2020

(Last updated March 25, 2020)

As promised, the DOL has issued a poster regarding employee rights under the Families First Coronavirus Response Act (“FFCRA”). While the FFCRA requires that covered private employers (fewer than 500 employees) put this poster in a conspicuous place on its premises, the DOL’s Q&A issued with the poster states employers can meet this requirement by emailing or direct mailing the poster to employees, or by posting the notice on an employee information internal or external website.

The poster can be found at: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf.

The Q&A on the notice requirements can be found at: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions.

The DOL has also issued several other guidance documents related to FFCRA benefits, requirements, and enforcement, which can be found at: https://www.dol.gov/agencies/whd/pandemic.

If you have any questions regarding the above, please contact:

Mike Birrer		Parker Graham
[email protected]		[email protected]
214.855.3113		214.855.3350

(Last updated March 25, 2020)

The wide reaching economic effects of the COVID-19 virus have placed substantial economic pressure on domestic small businesses. Specifically, government mandated business closures have left many small businesses with zero cash flows and no option but to close their doors for the foreseeable future. Understanding the bind that the virus has placed on small businesses, the U.S. Small Business Administration (SBA) recently announced that it would invoke the Economic Injury Disaster Loan (EIDL) program for businesses affected by the economic hardships of the COVID-19 pandemic.

What is an EIDL?

The EIDL program provides low-interest rate loans to small businesses and non-profit organizations which may be used to pay fixed debts, payroll obligations, accounts payable, and other obligations which the applicant is struggling to pay due to the effects of the COVID-19 pandemic. Depending on the individual applicant’s circumstances, each affected small business may borrow up to $2 million dollars, payable over a maximum term of 30 years.

Is my Small Business Eligible?

EIDLs are available only to small businesses and non-profits which the SBA determines have suffered economic injury as a direct result of the COVID-19 pandemic, and are unable to receive credit elsewhere. In addition, the principal office of the applicant must be located in a state that has an EIDL declaration. As of the date of this article, a large majority of U.S. states, including Texas and its boarding states of Oklahoma, Arkansas, Louisiana, and New Mexico, have received an EIDL declaration. Last, the SBA’s ultimate acceptance of an EIDL applicant is subject to customary underwriting and creditworthiness checks, which may include, among other things, whether the applicant has previously defaulted on an SBA loan.

How Can I Apply?

The SBA is now accepting EIDL applications through December 21, 2020. Prospective borrowers may apply in person or by mail, but are encouraged to apply online. Among other documents which may be requested by the SBA, each applicant is required to submit to the SBA: (1) SBA Form 5 Business Loan Application; (2) IRS Form 4506-T (authorizing the SBA to request a transcript of two years of tax returns); (3) a copy of the recent federal income tax returns of the applicant; (4) SBA Form 413 Personal Financial Statement (the personal financial statements of each owner of the applicant disclosed on the Form 5); and (5) a schedule of liabilities of the applicant (applicants may use SBA Form 2202).

How Long Does the Approval Process Take?

The SBA is currently publishing approval times of 18 to 21 days from the date the applicant submits a completed application. Further, it may take an additional five business days after approval for the loan to fund. However, it may be reasonable to expect delays from the published wait times due to the unprecedented nature of the COVID-19 pandemic. Accordingly, we recommend that any small business considering an EIDL submit its application as soon as possible.

If you have any questions regarding the SBA’s EIDL program, obtaining an EIDL, or the application process, please contact:

Bonnie Barksdale		Hayden Baker		Michael Lin
[email protected]		[email protected]		[email protected]
214.855.3119		214.855.3140		214.855.3525

(Last updated March 24, 2020)

Many viewers were perhaps left with an incorrect impression following the press conference by Collin County Judge Chris Hill this morning announcing Collin County’s “Stay Home, Work Safe” order. Notably, Judge Hill made the comment that all businesses in Collin County are “Essential Businesses.” This has led some to erroneously believe that businesses that were previously closed or limited under Texas Governor Greg Abbott’s Executive Order No. GA-08 issued on March 19, 2020 (the “Governor’s Order” – a full copy of which is linked here) are now free to open up and function again. Such is not the case.

Judge Hill made clear – during the Q&A session following his announcement – how the government hierarchy works. He clarified that the Governor’s Order controls over any conflicting county or city orders. Working down the chain, in similar fashion County Judge orders control over any conflicting orders of individual cities within the applicable county. With that established, let’s unpack the Order of Collin County Judge Chris Hill issued on March 24, 2020 (the “Collin County Order” – a full copy of which is linked here).

