Welcome to the Weintraub Resources section. Here, you can find our Blogs, Videos, and Podcasts, in which Weintraub attorneys regularly provide insights and updates on legal developments. You can also find upcoming Weintraub Events, as well as firm and client News.


Litigation Update: North Carolina Court Finds Insurers Liable Under Business Interruption Policies for COVID Losses Resulting from Shutdown Orders

In our last update, we highlighted a recent case out of the US District Court of Missouri (Studio 417) in which the court issued a preliminary ruling that allowed a group of policyholders to proceed with claims against their insurers based on allegations that the insurers wrongfully denied claims due to losses sustained as a result of the COVID-19 health crisis under business interruption insurance policies.  Prior to that ruling, insurers had largely stonewalled policyholders who submitted COVID-related claims under business interruption policies.  That case confirmed that these individuals could state facially valid claims for recovery and seek damages from the insurers based on the allegation that the presence of the virus on workplace surfaces constituted loss of or damage to property.

In what is further welcome news to policyholders, a North Carolina court went a meaningful step further, finding the insurers liable for wrongful denial of policyholders’ COVID-related business interruption claims in that case (North State)—claims based on the effect of COVID-prompted government shutdown orders as opposed to the virus’s physical presence at a particular policyholder’s business.  The North State case involved a similar set of circumstances as the Studio 417 dispute: a collection of restaurant owners and other retailers filed a lawsuit against their common insurer, alleging a right to recover insurance proceeds to offset losses incurred due to government-mandated shutdowns that affected their respective businesses.  The insurer denied coverage, finding that no physical loss or damage had occurred such that coverage would have been triggered as required by the insurance policy.

In finding the insurers liable for breach of the insurance policies, the North State court held that the ordinary meaning of the phrase “direct physical loss” includes the loss of ability to utilize or possess the insured property.  According to that court, the “loss” requirement “describes the scenario where businessowners and their employees, customers, vendors, suppliers and others lose the full range of rights and advantages of using or accessing their business property.  This is precisely the loss caused by the [g]overnment [o]rders.”  Moreover, because nothing in the insurance policies precluded recovery for virus-related causes of losses (which is not always the case in business interruption policies), the court concluded that the ordinary meaning of direct physical loss was either clearly applicable to government shutdowns or, at worst, the proper interpretation of an ambiguous phrase in the policy.  This decision represents a major win for policyholders, who now have a final court ruling supporting their claim for coverage despite the “direct physical loss” requirement.

On the whole, insurers remain relatively successful in thwarting policyholder efforts to obtain coverage under their business interruption policies for COVID-related losses.  Whether through hardline stances at the claims stage, aggressive litigation tactics, and/or major funding advantages, insurers can often overpower their insureds and cut off these claims before reaching the courts.  These recent decisions, however, highlight the potential for recovery for policyholders who maintain their resolve in pursuing insurance coverage during these unprecedented times. While odds of success remain long, desperate and/or persistent individuals may be able to obtain recovery for their COVID-related claims if they have business interruption policies.  Only time will tell whether cases like Studio 417 and North State coalesce into a widely adopted judicial perspective on the interpretation of business interruption policies.

Cares Act Provider Relief Funds: Reporting Set To Begin In 2021; New Reporting Requirements

The Health Resources and Services Administration (“HRSA”) has completed review of Phase 3 applications for the CARES Act Provider Relief Fund (“PRF”) and expects to distribute $24.5 billion to over 70,000 health care providers by the end of this month. These payments are intended to cover loss revenues attributable to the COVID-19 pandemic. According to HRSA, over 35,000 Phase 3 applicants will not receive any additional payment because they either experienced no change in revenues or net expenses attributable to COVID-19, or those that have already received funds that equal or exceed reimbursement of 88% of reported losses.1

PPP Second Draw Loans

In December 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the CAA).

In total, the CAA provides $900 billion in COVID relief, including $284 billion for additional Paycheck Protection Program (PPP) loans for new borrowers and “second draw” loans for existing borrowers.

The eligibility requirements for a “second draw” PPP loan (PPP2 Loan) are as follows:

1) The borrower must spend the full amount of the first PPP loan before receiving the PPP2 Loan.

2) The borrower must employ no more than 300 employees per physical location.

3) The borrower must demonstrate a 25% or more reduction in gross receipts in a quarter during calendar year 2020 compared to the same 2019 quarter.

The size of a PPP2 Loan can be up to 2.5 times the average monthly payroll costs during the 1-year period before the loan or during the 2019 calendar year. A borrower in the hospitality or food services industry (with an NAICS code beginning with 72) is eligible for a loan of up to 3.5 times average monthly payroll costs. The amount of each PPP2 Loan is subject to an overall cap of $2 million.

