Whether Negligence, IP or Contract Claims – All May Be Covered Under PREP Act Immunity

This alert discusses the scope of claims that may be covered under the Public Readiness and Emergency Preparedness Act’s (the PREP Act) immunity provision. If you are a product manufacturer or distributor, government contractor, health care facility or worker, or property owner and you qualify for PREP Act immunity, you may be able to claim immunity for a broad scope of claims brought against you arising out this current COVID-19 crisis.

Background

As discussed in our prior alert, on March 10, 2020, the Secretary of Health and Human Services issued a Declaration proclaiming that certain qualifying individuals and entities are now afforded tort liability immunity from any loss caused by, arising out of, relating to, or resulting from administration or use of COVID-19 countermeasures.¹ Specifically, this extends PREP Act immunity to “Covered Persons” providing “Covered Countermeasures”² in furtherance of a “recommended activity,” as those terms are defined in the PREP Act, 42 U.S.C. § 247d-6d, and in the Declaration. On April 14, 2020, the Department of Health and Human Services (HHS) issued an Advisory Opinion (“Advisory Opinion on the Public Readiness and Emergency Preparedness Act and the March 10, 2020 Declaration Under the Act”) that provides further clarification regarding and broadens the scope of activities that may qualify for PREP Act immunity.³

Scope of Potential Claims

Claims covered by the PREP Act will generally involve injuries or loss to a person or property with a causal connection to the product’s administration or use. 42 U.S.C. § 247d-6d(a)(1). If all PREP Act and Declaration requirements are met, the Covered Person will be immune from liability from claims for loss sounding in both tort and contract. (Advisory Opinion at 2.) Immunity extends broadly to covered persons engaging in activities related to any arrangement or agreement with the federal government or any activity that is part of an authorized emergency response at the federal, state or local level. Id. Given the intended breadth of immunity as discussed in the Advisory Opinion, the list of potential examples of covered claims is a long one. Indeed, the Advisory Opinion suggests immunity coverage will extend to “covered persons” who have a reasonable belief they are providing a “covered countermeasure” in furtherance of a “recommended activity,” even if the product at issue is not a covered countermeasure. Id.

This alert provides examples of where immunity is likely to exist for a “covered person” under the PREP Act. It is important to note, however, that the Advisory Opinion provides only the current view of the Office of General Counsel of HHS and is not binding on federal courts or on HHS. Id. at 1.

“Claims For Loss” Generally

As a starting point, the PREP Act states that covered claims for loss include, but are not limited to, the following:

1. Death
2. Physical, mental or emotional injury, illness, disability or condition
3. Fear of physical, mental or emotional injury, illness, disability or condition, including any need for medical monitoring
4. Loss of or damage to property, including business interruption loss

42 U.S.C. § 247d-6d(2)(A). Particularly relevant to the discussion below is the inclusion of medical monitoring claims and those claims for property damage or loss, including business interruption loss. In fact, HHS goes so far as to include these among those “[c]laims that courts must dismiss….” See PREP Act Q&As, PHE.gov.

Negligence, Product Liability, and Slip and Fall Claims May All Be Covered

A covered person may be able to claim immunity and defend against claims alleging the following:

• Negligence by a health care provider in prescribing an incorrect dose of a vaccine or improperly using a covered ventilator
• Negligence by a cleaning crew in using a covered sterilization and decontamination system
• Negligence by a manufacturer in creating or manufacturing a vaccine
• Product liability against a manufacturer in creating a faulty ventilator
• Negligence by a retail store serving as a dispensing or testing location that allows poor crowd control or lax security that results in injury to someone receiving a covered test or a vaccine. This immunity may also cover a security service hired by the retailer or property owner to provide security.
• Claims relating to the management and operation of a distribution program or site such as a slip-and-fall injury or a vehicle collision involving a countermeasure recipient
• Claims relating to a car accident by a supplier or distributor when delivering a covered countermeasure

The Advisory Opinion also provides a helpful illustration of a pharmacy qualifying for immunity in a certain situation that one would not typically consider, exemplifying the breadth of the intended immunity. For example, where a pharmacy permits its licensed pharmacists to order FDA-authorized COVID-19 tests, but one of the pharmacists involved inadvertently allowed his license to expire, despite the pharmacy’s reasonable compliance measures, the pharmacy would still be immune from a lawsuit relating to the COVID-19 test prescribed by that pharmacist. (Advisory Opinion at 7.)