First, Judge Hill made clear that any person “who is sick or currently experiencing common COVID-19 symptoms, including fever, cough, or shortness of breath, is . . . ordered to stay home . . .” until such time as (i) such individual has had no fever for 72 hours without use of fever reducing medication; (ii) such individual has seen improvement in the other symptoms; and (iii) at least 14 days have passed since the symptoms first appeared. The Collin County Order further requires that any person in a household with someone who has tested positive for COVID-19 must stay home and may not travel to work, school or any community functions until cleared by a medical professional. The only exception to this is that such a person may leave home to seek necessary medical or emergency care.

Second, all persons in Collin County are ordered to stay home, except for travel related to essential activities (and entertainment activities are not essential activities). In the Collin County Order, Judge Hill did not provide a definition for essential activities.

Third, persons at higher risk for severe illness have a responsibility to take actions necessary to protect their own personal health and to mitigate their own risk and potential exposure to COVID-19. Persons believing that they are at higher risk for severe illness from or are compromised by exposure to COVID-19 are ordered to stay home for the duration of the Collin County Order or until such person believes that he or she is no longer at higher risk for severe illness.

Fourth, all businesses and employers are hereby ordered to take actions necessary to prevent the spread of COVID-19, to increase social distancing in the normal course of business activities, and to provide for a safe and healthy work environment. Further, all persons are ordered to take actions necessary to prevent the spread of COVID-19 and to increase social distancing in the normal course of business activities. Social distancing includes staying 6 feet away from other people, avoiding mass gatherings, working from home if possible, canceling or postponing large meetings, and not shaking hands. Where social distancing is not possible, extreme care should be taken.

Fifth, the Collin County Order states that pursuant to the Governor’s Order, every person in Texas shall avoid gatherings in groups of more than 10, and shall avoid eating or drinking at bars, restaurants, and food courts, or visiting gyms or massage parlors, but the use of drive-thru, pickup, or delivery options for bars, restaurants, and food courts is allowed and highly encouraged.

Finally, the Collin County Order states that all businesses, jobs, and workers are essential to the financial health and well-being of the local economy and therefore are essential to the financial health and well-being of Collin County citizens.

So where does this leave us? Instead of ordering specific actions and making a judgment call on which businesses are essential and which are not, Judge Hill generally seems to be saying that he trusts businesses and individuals in Collin County to do the right thing to combat the spread of COVID-19. To be clear, the Collin County Order is a stay at home order and Collin County residents should only leave home for essential purposes – and – once again – recreation is not essential (although exercise conducted outside with proper social distancing is acceptable according to Judge Hill’s Q&A responses).

So, can most businesses in Collin County stay open? Yes, it would seem that they can unless they have been restricted or otherwise limited by the Governor’s Order or unless they are not able to properly practice social distancing or to implement appropriate protective measures where social distancing is not possible.

The Collin County Order is effective immediately and shall continue for a period of not more than 7 days unless continued or renewed.

We will continue to monitor developments in the DFW Metroplex and will provide updated alerts as applicable.

(Last updated March 24, 2020)

As a follow-up to its Declaration of Local Disaster due to Public Health Emergency issued on March 13, 2020 (as updated and amended on March 17th, 18th, and 21st), Tarrant County Judge B. Glen Whitley issued Tarrant County’s shelter-in-place order on March 24, 2020 (the “Order”). The Order has been referred to as the “Stay Home, Work Safe” order and is effective as of 11:59 p.m. on March 24, 2020 until 11:59 p.m. on April 7, 2020, unless rescinded, superseded or amended. A full copy of the Order is linked here.

So, what does this new Order mean for Tarrant County residents and businesses and how does it compare to the somewhat similar order issued in Dallas County effective March 23, 2020 at 11:59 p.m. (the “Dallas Order”)?

The Tarrant County Order is similar in many respects as the Dallas Order in that it requires all Tarrant County residents to stay at their place of residence except as allowed by the Order, but it also provides additional clarifications and includes additional business types in the definition of “Essential Businesses” and allows non-Essential Businesses to continue to have employees perform Minimum Basic Operations (described below).

