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On March 11, 2020, theWorld Health Organization declared COVID-19 a pandemic.
– WHO has been assessing thisoutbreak around the globe.
COVID-19 can becharacterized as a pandemic.
– This virus is notonly making people sick, but it's upending our daily lives.
That includes canceling vacations, postponing events, andupending employment.
Did you plan a wedding thatnow needs to be postponed? Did you have to cancelyour European vacation after the travel ban? Is your small businesssuddenly behind on rent? Well, today we're gonnatalk about how you might be able to use contract lawand insurance agreements to get refunds and even relief.
Let me start with a disclaimer that probably goes without saying, but I'm going to say itbecause I'm a lawyer.
Nothing in this video shouldbe construed as legal advice.
Nothing I say creates anattorney-client relationship with you, the viewer.
If you have acoronavirus-related question, you should contact your own lawyer, or better yet, your doctor.
Now, with that out of the way, I do want to give you one more warning.
What I'm going tell youis incredibly powerful.
But I want you to usethis information wisely.
Let's say you had a weddingscheduled for April, and maybe that won't be happening now.
So naturally you're gonna wantto cancel with the caterers, the band, and the photographer.
But remember, those are people too.
That's how they make their living, and it's going to be hardtimes ahead for those people.
Everyone in the serviceindustry is going to suffer.
A photographer can't work from home.
No one's going to behiring bands for parties that won't be happeningfor the foreseeable future.
Unless you live in Florida.
But it might be thesame with your landlord.
Sure, your apartmentbuilding might be part of a giant conglomerateowned by BlackRock, but it also might be the onlybuilding owned by a family.
There are always downstream consequences.
So, sure, no one's going to blame you for having to look out for yourself.
But remember that youractions effect others too, and everyone is going to be struggling for the foreseeable future.
So with that business out of the way, today we're going to becovering such sexy legal topics as terms and conditions, force majeure, and insurance riders.
(triumphant music) So let's start with the basics.
When you make a reservationwhen you buy plane tickets, or when you purchaseanything on the internet, you agree to abide bycertain terms and conditions.
You can find out what you agree to by clicking on the termsand conditions page of most websites orreviewing whatever document they send you by email or snail mail.
This document contains all of the legalese that you didn't review andmerely glanced at, at best.
And unfortunately, this isgenerally a binding contract that applies to you.
The good news is thatyou can learn to think like a lawyer to helpyourself out of a jam, often using the exact samelanguage that you find in those pages of text thatyou absolutely did not read.
Don't try and fool anyone.
You didn't read it.
Now, if you made travel reservations, you should immediately reviewthe terms and conditions pages to see what terms applied originally, and whether that companyhas updated their policies because of the coronavirus.
For example, Airbnb is theoriginal travel disrupter and they disrupted the travel industry by creating a websitethat lets people rent out their homes and extra rooms to travelers.
Now, generally Airbnb allows their hosts to set their own cancellation policy.
Some hosts require a deposit and more than 48 hours notice to cancel.
Other hosts are more strict, taking the guest deposit if the person cancels for any reason.
But that changed on March14 when Airbnb notified hosts and guests that it was updating their extenuating circumstances policy.
The site now allows all gueststo cancel all reservations without penalty anywhere in the world as long as the reservation for the travel was between March 14 and April 14.
And as things go on andpotentially get worse, that policy may be updated again.
A lot of hosts are veryunhappy with this result, since many depend on theincome to afford rent or pay for their mortgage.
But if you're a guest, however, you might be able to cancel your reservationand monitor the host to ensure that they complywith Airbnb's new policy.
It's really important not only to check the original terms, but alsoif anything has been updated.
Business Insider hascompiled a list of hotels which have updated theircancellation policies, and I'll put the link to thatdown in the description below.
Many hotels run by groupslike Disney, Hilton, and Hyatt are waiving cancellation fees for travel booked through April, and if you have travel datesthat are later in the year you might want to jumpon the phone immediately.
Because you know things arebad when travel companies are voluntarily relaxingtheir contractual terms.
If the customer servicepeople are giving you a hard time one pro tip is to use the government warnings to your advantage.
