Capturing data happens more often than you might think across our everyday lives, from a company monitoring its employees’ emails to security footage filming you in a retail shop.  Whether you are an employer, employee, or store patron, here’s what you need to know before peeking into someone else’s inbox or recording in public spaces.

One of the many side effects from COVID-19 was that businesses found themselves relying on a decentralized workforce spread across the city, state, or even international lines. Those companies who lost the centralized office are now investing in employee monitoring software to manage employee productivity and performance, protect confidential business information, ensure system security, and limit liability for employee misconduct. Again, when stated in such a manner, the software sounds like a reasonable business tactic to play a critical role in certain kinds of risk mitigation. But these systems can also significantly increase a business’ legal risk if not used properly.

Employers should take comfort in a monitoring company email. Texas’ common law does not recognize any right of privacy in the contents of electronic mail systems and storage provided to employees by the employer as part of the employment relationship. Id. McLaren v. Microsoft Corp., No. 05-97-00824-CV, 1999 WL 339015, at *4 (Tex. App.—Dallas May 28, 1999, no pet.) (holding that email messages contained on a company computer or sent over a company email system are inherently company-owned and not personal property). Therefore, an employee has no reasonable expectation of privacy in the contents of materials sent or stored on a company computer system. It is not limited to the company computer itself and goes to the less discrete storage system for email, the server-based “inbox.” Id. Meaning, emails sent over a company’s email server or domain belong to the company, not the individual. Even if the employee sends a personal email over the employer’s server, the employer has the right to review it (as the employer owns the domain and associated addresses).

Outside of the employer-employee context, intercepting or disclosing emails that are not yours carries severe civil penalties. “A person whose wire, oral, or electronic communication is intercepted or disclosed has a civil cause of action against the interceptor or discloser.” Texas Civ. Prac. & Rem. Code § 123.002. “Such a person is entitled to recover $10,000 for each occurrence, actual damages in excess of $10,000, as well as punitive damages and attorney fees and costs.” Texas Civ. Prac. & Rem. Code § 123.004.

Federal law is similar. Section 2520 of the Federal Wiretap Act (the “FWA”) creates a civil remedy for “any person whose wire, oral, or electronic communication is intercepted, disclosed, or intentionally used in violation of this chapter[.]” 18 U.S.C. § 2520(a). A violation of the FWA occurs when a person intentionally intercepts a wire, oral, or electronic communication, or discloses or uses the contents of such communication if the person knows the information was obtained unlawfully. 18 U.S.C. § 2511(a)–(d). Any endeavor, directly or through another person, to engage in such activity, is likewise unlawful. Id.; see Steve Jackson Games, Inc. v. U.S. Secret Service, 36 F.3d 45, 461–62 (5th Cir. 1994) (emails are electronic communications for the purposes of the FWA).

Tape recording or filming your employees at work is less clear. Texas, like the majority of states in the U.S., is a “one-party” consent state. This means that one party to the conversation must consent in order for it to be recorded. In short, if you are a party to the conversation, you may record it without informing the other party. If you are not, then one party to the conversation must give you permission to record it. Without this consent, it is a crime to intercept or record any “wire, oral, or electronic communication.” Texas Penal Code § 16.02. In addition to criminal prosecution, and as mentioned above, violating wiretapping laws can expose you to a civil suit for damages. Texas Civ. Prac. & Rem. Code § 123.002. It can also expose you to the invasion of privacy claims.

Yet, any civil claim for invasion of privacy requires that the plaintiff plead and prove at least one of the following four torts:

(1) Intentional intrusion upon the plaintiff’s seclusion or solitude or into the plaintiff’s private affairs (which would be highly offensive to a reasonable person);

(2) Public disclosure of embarrassing private facts about the plaintiff;

(3) Publicity which places the plaintiff in a false light in the public eye; or

(4) Appropriation, for the defendant’s advantage, of the plaintiff’s name or likeness.

When assessing the offensive nature of the invasion in (1) above, courts require the intrusion to be unreasonable, unjustified, or unwarranted. This type of invasion of privacy is generally associated with either a physical invasion of a person’s property or eavesdropping on another’s conversation with the aid of wiretaps, microphones, or spying.

Bottom line, intercepting or disclosing emails that are not yours and recording others without consent when you are not a party to the discussion are illegal acts under several statutes and carry criminal and civil penalties. If you intend to record conversations of employees, co-workers, people located in more than one state, or wholesale filming of interactions in your workplace, consult an attorney.