Activities
Under the Order, the reasons that residents of Tarrant County can leave their homes include Essential Travel, Essential Activities, to work in Essential Businesses, Government Service, Essential Critical Infrastructure, or to perform Minimum Basic Operations.

Essential Travel – generally includes (i) travel related to other permitted functions under the Order (e.g. traveling to permitted work, necessary medical-related travel, grocery trips); (ii) travel to care for elderly, minors, dependents, persons with disabilities, or other vulnerable persons); (iii) travel to and from educational facilities for the purpose of receiving materials for distance learning and to receive meals (as applicable); (iv) travel to return to a residence in Tarrant County and travel to leave Tarrant County to return to a residence outside of Tarrant County; (v) travel required by law or court order; (vi) travel by clergy providing religious services and other ministries; and (vii) travel related to funerals.

Essential Activities – The Tarrant County Order is generally consistent with the Dallas Order in its definition of “Essential Activities,” which includes activities necessary for health and safety of family or household members (including seeking medical care, medication, medical supplies or supplies needed to work from home), obtaining necessary services or supplies such as food, pet and livestock supplies, and other household consumer products, engaging in outdoor exercise activity in compliance with social distancing standards, performing work providing essential products and services at an Essential Business and to care for a family member or pet in another household.

Essential Businesses – The Order is also generally consistent with the Dallas Order’s definition of Essential Businesses. For the sake of brevity, we don’t reiterate the listing of all Essential Businesses here (our Dallas County Client Alert can be found here), but the following is a listing of the additional categories of businesses added to Tarrant County’s definition: (i) the definition of Financial Services was broadened to include consumer lenders, alternative financial services companies, appraisers and title companies; (ii) real estate transactions (but as much as can be done remotely through technology should be); (iii) animal shelters, zoos and related facilities (no visitors are permitted but staff can be there to care for animals); (iv) funeral services (but no more than 10 non-employees may attend); (v) construction under valid permits; (vi) moving services and moving supplies. Notwithstanding a designation as an “Essential Business,” employers should ensure that all employees and contractors who can work from home do so. Additionally, all Essential Businesses must still practice social distancing to the extent possible and establish screening procedures for employees to ensure that sick employees do not report for work.

Minimum Basic Operations – One key (and useful) additional designation in the Tarrant County Order which was not included in the Dallas Order is that of permissive Minimum Basic Operations. The Dallas Order created a dilemma for non-Essential Businesses and raised questions as to whether skeleton crews of employees were permitted to enter Dallas County non-Essential Businesses to perform critical functions. The Order in Tarrant County, in contrast, is clear that businesses can, provided that social distancing is observed, have employees enter the business to perform the minimum necessary activities to maintain the value of the business’s inventory, ensure security, process payroll and employee benefits, facilitate online or call-in sales (provided that the business is closed to the public), in-store repairs (provided the store is closed to the public), and to undertake necessary tasks (such as IT) to enable the majority of employees to be able to work remotely from their residences.

A few additional items set forth in the Tarrant County Order include: (i) a prohibition against price gouging (defined as charging more for something than the seller charged on March 16, 2020); (ii) if someone in a residence has tested positive for coronavirus, the entire household must isolate at home and residents of that household may not go to work, school, or any other community function; (iii) religious services are to be online only; (iv) restaurants, microbreweries, micro-distilleries and wineries may only provide take out, delivery or drive-through services, and (v) except as otherwise expressly permitted by the Amended Order, all public or private gatherings of any number of people other than within a single household or living unit by members of such household or unit are prohibited. Notably, the Tarrant County Order (unlike the Dallas Order) did not establish a moratorium on eviction proceedings.

We will continue to monitor developments in the DFW Metroplex and will provide updated alerts as applicable.

(Last updated March 23, 2020)

On March 12, 2020, Dallas County Judge Clay Jenkins issued a Declaration of Local Disaster for Public Health Emergency due to a novel coronavirus now designated SARS-CoV2 which causes the disease COVID-19. On the same day and in relation to the referenced declaration, Judge Jenkins issued an Order to “protect the safety and welfare of the public by slowing the spread of the virus.”

On March 22, 2020, Judge Jenkins issued an Amended Order entitled “Stay Home Stay Safe” which amounts to a shelter-in-place order for Dallas County effective as of 11:59 p.m. on March 23, 2020 until 11:59 p.m. on April 3, 2020, unless rescinded, superseded or amended. A full copy of the Amended Order is linked here.

So, what does this mean for Dallas County residents and businesses?