Intellectual Property Claims

Although not expressly mentioned in the Declaration, intellectual property claims may also be covered under the PREP Act. More specifically, it is possible to envision coverage for patent, copyright and trademark infringement claims. For example, patent infringement is a tort, like product liability, and thus an argument can be made that immunity extends to such claims for loss caused by, arising out of, or relating to covered products manufactured and used in responding to this public health crisis. In addition, immunity extends to any claim of “loss” including injuries and property damage. (Advisory Opinion at 2.) Given that covered activities explicitly include the “design” and “manufacture” of covered countermeasures,⁴ IP claims such as patent infringement may be considered a “loss” of intellectual property rights related to the design or manufacture of covered countermeasures under the PREP Act, and therefore should benefit from the Act’s liability protection. See 35 U.S.C. § 171 Patents for Designs (“Whoever invents any new, original, and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title.”); 35 U.S.C. § 101 Inventions Patentable (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”); 35 U.S.C. § 271(a) Infringement of Patent (“whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent”).

Relevant to intellectual property claims, the Advisory Opinion offers an example whereby a “covered person” inadvertently uses counterfeit products, such as a covered test or respirator, but would still be immune from a claim for such use, especially where the covered person took reasonable steps to substantiate the authenticity of the products. (Advisory Opinion at 5.) Sellers or users of counterfeit goods could be accused of trademark, patent or copyright infringement, as well as breach of contract, but the Advisory Opinion suggests immunity may be available in those situations as well. See 15 U.S.C. § 1125 (“any person who … uses in commerce any …device . . . which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action . . . .”).⁵

Notably, like many of the claims listed in this alert, no court has yet weighed in on the scope of immunity relating to intellectual property claims.

Contractual Claims

Likewise, contractual disputes between a manufacturer of a covered countermeasure and a third-party distributor that result in a business loss to the distributor may be subject to PREP Act immunity. Indeed, claims for any loss related to “the manufacture, testing, development, distribution, administration, and use of” certain countermeasures are covered and must be dismissed. (85 Fed. Reg. 15201.) For example, the PREP Act may bar claims against a manufacturer in the following circumstances:

• Claims arising from the inadvertent provision of counterfeit components or products
• Breach of contract claims in relation to a distributor exclusivity agreement
• Claims arising from indemnification clauses for product liability claims and breach of product warranties

The Willful Misconduct Exception and Other Caveats

Immunity is not absolute, however. An exception to PREP Act immunity is an act of willful misconduct that proximately causes death or serious physical injury. 42 U.S.C. § 247d-6d(d)(1). Where an action alleges such an exception to immunity for covered persons, the case must be brought in the U.S. District Court for the District of Columbia. 42 U.S.C. § 247d-6d(e)(1), (5). The plaintiff must establish that the willful misconduct proximately caused death or serious injury by clear and convincing evidence in order to prevail. 42 U.S.C. § 247d-6d(c)(3).

The Advisory Opinion also provides that immunity is not available against federal enforcement actions — civil, criminal or administrative. (Advisory Opinion at 2.) Further, immunity is not available against claims under federal law for equitable relief. Id.

Finally, the period of immunity remains in effect through October 1, 2024 for activities undertaken pursuant to a federal contract.⁶ 85 Fed. Reg. 15202. For activities taken in accordance with an Authority Having Jurisdiction, immunity is available until the Declaration is no longer in effect, or until October 1, 2024, whichever occurs first. Id. In addition, the Declaration grants covered entities an additional 12 months of liability protection following expiration of the Declaration to dispose of any covered countermeasures and to take appropriate steps to limit further administration or use of covered countermeasures. Id.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.