The Small Business Administration has not provided guidance as to how to calculate whether the business suffered a 25% or more reduction in gross receipts.

The SBA is expected to publish a new application form and guidance for PPP2 Loans.

Because the PPP2 Loan program should use much of the existing PPP framework, financial professionals believe the rollout of this new round of loans should go more smoothly compared to the initial PPP rollout last year.

COVID Relief Bill: PPP-Paid Expenses Are Deductible (Updated 12/28/2020)

This past Monday, December 21, a $900 billion pandemic relief bill came out of the U.S. House and Senate. It is called the Consolidated Appropriations Act, 2021. If President Trump signs it, it will become law. Weighing in at 5,593 pages in length, it addresses many areas, including vaccines, education, childcare, jobless benefits, energy, and national security.

Part of the bill is the COVID-Related Tax Relief Act of 2020 (COVIDTRA). One reason why COVIDTRA is getting attention is that it provides direct payments to individual taxpayers, “recovery rebates” – similar to the direct payments that went out to individuals earlier this year.

Another thing COVIDTRA does is clarify that taxpayers whose Paycheck Protection Program (PPP) loans are forgiven ARE allowed deductions for otherwise deductible expenses that were paid with PPP loan proceeds. See COVIDTRA Section 276(a)(1). This overrides the IRS’s earlier position that businesses could not claim deductions for expenses paid with PPP loan proceeds when the loan is forgiven or expected to be forgiven. COVIDTRA also clarifies the tax basis and other attributes of the PPP borrower’s assets will not be reduced as a result of PPP loan forgiveness.

When a PPP loan is forgiven, the borrower does not need to include the amount of the forgiven PPP loan in taxable income. That is a great benefit for the borrower. Now, under COVIDTRA, the ability for taxpayers to deduct expenses paid with forgiven PPP loan money further amplifies the benefits of the PPP loan.

For example, think about a partnership that gets a $100 PPP loan. The partnership spends the $100 on PPP-specific expenses (payroll, rent, etc.), and then has the PPP loan forgiven. The partnership does not pay any federal income tax on the $100. Also, according to COVIDTRA, the partnership can reduce its taxable income by $100 by deducting the $100 that it spent on the PPP-specific expenses. If the owners of the partnership are all taxed at a rate of 37% on ordinary income passed through from the partnership, $100 of PPP money (received tax free) also saves them $37 in taxes.

If it becomes law, this will be a significant tax benefit for many businesses.

On Tuesday, December 22, President Trump threatened not to sign the bill, pressing for higher direct payments and changes to various provisions.  However, on Sunday, December 27, he signed the bill as passed by Congress.

If you have further questions, please contact:

Jim Clarke – 916.558.6084

Mandatory Vaccines in the Workplace? New EEOC Guidance Regarding What Employers Can Do

The FDA’s rollout of COVID-19 vaccinations has given hope to many employers that we may finally be witnessing the horizon of the pandemic. But this good news comes with a few side-effects, including the question of whether employers can require, or even encourage, their employees to get vaccinated.

To that end, on December 16, 2020, the Equal Employment Opportunity Commission (EEOC) issued guidance regarding the COVID-19 vaccinations in the workplace and the interplay with other employment laws.

Newsom Signs Executive Order Modifying CalOSHA’s Emergency Temporary COVID-19 Regulations

On December 14, 2020, Governor Newsom issued Executive Order N-84-20 which, among other things, modified CalOSHA’s emergency COVID-19 regulations.

Background.

On November 30, 2020, CalOSHA’s emergency temporary regulations concerning COVID-19 prevention in places of employment (ETS) went into effect.  Among other requirements, the ETS directed employers to exclude from the workplace for 14 days those employees who have been exposed to COVID-19, reflecting the then-current guidance of the Centers for Disease Control and Prevention (CDC) and the California Department of Public Health (CDPH) on quarantining after being exposed to COVID-19.

However, on December 14, 2020, the CDPH published updated COVID-19 Quarantine Guidance that sets forth new directives, based upon updated CDC guidelines, for when employees exposed to COVID-19 who are asymptomatic may discontinue quarantine.  According to the CDPH’s updated COVID-19 Quarantine Guidance, the following timelines are applicable for quarantine for exposed employees:

  • All asymptomatic close contacts (within 6 feet of an infected person for a cumulative total of 15 minutes or more over a 24-hour period) may discontinue quarantine after Day 10 from the date of last exposure with or without testing.
  • During critical staffing shortages when there are not enough staff to provide safe patient care, essential critical infrastructure workers in the following categories are not prohibited from returning after Day 7 from the date of last exposure if they have received a negative PCR test result from a specimen collected after Day 5:
    • Exposed asymptomatic health care workers; and
    • Exposed asymptomatic emergency response and social service workers who work face to face with clients in the child welfare system or in assisted living facilities.
  • All exposed asymptomatic contacts permitted to reduce the quarantine period to less than 14 days must:
    • Adhere strictly to all recommended non-pharmaceutical interventions, including wearing face coverings at all times, maintaining a distance of at least 6 feet from others, and the interventions required below, through Day 14.
    • Use surgical face masks at all times during work for those returning after Day 7 and continue to use face coverings when outside the home through Day 14 after last exposure.
    • Self-monitor for COVID-19 symptoms through Day 14 and if symptoms occur, immediately self-isolate and contact their local public health department or healthcare provider and seek testing.