First, all residents living in Dallas County are ordered to shelter at their place of residence (with residences including hotels, motels, shared rentals, and similar facilities) and that they should not leave their residences except for “Essential Activities.” Essential Activities are defined to include acts such as obtaining medical supplies, medication and food, visiting a healthcare professional, obtaining supplies needed to work from home, obtaining (or delivering to others) other products necessary to maintain the safety, sanitation, and essential operation of residences, engaging in outdoor activities compliant with the social distancing requirements of six feet (for example, walking, biking, hiking or running), performing work providing essential products and services at an Essential Business (described below), and caring for a family member or pet in another household.

Additionally, and of equal importance, all businesses in Dallas County, except for Essential Businesses, are ordered to “cease all activities” at facilities located within the County, with the Amended Order clarifying that businesses in the County may continue operations “consisting exclusively of employees or contractors performing activities at their own residences.” Essential Businesses include the following general classifications:

(1) Essential Healthcare Operations – Healthcare operations, interpreted broadly, are to continue (for obvious reasons) and include broad classifications of medical, dental pharmaceutical and veterinary services, but expressly exclude fitness and exercise gyms and similar facilities, as well as elective medical, surgical and dental procedures.

(2) Essential Government Functions – All services provided by local governments needed to ensure the continuing operation of the government agencies to provide for the health, safety and welfare of the public.

(3) Essential Critical Infrastructure – Work “necessary to the operations and maintenance” of 16 critical sectors including (1) public works construction, (2) residential and commercial construction, (3) airport operations, (4) water, (5) sewer, (6) gas, (7) electrical, (8) oil refining, (9) roads and highways, (10) public transportation, (11) solid waste collection and removal, (12) internet; (13) telecommunications systems, (14) financial institutions, (15) defense and national security and (16) essential manufacturing.

(4) Essential Retail – Food supply chain businesses (including production, processing, transportation and distribution), laundromats, dry cleaners, gas stations, auto supply, auto and bicycle repair, hardware stores and businesses that supply products for people to work from home.

(5) Providers of Basic Necessities to Economically Disadvantaged Populations – Self-explanatory.

(6) Essential Services Necessary to Maintain Essential Operations of Residences or Other Essential Businesses – Trash services, mail and shipping, building cleaning and maintenance, warehouse/distribution and fulfillment, storage for essential businesses, funeral homes and cemeteries, trades necessary for safety, sanitation and essential operations of residences and Essential Businesses, professional services when necessary to assist with legally mandated activities.

(7) News Media – Self-explanatory.

(8) Childcare Services – for children of employees of Essential Businesses who need to work away from home.

Notwithstanding a designation as an “Essential Business,” employers should ensure that all employees and contractors who can work from home do so. Additionally, all Essential Businesses must still practice social distancing to the extent possible and establish screening procedures for employees to ensure that sick employees do not report for work.

A few additional takeaways from the Amended Order: (i) eviction hearings and writs of possession in the County are suspended for at least the next 60 days; (ii) if someone in a residence has tested positive for coronavirus, the entire household must isolate at home and residents of that household may not go to work, school, or any other community function; (iii) religious services are to be online only; (iv) restaurants, microbreweries, micro-distilleries and wineries may only provide take out, delivery or drive-through services, and (v) except as otherwise expressly permitted by the Amended Order, all public or private gatherings of any number of people other than within a single household or living unit by members of such household or unit are prohibited. One final note, at his press conference on the Amended Order, Judge Jenkins made clear that employment by a resident of Dallas County by an out-of-county non-Essential Business does not excuse such resident from the shelter in place order and that they are prohibited from traveling to such out-of-county employment.

We will continue to monitor developments in Dallas County as well as other surrounding counties and will provide updated alerts as applicable.

David Heidenreich

[email protected]

214.855.3031

(Last updated March 23, 2020)

COVID-19 is rapidly impacting much of our society and our economy, and your business may be hard-pressed in the near future. Some businesses are reeling from the impacts of forced closure, and many others may soon be impacted by supply chain and labor issues as the workforce adjusts to living in the time of the pandemic.

The real estate and construction industries are already feeling the impact, and clients are facing several questions. How will COVID-19 impact your tenants? What will be the impact on your construction projects? Is there any relief for your businesses ongoing obligations in light of a severe slowdown, or possibly a forced shutdown.

