3 Ways to Mitigate Risk in Third-Party Liability Lawsuits Due to COVID-19

September 11, 2020

Across the country, nonprofit and human service organizations are dealing with a variety of unforeseen losses and risks related to the COVID-19 pandemic. In addition to quantifiable losses, like revenue and added expenses, organizations also face the specter of being the subject of third-party liability claims or lawsuits related to the spread of the virus.


Employees who contract COVID-19 may be entitled to workers’ compensation benefits. In fact, some states have already made modifications to their codes to create presumptive liability for employers when essential employees test positive for the virus.

Organizations also run the risk that a third party could claim that the employer negligently allowed an infected employee to stay on the job, endangering others and furthering the spread of the virus. Another possible type of claim might allege that a customer, visitor, vendor, or other party contracted the virus due to the nonprofit’s failure to take reasonable precautions to prevent exposure.


The steps your organization takes to mitigate the risk of spreading the virus can be critical in mitigating risk in third-party liability suits. Because COVID-19 is so new, there is little established law to draw on when trying to determine how a court might rule in a liability action against a nonprofit or human service organization. However, taking the following steps can help you establish a defense if it is ultimately needed:

Follow public health practices. If a third party claims your organization was negligent in its response to COVID-19, your first line of defense is to demonstrate that you implemented recommended safety precautions and followed local, state, and national health guidelines and recommendations. These include (but are not limited to) encouraging frequent hand washing, cleaning and sanitizing surfaces regularly, quarantining sick employees or volunteers, enforcing social distancing, encouraging the use of masks and other personal protective equipment as appropriate.

Hold virtual events and fundraisers. Nonprofits that choose to hold in-person fundraisers and other events during the pandemic face an increased likelihood of third-party liability suits, simply because the risk of exposure at such events is increased. If you hold events in person, consider how you can do so while limiting the risk of viral spread. For example, outdoor events where social distancing is possible and masks are required will be viewed as more responsible than crowded, indoor events with no PPE or other safety measures. Some nonprofits have embraced online events as an alternative during this uncertain time, which is likely the best option.

Document your actions. If you implemented new policies or procedures as a result of COVID-19, document them in writing, including adoption date(s) as well as how and when the new measures were communicated to your employees. Creating and maintaining a paper trail showing your actions and compliance with health guidelines and requirements can help you refute allegations your organization was negligent in some way. Similarly, if an employee is sent home because of suspected COVID-19 or if disciplinary actions are taken against an employee who refuses to comply with new rules, document those steps as well.

Remember that, no matter how solid your policies, procedures, actions, and documentation are, you cannot completely eliminate the risk that someone will institute third-party liability litigation against you in this COVID-19 environment. However, by implementing the recommendations above, you can increase your likelihood of a successful outcome.

At Lamb Insurance Services, we work exclusively with nonprofit and human service organizations of all sizes, helping them reduce risk through property and liability protection, employee benefits solutions, and more.

Lamb recognizes that COVID-19 has created many challenges for nonprofit and human service organizations. That’s why we’ve made it EASY for you to submit changes to payroll for your workers’ compensation policy and vehicle schedule for your auto policies. Click below to proceed with your change requests.