Relevant Provisions of the Executive Order.

Because the public health recommendations and the requirements of the ETS should be consistent in order to protect public health, the Executive Order suspended (replaced) the quarantine/return to work periods for asymptomatic individuals as specified in the ETS with those contained in the CDPH’s COVID-19 Quarantine Guidance, or any applicable quarantine or isolation period recommended or ordered by a local health officer. However, the Executive Order expressly states that the suspension (replacement) shall not apply where an employer prevents a worker who returns to work earlier than permitted under the ETS from satisfying any of the conditions [upon return] specified by the CDPH or a local health officer.

Finally, the Executive Order directs Cal/OSHA to promptly provide public notice if it changes the quarantine or return to work periods in the emergency COVID-19 regulations.

A copy of the Executive Order can be obtained here.

COVID-19’s Impact on Leasing and Other Transactions

By Louis Gonzalez, Jr., Josh Escovedo, and Mark Ellinghouse

California Real Property Journal

This article was first published in Volume 38, No. 4, 2020 of the California Real Property Journal, reprinted by permission.

The COVID-19 pandemic has strongly affected contractual relationships in the real estate industry. This article discusses the most important legal defenses for practitioners to be aware of, summarizes and evaluates the few recent cases considering how these defenses apply in the pandemic, and provides recommendations for limiting exposure during future pandemics.

I.      INTRODUCTION

COVID-19 has disrupted commerce and life as we know it. It has resulted in the passing of various ordinances and issuance of executive orders that have shut down businesses, disrupted the labor force, and kept the population at home. This has severely impacted countless businesses, resulting in a massive decrease in revenue and causing numerous businesses to reduce their workforce, if they are even able to stay open. As a consequence, parties have been forced to evaluate the enforceability of their lease agreements, looking for ways to either enforce or excuse performance.

WEBINAR: Employment Law Update 2020/2021 – Part I & Part II

  • When: Jan 6, 2021
  • Where: Webinar

Summary of Program

Our Labor & Employment Group presents our annual Employment Law Update where they discuss important legal developments from 2020 and review a number of new employment laws and relevant court cases impacting employers in 2021

Program Highlights – Part 1 of 2

This part will focus on:

  • Class Actions
  • Independent Contractors Status
  • Wage and Hour Obligations Specific to Non-Exempt Employees
  • Wage and Hour Obligations Specific to Exempt Employees

This seminar was presented and recorded on January 6, 2021. A recording of this webinar can be viewed on the Weintraub Tobin YouTube page. Please note that this webinar is for educational purposes only and should not be construed as legal advice. We recommend that you speak to your professional advisors about the specifics of your business.


Program Highlights – Part 2 of 2

This part will focus on developments in:

  • COVID-19 Specific Laws
  • Harassment, Discrimination and Retaliation Law
  • Leaves of Absence and Reasonable Accommodations Laws
  • Employment, Arbitration and Confidentiality Agreements
  • Privacy Laws

This seminar was presented and recorded on January 13, 2021. A recording of this webinar can be viewed on the Weintraub Tobin YouTube page. Please note that this webinar is for educational purposes only and should not be construed as legal advice. We recommend that you speak to your professional advisors about the specifics of your business.

A Deeper Dive into the New Cal/OSHA Temporary Emergency Standards for COVID-19 Prevention

As we wrote on December 3, 2020, an emergency COVID-19 rule was adopted and approved by the California Occupational Safety and Health Standards Board. The regulation contains significant new requirements including a mandatory written “COVID-19 Prevention Program,” paid time off in certain circumstances when a “COVID-19 case” is excluded from the workplace, notice and training requirements, and requires that employers offer testing in some situations.

The emergency standards will remain in effect for 180 days unless renewed, withdrawn or replaced. It applies to all California employers covered by Cal/OSHA (generally, employers with ten or more employees at any time during the year).

This blog summarizes and highlights some of the key provisions (other than the requirement that employers develop a written “COVID-19 Prevention Program” as discussed in our previous blog).

California Announces New Regional Stay Home Order