Carrington Coleman is working to alert our clients to many of the legal issues that will arise as a result of the current crisis. This alert addresses “force majeure” clauses, which are common in many contracts, including those involving real estate such as construction contracts and leases. Many contracts may lack these clauses, but Texas recognizes the concepts of “frustration of purpose”, “impossibility of performance”, and “commercial impracticability” to excuse performance when it becomes impossible.

Force Majeure or “Acts of God”

A force majeure clause allocates risk for events beyond a party’s control. These commonly include floods, earthquakes, other natural disasters, and governmental actions. If the phrase “force majeure” does not appear in your contract, look for “act of god” or other provisions that address performance in the face of changed circumstances. Evaluation of the applicability of force majeure clauses requires an analysis of both the specific language of the contract and the factual situation.

Many construction contracts use the AIA form documents.  The unmodified language in the A201 General Conditions § 8.3.1 provides contractors an extension of time to complete the project if there are “labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions . . . , or other causes beyond the Contractor’s control.” Because COVID-19 may cause labor shortages as employees become ill, or supply shortages based on the impact on the supply chain, Owners should expect Contractors to claim COVID-19 justifies an extension. Section 8.3.1 is often heavily negotiated or edited, however, so parties should read their particular contract carefully, particularly those relating to adequate labor forces.

While the contract provisions provide guidance to avoid or resolve disputes about responsibility for delays and cost increases, both Owners and Contractors should be motivated to mitigate disruptions and complete projects. In many instances, transparent discussions regarding the constraints and mitigation solutions available could be more helpful than circling the wagons. It may make much more sense to negotiate change orders that adjust scope, schedule, and pricing rather than allowing projects to come to a halt and hoping a judge, jury, or arbitrator will make things right.

Owners and occupants of existing buildings will also need to closely review the force majeure clauses in their lease agreements. As issues arise between landlords and tenants in the midst of this crisis, a force majeure clause in a lease can offer protection if performance of lease obligations is impossible or delayed due to an uncontrollable event, like COVID-19. While a tenant’s obligation to pay rent and other monetary obligations may be commonly excluded from force majeure clauses, performance of non-monetary lease obligations, such as a landlord’s obligation to provide access to the leased premises or timely construct and deliver the leased premises to a tenant, or a tenant’s obligation to continuously operate its business in the leased premises, may be excused during an applicable force majeure event. Landlords and tenants should pay careful attention to the force majeure clauses in their leases to determine whether COVID-19 triggered such clauses and whether performance of certain lease obligations are or are not excused if such clauses are triggered.

I Don’t Have a Force Majeure Clause—Am I Just Out of Luck?

What if your contract does not have a force majeure clause?  Are you left with absolutely no argument?  No.  Texas courts have recognized the interchangeable concepts of “frustration of purpose”, “impossibility of performance”, and “commercial impracticability” to excuse performance when supervening circumstances made performance under the contract impossible.  The doctrines do not apply in every instance as impossibility is a high threshold, but Texas courts have recognized three situations in which they may be available:  (1) death or incapacity of a person necessary for performance, (2) the destruction or deterioration of a thing necessary for performance, and (3) prevention by government regulation.  It remains possible that the global supply chain interruptions and government-ordered closures of businesses in response to the current health pandemic might trigger common law protections.

(Last updated March 23, 2020)

On March 21st, the IRS issued Notice 2020-18 which supersedes its earlier guidance (i.e., Notice 2020-17) issued two days earlier. This Notice is more taxpayer friendly and resolves uncertainties relating to Tax Day responsibilities.

All federal income tax payments (regardless of amount) otherwise due on April 15^th and related tax filings have been extended for 90 days.  For the first time, July 15^th is the new Tax Day.

Below are the most important things for our clients to know. 

Taxpayers.  All taxpayers (individuals, trusts, estates, C corporations, S corporations, limited liability companies and partnerships) are covered by the new payment/filing rules.

Taxes.  All federal income taxes (including self-employment taxes) otherwise due on April 15th are covered.  This includes all income tax payments for 2019 and 2020 estimated income tax payments.  There is no limit on the amount of these payments that may be extended. The new rules do not apply to estate, gift or state taxes. However, most states will piggyback these changes, but that’s subject to each state’s discretion.

Extensions.  Nothing needs to be filed.  The extensions are automatic and require no taxpayer action.

Interest & Penalties.  No interest or penalties if tax filings and payments are made on or before July 15th.  Interest and penalties will begin to accrue on July 16th.