For example, the WHO, theWorld Health Organization, declared coronavirus a pandemic, and experts are unsure forhow long extreme measures like social distancing, isolation, and quarantine will last.
The State Department hasissued travel advisories and warnings for certain countries.
State governors have prohibited gatherings and are locking downhuge swaths of people, and when you're talkingto customer service you can site thesewarnings as evidence to why you cannot travel and should get a refund.
We'll go into detail aboutthese specific legal doctrines that you might use to bootstrapsome of these warnings in dealing with customerservice or other companies that you might have to cancelin order to get a refund.
Now, not all travel orcommercial companies are going to be as gracious as the ones that are voluntarily rolling back their cancellation policies.
But if you dig into theterms and conditions you might find specificlanguage or fine print that says something along the lines of “the company is notresponsible for any injury, “loss, or damage toperson or property, death, “delay, or inconveniencein connection with “the provision of any goodsor services occasioned “by or resulting from, but not limited to, ” and this is the important part, “acts of God or force majeure.
” That brings us to one of themost important legal doctrines that you're probablygoing to be dealing with in this particular situation.
Acts of God and force majeure.
Now, force majeure isbasically like a magic spell used by dark wizards called lawyers.
Force majeure! (exciting music) I'm just kidding.
It's a very dry contractualprovision in most circumstances, but in circumstances like theseit can be just as powerful because most contracts includea force majeure clause.
These clauses excuse aparty from performing its obligations under thecontract if they are faced with circumstances beyondthat party's control.
The phrase force majeure isFrench for superior force.
The kind of superiorforce that would interfere with the performance of a contract, and that includes wars, labor disputes, and extreme weather events.
Generally, the test for whether something is a force majeure eventrequires three specific elements.
Number one, the elementis beyond the control of the affected party.
Two, the affected party'sability to perform its part of the contractmust have been prevented, impeded, or hindered by the event.
Three, the affected party must have taken all reasonable steps to avoid or mitigate the event or its consequences.
There are two categoriesof force majeure events.
The first category isfor acts of government that change the legalor political environment that could impact a project or a business.
This could include thingslike war, terrorism, labor strikes, or riots.
The second categoryincludes natural disasters, such as floods, earthquakes, hurricanes, and other weather disturbances that are sometimes called acts of God.
When a party is affectedby a force majeure they are usually relievedfrom performing the contract.
There may be disputesabout whether that persons contractual obligations arecanceled or just postponed.
Now, there's no generalstatute that defines what constitutes a force majeure event.
A parties ability to claimrelief for a force majeure event depends on the way thatthe contractual terms are written and the contextof the rest of the contract.
Most contracts contain adetailed list of events that are deemed to be force majeure and beyond the parties control.
Some contracts includethings like diseases, pandemics, or epidemics in their list of naturally occurring eventsthat may disrupt the contract.
However, if a contractclause omits language about diseases and pandemics, then there will probably be a dispute about whether a pandemic, like coronavirus, is included in a force majeure event.
For example, if the contractlists a bunch of categories that do constitute a force majeure, then the fact that apandemic is not listed in it could be evidence that apandemic is not covered.
If there is vague language that says that a force majeure can be anything like an example of thethings that are given, then you have a better argument.
But there's no federal law that says these particular things areconsidered force majeure.
But if you are lookingthrough your own contract or your own terms and conditions, here's a couple examples ofwhat force majeure clauses look like so you'll know what to look for.
Notwithstanding anything tothe contrary contained herein, neither party shall be liablefor any delays or failures in performance resulting from acts beyond its reasonable controlincluding, without limitation, acts of God, acts of war or terrorism, shortage of supply, breakdowns or malfunctions, interruptions or malfunctionof computer facilities, or loss of data due to power failures or mechanical difficultieswith information storage or retrieval systems, labordifficulties or civil unrest.
Notwithstanding the foregoing, in the event of such an occurrence, each party agrees tomake a good faith effort to perform its obligations hereunder.
So would coronavirus bea force majeure event under this clause? Well, this is why lawyersare going to outlive everyone except the cockroaches.
Because lawyers will arguethat the acts of God language operates as a catchall, with respect to events which are beyond the controlof the parties to the contract.
Since a pandemic would bebeyond the reasonable control of the parties, it seemslike the coronavirus crisis would be a force majeure eventunder this type of clause.
