SMBs Look For Lawsuit-Liability Protection As They Plan Reopening

waiter in mask cleaning table

Main Street shops and restaurants are preparing to reopen in the safest way they can conceive of — with things like masked staff, temperature checks, gloves and frequent sanitizing sessions. But small and medium-sized business (SMB) owners like Chris Purcell, owner of Firehouse Subs in Elizabeth City, N.C., fear that despite going above and beyond U.S. Centers for Disease Control and Prevention (CDC) guidelines, that won’t be enough and they’ll risk lawsuits from the public.

“There’s really no way to prove or disprove that someone did or did not catch [coronavirus] in any particular location,” Purcell told CNBC. “And that scares a lot of the small business owners like myself and fellow restaurateurs in town.”

And so, some SMB owners are asking the U.S. government to offer them protection from liability in the post-pandemic world. The U.S. Chamber of Commerce and 200 trade groups across the country recently wrote Congress asking lawmakers to take up the issue as part of COVID-19 relief legislation.

The groups want liability protection for businesses, nonprofits and educational institutions that follow public-health guidelines.

“Our members and constituencies are concerned that, despite doing their best to follow applicable guidelines, they will be forced to defend against an onslaught of frivolous lawsuits,” the letter said. “The prospect of such litigation and associated exorbitant legal costs are a deterrent to reopening. … Absent a targeted safe harbor for those that work to follow applicable guidelines, the fear and uncertainty from boundless liability threatens to impede our country’s social and economic recovery.”

Making matters worse, many SMBs are find that despite its name, their business-interruption insurance doesn’t cover COVID-19 losses — and presumably not lawsuits related to the pandemic. Insurance executives have warned that such exclusions protect the industry from bankruptcy and that lawmakers shouldn’t attempt to change things.

“You can’t just retroactively change a contract. That is plainly unconstitutional,” Chubb CEO Evan Greenberg recently told CNBC. “I understand the frustration of legislators. I understand they’re looking for a remedy, but this would be a self-inflicted injury and create great uncertainty at a time when we have enough uncertainty and we’re trying to heal the economy.”

Senate Republicans have said they won’t pass any new COVID-19 stimulus bill without liability protections for doctors and businesses. “Liability protections would be the No. 1 thing I would look at,” House Minority Leader Kevin McCarthy told CNBC last month. “No bill will pass without it.”

The fear of liability is just the latest bump in the road for SMBs trying to regain their footing in a post-pandemic world. Our latest survey of SMBs found that just 48.1 percent were confident as of May’s end that they could stay in business through the pandemic, although that’s up from 46.5 percent as of mid-April and 41.8 percent as of early that month.

That said, the share of small business owners reporting they were certain they couldn’t stay open also rose to 7.2 percent in early May  from 5.3 percent in mid-April.

SMBs are also increasingly digitizing their offerings, perhaps partly to minimize liability risk. Some 42 percent told us they’ve developed new digital capabilities that they expect maintain even after the pandemic, while 36 percent say they’ll invest more heavily in developing new digital capabilities after their local economies reopen. Another 16.9 percent haven’t yet developed new digital capabilities but expect they’ll rely more on those technologies once their local economies reopen.

All told, 51.2 percent plan to invest in new digital innovations in the future, 48 percent have begun accepting or have enhanced their mobile wallet payment options and 47.7 percent have adopted or enhanced their online order-ahead-for-delivery features.

The bottom line: Merchants are going digital and staying that way for the long term. That’s partly to meet consumer demands for safety — but also perhaps to create safety for the merchants themselves in the absence of liability legislation.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.