Refunds.  Taxpayers in a refund position should, as always, file their returns as soon as possible.  The IRS, as always, encourages taxpayers to file electronically.

Updates.  The IRS has set up a special webpage (Coronavirus Tax Relief) to update new information as it becomes available. A good source to track state changes is AICPA’s State Tax Filing Guidance for Coronavirus Pandemic.

Taxpayers should consult with their tax return preparer regarding the advisability of deferring their tax payments and filing their tax returns, and for any future updates.  Our firm will continue to monitor and provide you with important tax updates.

Ashley McMillan		Bob Botts		Bruce Hendrick
[email protected]		[email protected]		[email protected]
214.855.3066		214.855.3105		21.855.3033
Catherine Bright Haws		Laura Hebert
[email protected]		[email protected]
214.855.3002		214.855.3109

(Last updated March 20, 2020)

It is an understatement to say the current Coronavirus crisis is unprecedented. As individuals and businesses, we are all facing risks few of us ever contemplated. Ordinarily, one source of potential assistance when faced with financial risks is insurance. Naturally, many people have asked whether any of the policies for which they have been paying premiums for years provide any protection against the potentially devastating losses they are confronting now.

The answer, unfortunately, is complicated, and often not particularly promising. As always, whether you are covered for a particular loss depends on two things: the terms of the relevant policies and the actual facts creating the loss. The purpose of this Client Alert is to offer some general guidelines and suggest the first steps towards determining what, or whether, coverage might be available. I will focus on the most pressing issue for most businesses—coverage for lost income resulting from the current crisis. Liability risks and policies will be addressed in subsequent alerts.

BUSINESS INTERRUPTION COVERAGE IN PROPERTY POLICIES

A common problem facing many businesses right now is the dramatic loss of profits caused by emergency orders either requiring or encouraging them to shut down the business altogether or drastically reduce operations. Most commercial property policies include some amount of coverage for business losses under certain circumstances. This is generally known as “Business Interruption” coverage. Typically, the coverage is triggered by “direct physical loss or damage” to covered property. For example, if a business is damaged by fire and has to close operations while the damage is repaired, the policy will pay to repair or replace the structure, and will also pay for a limited amount of profits lost while the business is closed and for a limited period of “restoration” after it is reopened. A threshold issue, therefore, is whether the business interruption is the result of “direct physical loss or damage” where a business has closed or reduced operation because of actual or potential virus contamination.
As with many other issues, courts in some states have been more “generous” than others in finding physical damage in similar situations, and the facts of a specific situation can make or break an insurance claim. Certainly, proof of actual contamination, rendering a building uninhabitable or unfit for its ordinary use, is more likely to satisfy the physical-damage test than a voluntary closure prompted solely by a concern for public health and compliance with “social distancing” recommendations. In any event, the meaning of “direct physical loss” is not as cut and dried as many insurance companies and adjusters are likely to assume.

Another, related provision contained in some property policies is coverage for business interruption attributed to an order of a civil authority prohibiting access to your building. This coverage often has a lower limit of coverage than the core property policy. These provisions also vary in the extent to which they require physical damage to your property or other property in some proximity to the covered building.

Another obstacle to coverage for business interruption losses under many policies will be the requirement that the business completely close before coverage is triggered. Disputes are likely to arise in connection with businesses that continue operations, but on a drastically reduced basis, such as doing only take-out or delivery for a period of time.

At least one lawsuit has already been filed to determine the scope of coverage under a government-ordered closure provision. Oceana Grill, a French Quarter restaurant, filed suit in a Louisiana court seeking a declaratory judgment construing the “direct physical damage” requirement in light of statewide orders curtailing the size of gatherings and requiring restaurants to close on-site dining. The issues may prompt a “battle of experts” on how long the coronavirus can contaminate a building and render it unusable. Similar lawsuits can be predicted in other jurisdictions, including Texas.

Importantly, some property policies even have an endorsement expressly extending coverage to damages attributed to virus, bacteria, or similar contamination. More often, however, policies have explicit endorsements excluding all coverage for loss or damage caused by such perils. There have been efforts by some legislatures, notably New Jersey, to compel insurers not to enforce the virus exclusion in this circumstance, at least for businesses with fewer than 100 employees. Removing the exclusion, however, would not necessarily resolve the “physical damage” issues, which could prompt even more drastic legislative action in some states (probably not Texas).