But you can also argue thatsince it's not mentioned there, perhaps it doesn't cover that.
Or that the actual lossof business is not related to the coronavirus perse, but because of acts of other people who are notgoing to various businesses.
You can go either wayon some of these things.
But statements like theWHO declaring coronavirus a pandemic is certainlyhelpful to consumers who want to make their case, as are the statements ofvarious state governors who are putting entire states on lockdown.
So in a situation like this, you can argue that this isa change in circumstances of the law that makesperformance impossible, and you can also arguethat it is a natural event, like a plague or some other weather event, such as a natural disasterthat would also be covered by a force majeure clause.
There are arguments for both sides.
Keep in mind that making thisargument of a force majeure event doesn't necessarilymean that the party themselves needs to test positive for coronavirus.
What we're looking forhere are disruptions that are the direct result of coronavirus, like a forced self-isolationor shutting down a factory.
These are the consequences that impact a parties ability to fulfillits contractual obligations.
So for example, think aboutall the vendors that were providing services toMiami's Ultra Music Festival.
Despite the festivaltaking place in Florida, where apparently anythinggoes and there are no laws, the festival was actually canceled after Florida's governordeclared a state of emergency.
– That allows us to createa unified command structure.
It also allows, if need be, out of state medical personnel to operate in Florida.
– Since the event wascanceled due to events beyond their control, mostvendors should be able to rely on their contract'sforce majeure language to justify not performing theservices under the contract.
If money changed hands, I would expect that thatmoney would change hands again and go back to the original buyer.
But this isn't a silver bullet.
It doesn't work all the time.
For example, if we're talkingabout financial agreements, like an investor'scontract to fund a startup, a force majeure eventmay not excuse investors from making paymentsthat they agreed to make under a contract.
This is what happened inthe 2008 financial meltdown, which resulted in manylawsuits about whether the financial crisiswas a qualifying event for force majeure purposes.
Most courts interpreted forcemajeure clauses very narrowly.
Market forces didn'tcount as a force majeure unless the specific financial scenario was spelled out in the clause.
Some people also unhappily discovered that market forces were directly excluded by the contract as anexcuse for non-performance.
That surely resulted in alot of angry phone calls to the parties lawyers, which keeps us employed too.
But force majeure clauses are not a get out of jail free card.
They don't normallyoperate to excuse a party from making rent payments, operating expenses, or loan payments.
But in a situation like this, with a once in a centurypandemic, all bets are off.
Lawyers are going to bearguing over these clauses until we die, which for some of us, may be pretty soon.
But force majeure is notthe only argument available to consumers and peoplethat are trying to get out of a contract or not pay something.
If a pandemic isn'tincluded in the contract or isn't interpretedto be in the contract, then the parties might haveto rely on other defenses that excuse them from performing.
Under American law, thedefenses of frustration and impossibility may apply.
These defenses are usuallyinterpreted narrowly, and they usually requiretwo considerations.
Number one, whether thesubject matter of the contract or the means of performancehas been destroyed such that performance isrendered objectively impossible.
Two, whether the centralpurpose of the contract has been frustrated orthe contract has become radically different fromwhat was contemplated by the parties at the timethey agreed on the terms.
Many US states have adopted the Uniform Commercial Code, or UCC.
The UCC applies when you buya good generally speaking.
The UCC includes an excusewhere performance has been made “impracticable by theoccurrence of an event, ” “the non-occurrence ofwhich was a basic assumption “on which the contract was made.
” So sorry for the doublenegative, but in other words, something that the contractassumed wouldn't happen.
This defense might workin a scenario where a state governor has canceled an event because it would be attendedby more than 50 people.
If the event that needed to occur was a gathering of thousands of people, such as those attendingthe music festival, then arguably the inabilityto gather in a group because it was made illegal could justify non-performance as impracticable, which takes me to thesexiest legal topic of all.
I saved the best forlast, insurance policies.
Now, if a party to a contractcan't meet its obligations due to the coronavirus outbreak, you probably need to find out if insurance will cover you losses.
Sometimes it will.
Many commercial propertyinsurance policies provide business interruption coverage.
