination program for certain trademark and service mark applications. It is available for products that are subject to U.S. Food and Drug Administration (FDA) approval […]
Author: David A. Einhorn
After a difficult few months, New Jersey restaurants are gradually reopening their doors for on-premises dining. After a difficult few months, New Jersey restaurants are gradually reopening their doors for on-premises dining. For restaurant operators and their customers, it is important to understand what is required to reopen safely. This article outlines the guidance provided […]
Author: Michael Jimenez
The Regulatory Examination Process has evolved in positive directions over the past several years. Thanks to these prior process improvements, the SEC, CFTC/NFA and FINRA are able to conduct regulatory exams virtually… The Regulatory Examination Process has clearly evolved in positive directions over the past several years. Thanks in part to these prior process improvements, […]
Author: Scarinci Hollenbeck, LLC
The coronavirus (COVID-19) pandemic has forced us to change the way we conduct everyday activities… The coronavirus (COVID-19) pandemic has forced us to change the way we conduct everyday activities. Court proceedings, arbitrations, and mediations are no exception, and parties to such proceedings increasingly rely on video conferencing to go “virtual.” While technology can allow […]
Author: Joel N. Kreizman
While the COVID-19 pandemic may be slowing the pace at which white-collar crimes are prosecuted, it would be unwise to expect that the pace of white-collar investigations will slow… While the coronavirus (COVID-19) pandemic may be slowing the pace at which white-collar crimes are prosecuted, it would be unwise to expect that the pace of […]
Author: Gregg H. Hilzer
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!