3 key points: (1) many business interruption insurance claims policies have exceptions for communicable diseases, viruses, bacteria or fungi—this is the first place to look to determine whether you are covered; (2) insurers are denying coronavirus-related claims from small businesses even if they do not have those exceptions in their policies—despite this, insureds can still file claims arguing coverage is triggered; and (3) restaurants are lobbying lawmakers and suing insurers to get payouts—there is hope for small business owners in the foreseeable future.

  1. Exclusions, Endorsements

Whether you have insurance coverage for COVID-19 business losses can hinge on several factors. If there is a specific virus exclusion written in to the policy, it will be difficult to argue for the insurer to cover your claim. Many insurers began adding virus and pandemic exclusions following the SARS outbreak in the early 2000s and rely on this language as the basis for claim denial. Lobbying and litigation, as discussed below, could change that in the near term and preclude virus exclusion enforcement.

If your policy does not contain express exclusionary language, it may either contain language endorsing business interruption coverage for viruses and pandemics or be silent on the issue. If your policy contains endorsing language, your insurer will likely provide coverage without issue. If your policy is silent regarding coverage for virus or pandemic related business losses, most disputes between insurers and insureds will result from whether there was an applicable act of civil authority (in general, to implicate civil authority coverage, there must be physical damage to property other than the covered premises), what the applicable stay-at-home order states, or whether the policy language requires direct “physical loss or damage” to the covered property itself.1

2. “Physical loss or damage” to covered property

Most policies require “physical loss or damage” to covered property to trigger coverage. Insurers are denying claims arguing that the virus does not constitute “physical damage” to the property. On the other hand, several recently filed lawsuits seek declarations that if COVID-19 is found within the covered property, because COVID-19 may spread through “formites” for up to 28 days, the property has suffered “physical loss” triggering the business income coverage provision.2 What constitutes physical loss or damage is and will likely continue to be a litigated issue nationwide for the foreseeable future.

3. Lobbying and Litigation

Current lobbying efforts and a wave of lawsuits seek to preclude virus exclusion enforcement and force insurers to cover business losses related to COVID-19. Several states including California, New York, South Carolina and Ohio, are working to propose legislation that would apply to existing insurance policies.3 These proposed bills may benefit small business owners as President Trump signaled that he believes insurers should cover business losses related to COVID-19 if the policies do not contain specific virus exclusions.4

1 Randy J. Maniloff and Margo Meta, New DJ Takes Different Tack on Business Interruption Coverage for COVID-19, White and Williams   (Mar.   27,   2020), Business-Interruption-Coverage-for-COVID-19.html.

2 Id.

3 Id.; see also Barry Shuster, Business Interruption Insurance: Are You COVID-19 Covered?, (last visited May      4,      2020) Covered.cfm.

4 Id.; see also Victor Reklaitis, Insurers face ‘uh-oh moment’ as Trump says some business-interruption policies should cover coronavirus claims, MarketWatch (Apr. 13, 2020) some-business-interruption-policies-should-cover-coronavirus-claims-2020-04-13.

The global economy and businesses’ ability to operate have been disrupted due to the coronavirus outbreak (COVID-19). Companies should expect to see a surge in disputes over whether force majeure clauses and business interruption insurance applies to COVID-19.[1] Force majeure clauses are contract provisions that excuse a party’s nonperformance when “acts of God” (typically natural disasters such as hurricanes, lightning strikes, tornadoes, floods, earthquakes, and fires) or other extraordinary events prevent a party from fulfilling its contractual obligations.[2] If a force majeure clause includes epidemics or pandemics as a triggering event, the party could argue that COVID-19 qualifies as it has been officially declared a pandemic by the World Health Organization.[3] COVID-19 could also be covered under other triggering events such as an act of governmental authority since the federal government and state governments at nearly every level have instituted lockdowns to prevent the spread of COVID-19. Because force majeure clauses are typically interpreted narrowly, whether claims relying on these provisions will be successful will be heavily dependent on the contractual language and the facts specific to the business at hand.[4]

Business interruption insurance is intended to cover losses resulting from unforeseen interruptions to a business’s operations and generally cover lost revenue, fixed expenses such as rent and utilities and certain floating expenses such as operating from a temporary location.[5] Similarly, supply chain insurance is intended to cover lost profits and costs resulting from disruptions in the company’s supply chain and is typically quite broad covering “Public health emergencies; e.g., pandemics requiring quarantine.”[6]

Pollution liability coverage may be applicable too during the COVID-19 emergency. Businesses may incur cleanup or waste removal costs if forced by government authorities to temporarily close. If the virus is present on a policyholder’s premises, there could be coverage for decontamination costs, cleanup and interruption by a communicable disease.[7]

Many policies also provide coverage for business income losses sustained when a civil authority prohibits or impairs access to the policyholder’s premises. In the event that a federal, state, or local governmental authority limits access to areas where a communicable disease has been identified, civil authority coverage may apply.