But companies covered by these policies won't be able to invokethem unless they show direct physical loss toproperty of the insured, its customers, or its suppliers.
Commercial insurers alsosell specific products dealing with force majeure, political risk insurance, or trade disruption insurance.
Sometimes a policy that wouldotherwise cover these things have what's called a rider, which excludes the specificoccurrence of things.
You'll often see a terrorism rider, that if your store wasbombed by a terrorist then the insurance doesn'tapply in that particular case.
So you have to check notonly the policy itself, but the riders that goalong with the policy.
If you're an individual, you might check your homeowners insurance, you might check your renters insurance.
Hell, you might try your car insurance.
Because consumers also have insurance implications to consider.
Many travelers buy travelinsurance to protect them from things like a deadlypandemic that restricts travel.
But if you think thatyour insurance company does have you coveredyou may be disappointed, because insurance companies are terrible.
Once again, you have tolook to the fine print, and this is, frankly, just always good advice.
Many travel insurance companiesexclude health epidemics or pandemics in their standard policies.
They won't even refundtravelers who are afraid to travel because of the virus.
If you plan to go later in the year, you might buy a policy that has a cancel for any reason clause.
However, some insurancecompanies are already limiting the number of cancelfor any reason policies that they're going tosell in this environment.
Now, that is largely the bad news.
But let me give you some good news.
It looks like help for smallbusinesses is on the way.
It's going to depend on whatfederal relief is passed by congress and state lawswill vary state by state.
But everyone is on boardto try and help out as many people as possible.
Now, I can't go intodetail about all of these different relief laws, mainlybecause they don't yet exist.
The debate is going on in congress.
But the good news is that it seems like everyone is on board with trying to help as many people for as long as possible.
Because, really, we only recently realized how serious this wholecoronavirus thing is.
If you want to see my prior video on how the US government has botched its response to the coronavirus I'll leave a link to the descriptions of myprior video on the subject.
– No, I don't take responsibility at all.
– But as you know, ifyou own a small business, the coronavirus isprobably already disrupting your ability to stay openand pay your employees.
Many restaurants are expected to close for the duration of the lockdown.
Some states have shut down tattoo parlors, nail salons, restaurants, and yes, even GameStop.
Any non-essential companyis being shut down.
This means that many businessesare going to struggle to survive and it's clearthat the federal government is trying to get its act togetherand trying to help people.
It's just not clear when thatrelief is going to happen.
– There's tremendous spiritto get something done, so we'll see what happens.
– So you might have to look to your state and local governments for help.
For example, New YorkCity Mayor, Bill De Blasio announced that the city isoffering no-interest loans to businesses which see salesdecrease by 25% or more.
To qualify, a business musthave fewer than 100 employees.
For businesses withless than five workers, the city is offering grants to help cover 40% of payroll costs andthis hopefully will help people stay employed duringthe duration of this pandemic.
Similarly, Seattle Mayor, Jenny Durkan, will increase funds availablefor micro-businesses to help small companies access SBA loans, and provide relief for utility payments.
The city is also delaying collection of business and occupation taxes.
At the federal level, we are starting to see mobilization of the administrative state.
The Small Business Administration has an Economic Injury Disaster Loan Program that will give low-interest loans to small businesses and non-profits that have been severelyimpacted by the coronavirus.
Hopefully, this will justbe the tip of the iceberg.
I expect a whole raft of newand exciting statutory laws that will help people in this situation, and all of the fun litigation that's going to come as a result of it.
But, of course, this is aconstantly evolving situation.
Although we're focused onthe next four to six weeks, the reality is thatquarantine and isolation and self-isolation may lastfor a lot longer than that.
Of course, the longereveryday life is disrupted, the greater economic impact of all the businesses and contracts.
But if there's onetake-away from all of this, it's that, as always, it's the lawyers who are the real heroes that are looking out for those in need.
Eat it, doctors and nurses.
Now, of course, part of whatgot us here is a failure to understand the exponentialgrowth of viruses.
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Plus, clicking on the linkreally helps out this channel.
So do you agree with my analysis? Leave your objections in the comments, and check out this playlist over here where I explore all the otherlegal issues of the day, like how the US botched itsresponse to the COVID-19.
So click on this playlistand I'll see you in court.