“And They’re Off”: The Arms Race for the COVID Legal Services Market has Begun

An organic, but intentional market has already started to evolve in the face of the COVID-19 pandemic in the legal industry. While at the same time cutting pay, issuing furloughs, trimming summer programs, and the like, almost any law firm worth its salt has created a COVID-19 Taskforce and is busy creating resource centers. On any given day, one can be bombarded by dozens of law firms with new articles in every area of the law. From labor issues, to obtaining relief through the CARES Act, how to handle corporate governance issues, dealing with contract performance and force majeure clauses, and tax implications, to name just a few, a COVID Legal Cottage Industry has sprung up overnight. Pragmatically, these efforts are certainly needed now for clients, but also provide work for firms as the short-term demand for legal services has begun to dry up, and present marketing opportunities as well.

Perhaps more interesting is the “in real time” creation of “expert” position papers on several critical legal issues affecting business law that will be litigated for many years to come. They – like the novel Corona virus – are new issues, but also, like the virus, have deadly consequences for many, many businesses. It is not new to have industry try to influence the outcome of the next wave of litigation through the creation of “science”. The most outstanding example is how the asbestos industry lost the “science” on the issue of proximate cause between exposure and health concerns. Since that time, industry has formed coalitions to “create science” when they become aware of the newest liability risk; whether it be the health impact of exposure to solvents or the fight over climate change, creating early “facts on the ground” becomes a critical strategic initiative.

In the case of COVID-19, reviewing the articles that law firms are sponsoring over the last month reveals emerging lines of legal battle on a number of critical issues. Firms who typically represent a particular side in industry litigation are staking out their positions now, trying to influence public debate, creating “expert articles” that can be cited in future litigation, and hoping to attract clients through early specialization on key issues.  The spontaneous creation of this “market” is influenced by real issues caused on a macro level by the harsh economic implications of the pandemic. But at a micro level, they are strategic initiatives taken by firms, at times in concert with their clients to influence at an early stage future outcomes.

Perhaps the most patent example is the issue of insurance. With mandatory closure of many businesses by government order, business interruption losses are mounting at staggering speed every day. Even as some of these orders may get lifted, economic losses will persist until consumers, investors and markets are confident that business can be fully reopened in a safe manner without constant re-closings. With warnings of second and third waves of virus, at times dire predictions from public health officials, the economic impact over a longer term seems inevitable.

Unsurprisingly, businesses immediately began to look at their business interruption coverage in their insurance policies. Most businesses have some BI coverage as part of their property insurance programs, but these policies have exclusions and very specific conditions for when coverage is triggered. Not surprisingly, articles began to spring up from law firms that represent policy holders and firms that represent insurers taking contradictory positions on coverage. Indeed, claims and even a few lawsuits have already been filed.[i]

A second area that is creating a legal market for insurance issues is in the area of constitutional law. Several states, recognizing coverage problems in existing property policies for business interruption have proposed passing laws to force insurers to pay such claims. Many articles have already been written on whether such laws are constitutional under the contract impairment clause on both sides of the issue.[ii]

Another major area is the legality of the scope and range of various shutdown orders and health requirements in the workplace. Articles have been written over the scope of the police power, for religious institutions the violation of the free exercise clause, federal versus state regulatory authority, and the like.

As you read these law firm alerts and the 10-Q’s new COVID-19 Resource Page, note carefully these articles as the combatants begin to go to their corners, polish their weapons, and prepare for combat. It’s a rare opportunity to see a new market form in real time. We will be reading about these legal issues for a long, long time. The law firms that are most entrepreneurial now will, even in the short term, emerge stronger on the other side of the current crisis for legal resources.

[i] See, e.g., Suzan Charlton, et al., 8 Possible Paths to Insurance coverage for COVID-19 Losses, Law 360 (March 26, 2020, 2:26 PM), https://www.cov.com/-/media/files/corporate/publications/2020/03/8-possible-paths-to-insurance-coverage-for-covid-19-losses.pdf.

[ii] See, e.g., Robin Cohen and Patrick Pijls, Contracts Clause Unlikely to Impede Biz Interruption Laws, Law 360 (April 22, 2020, 5:44 PM), https://www.mckoolsmith.com/assets/htmldocuments/Contracts%20Clause%20Unlikely%20To%20Impede%20Biz%20Interruption%20Laws.pdf.

 

Jonathan M. Broder (LAW ’83) is a retired Vice President of Corporate Development and General Counsel for Conrail. He managed Conrail’s legal and corporate affairs, as well as its real estate and business development departments.


 

 

 

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