On March 16, the first coronavirus coverage suit for business interruption was filed in a Louisiana state court by a restaurant seeking a declaration of coverage for coronavirus-caused losses under an “all risk” business interruption policy.[8] The restaurant is seeking a judicial determination that the Louisiana governor’s public gathering restriction, and New Orleans mayor’s restriction on restaurant operations, trigger the “civil authority” provision of the insured’s policy.[9] The restaurant also seeks a declaration that if COVID-19 is found within the restaurant itself, because COVID-19 may “formites” for up to 28 days, the restaurant has suffered “physical loss” triggering the business income coverage provision.[10] The restaurant is further arguing that because the policy covers all risks of loss, and there is no exclusion for losses due to a virus or global pandemic, the insurer must cover the business’s losses.[11]

However, standard property policies require physical damage to be triggered and typically contain contamination exclusions.[12] As a result, insurers will likely dispute whether COVID-19 constitutes the physical loss requirement.[13] Courts across the country have yet to uniformly determine whether contamination to property constitutes the physical loss requirement. Businesses should proactively review their policies and take all required steps to effectively make a policy claim, which may include efforts to mitigate damages and timely provide notice. Like force majeure clauses, whether a business’s insurance policy covers business or supply chain interruptions due to COVID-19 requires a close analysis of the specific terms and conditions of the governing policies. Just as COVID-19 continues to spread, the fluidity of the legal landscape in this area continues to change. If you have questions about your insurance policy, contact us.

Businesses affected by the coronavirus (COVID-19) pandemic need specialized advice on a wide array of unprecedented and rapidly-evolving legal issues. Dunn Sheehan’s experienced litigation and business attorneys are well-positioned to help our clients proactively navigate these challenges, including business and supply chain interruption claims; contracts, leases, force majeure and impossibility of payment and performance; and your obligations and benefits under emerging legislation such as the CARES Act and EFMLA.  Dunn Sheehan offers legal representation on an hourly, contingent and/or hybrid based on a case-by-case basis.  Please contact us to learn more about preserving and protecting your business during the COVID-19 crisis.  For more information on business interruption claims please contact us.

  1. Leslie Scism, U.S. Businesses Gear Up for Legal Disputes with Insurers Over Coronavirus Claims, Wall St. J. (Mar. 6, 2020)
  2. Tracy Bateman et al., 77A Corpus Juris Secundum, Sales § 370 (describing a force majeure clause as a provision that “may have the effect of excluding nonperformance arising out of certain causes as unforeseeable or beyond the parties’ reasonable control or specified by the contract”); Marie K. Pesando, American Jurisprudence 2d, Act of God § 13.
  3. Helen Branswell and Andrew Joseph, WHO declares the coronavirus outbreak a pandemic, STAT News (Mar. 11, 2020)
  4. Virginia Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 402 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (stating “[t]he scope and effect of a ‘force majeure’ clause depends on the specific contract language, and not on any traditional definition of the term”); see also GT & MC, Inc. v. Texas City Ref., Inc., 822 S.W.2d 252, 259 (Tex. App.—Houston [1st Dist.] 1991, writ denied) (an “act of God” does not relieve the parties of their contractual obligations absent an applicable force majeure clause).
  5. Covering Losses with Business Interruption Insurance, Insurance Information Institute (last visited Mar. 26, 2020); Jing Yang, Why Many Businesses will be on the Hook for Coronavirus Losses, Wall St. J. (Feb. 21, 2020)
  6. Protecting your business against contingent business interruption and supply chain disruption, Insurance Information Institute (last visited Mar. 26, 2020)
  7. Claire Wilkinson, Liability policies may respond to coronavirus, Business Insurance (Feb. 26, 2020)
  8. Kteba Dunlap, French Quarter restaurant seeks coverage for Coronavirus-related losses, Thomson Reuters (Mar. 20, 2020)
  9. Id.
  10. Id.
  11. Id.
  12. Claire Wilkinson, Liability policies may respond to coronavirus, Business Insurance (Feb. 26, 2020)
  13. Leslie Scism, U.S. Businesses Gear Up for Legal Disputes with Insurers Over Coronavirus Claims, Wall St. J. (Mar. 6, 2020)
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