Finally, several members of Congress sent a letter on March 18, 2020, to CEOs of four large insurance associations urging the industry to “recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage” in order to “help sustain America’s businesses through these turbulent times.”

FIRST STEP

As should be clear from this discussion, insurance policies are not all the same. Although there are a few standard forms and similar terms in many policies, there also nuances in language that can spell the difference between coverage and no coverage in a particular situation. There are also a number of endorsements that can either add or exclude coverage for certain types of loss. And every policy has a deadline for giving notice to the insurer, generally tied to the date of the loss, as well as limitations on what actions a policyholder may take without impinging on coverage.

So, the first step is to collect your policies. If you don’t already have copies in your files, ask your insurance agent or broker to provide copies. Reading the policies, of course, can be a daunting task for the average individual. Carrington Coleman’s experienced insurance attorneys are prepared to help you understand the scope of your coverage and, if necessary, work with you in diligently pursuing your claims.

Lyndon Bittle		Brent Rubin
[email protected]		[email protected]
214.855.3096		214.855.3123

(Last updated March 19, 2020)

COVID-19 has created a pandemic of fear that involves a public health crisis, an economic crisis and a financial crisis all rolled into one. It has created a fundamental disruption of not only our personal lives but also our business lives. At this time, the short term consequences are simply unknowable. Our best advice is to hope for the best, but expect the worst. Since hope is not a strategy, for many of our clients, the “name of the game” is cash preservation and protecting your short term liquidity.

Here’s a list of ten things to consider doing now:

1. Line of Credit. Contact your bank and ask for an increase in your line of credit.

2. Loan Terms and Certain Lending Agreements. Contact your lender and ask to defer upcoming coupon payments. Consider renegotiating the loan terms. Have an art collection? You can use your collection to borrow the cash you need now, and still enjoy the art on your wall. Many financial institutions offer loans secured by art. Bank of America, Levart, Citibank, Athena Art Finance, Morgan Stanley, and many other lenders offer low-interest loans leveraging your collection and allowing you to keep possession of your art.

3. Customers. Stay in close communication with your customers. And carefully monitor your accounts receivables.

4. Liquidity. Tap other sources of liquidity such as short term lender solutions or sales of under-utilized assets.

5. Tax Changes. Take advantage of all tax deferral opportunities. Most tax payments otherwise due on April 15th (for 2019 taxes and 2020 estimated tax payments) are extended for 90 days (with no interest or penalty). We expect more tax relief may be forthcoming from the Treasury.

6. Agreements. Contact your vendors to negotiate an installment payment plan. Consider renegotiating your lease with your landlord. If it would work for your business, request one to three free months of rent in exchange for a one or two-year lease extension.

7. Employees. Consider the necessary workers. Consider furloughs or temporary layoffs of employees as needed, with eligibility for rehire and offers to return to work when the need returns. And consult employment counsel for separation agreements as needed.

8. Notice. Be sure to consult with your employment counsel with respect to the WARN Act and other federal, state and/or local law which may impact the notice and other requirements to layoff/terminate employees.

9. New Laws. Monitor evolving protections for employees, such as the Families First Coronavirus Response Act, which applies to all public employers and private employers with fewer than 500 employees, and requires paid leave under certain circumstances for employees who would not otherwise be eligible for paid leave.

10. Litigation. Businesses engaged in litigation should be aware that the courts are issuing temporary, emergency rules that in many instances extend deadlines, delay hearings already set, convert otherwise in-person hearings to telephonic hearings or set the hearings to take place other than at the courthouse, temporarily relax certain rules regarding the use of affidavits in lieu of live witnesses, and the like. The Supreme Court of Texas has even authorized individual courts to extend statutes of limitations for a limited time. These emergency measures vary from court to court and district to district. You should contact your litigation attorneys to explore how these measures may affect your pending cases.

Strong leadership is especially important during this difficult time. Together, we will all get through this. Please do not hesitate to contact us if you have any questions or we can help you in any way.

Bruce Hendrick		George Lee		Bret Madole
[email protected]		[email protected]		[email protected]
214.855.3033		214.855.3035		214.855.3034
Laura Herbert		Andrea Perez		Mike Sutherland
[email protected]		[email protected]		[email protected]
214.855.3109		214.855.3070		214.855.3069
Hayden Baker
[email protected]
214.855.3140