COVID-19 Business & Community Guidance

COVID-19 is impacting almost all aspects of business and our community. The drastic changes are happening daily, in real time. Our Community Support & Business Response Legal Team is analyzing COVID-19 and its effect on Arizona’s businesses. We’re building on our 40+ years in Arizona to offer thoughtful guidance on how businesses can navigate this complex and fast-changing situation. We’re here to help. If the information below does not answer your pressing questions, please feel free to contact our team of professionals.

Gallagher & Kennedy’s Business Continuity Response to COVID-19, 3/18/2020

Table of Contents to Business Guidance

Considerations for Board and Shareholder Meetings


Employment & Labor


Financial Distress, Bankruptcy & Creditor’s Rights

Franchising Issues

Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

Impact on Litigation

Insurance Recovery and Protection for Businesses

Paycheck Protection Program (the “PPP”)

Real Estate


Tax – Federal Developments

Tax – State and Local Developments

Tort Liability for Businesses

Considerations for Board and Shareholder Meetings

Terry Thompson
(602) 530-8515

In-person meetings of shareholders, directors, partners, or other owners or managers may prove difficult to convene in light of governmental restrictions on the occurrence, size, time, or place of gatherings.

  • Under applicable law and governing documents, it may be feasible to implement an alternative such as telephonic or web-based communications or conferences. For example, for business corporations, Arizona Revised Statutes (A.R.S.) § 10-708 permits participation in shareholders’ meetings by remote communication under certain conditions.
  • Statutes and/or governing documents may provide alternative means of meeting in the case of “emergencies.” For example, under A.R.S. § 10-3303 facilitates the ability of the board of directors of a nonprofit corporation to take action during emergencies.
  • Written consents or other means can be used to take action in some instances. For example, in the case of limited liability companies, A.R.S. § 29-3407(D) permits an action requiring the approval of members or managers to be taken without a meeting if the action is approved by the minimum number of members or managers required to approve the action.

Obtaining signatures on legal documents may present logistical problems when people are away from business offices or in places where electronic communication is not available or reliable.

  • A government agency, contract party, or other person may be willing to accept instruments or methods that might facilitate the signing of documents. For example, the Arizona Corporation Commission allows persons to complete most business filings online and to fax or mail filings.
  • Traditional documents such as powers of attorney or proxies might help in consummating a transaction. For example, A.R.S. § 29-3407(D) permits a member of a limited liability company to appoint a proxy or other agent to vote, consent, or otherwise act for the member by signing an appointing record, personally or by the member’s agent.
  • Electronic means of obtaining or affixing signatures can be lawful and acceptable in a particular situation. For example, the Arizona Electronic Transactions Act (A.R.S. §§ 44-7001 et seq.) authorizes the use of electronic records and electronic signatures relating to a transaction.

If and to the extent that certain governmental offices and private businesses might be closed from time to time, the obtaining of official certifications or other third-party confirmations might not be practical.

  • To the extent the certification is expected by another party to the transaction, it is possible that the law allows the requirement to be ignored, or the other party might be willing to waive the requirement or to accept delivery of the certificate after the fact. For example, a party might be willing to waive a requirement that a landlord certify that the tenant is not in default under a lease.
  • Often there is an alternative and lawful means of evidencing the matter in issue. For example, instead of having a copy of a limited liability company’s articles of organization certified by the Arizona Corporation Commission, a party might be willing to accept a certificate signed by one of the company’s officers attesting to the organizational documents.
  • A party might be able and willing to accept a previous certification in lieu of a recent certification. For example, a certificate of good standing of a limited liability company from the Arizona Corporation Commission pursuant to A.R.S. § 29-3211 might have been obtained last year in connection with a previous transaction, and a party might be willing to accept that as good evidence of the company’s existence, even though a more recent certificate would be preferable.

Terry Thompson is available to answer questions about Considerations for Board and Shareholder Meetings.


Matt Engle
(602) 530-8285

Force Majeure Clauses

Due to the Coronavirus (COVID-19) pandemic, many businesses are confronting unique and unforeseen circumstances that could either excuse or delay the obligation to perform under existing contracts as a result of the occurrence of a force majeure event. Force majeure is a contractual defense generally allowing a party to postpone, defer, or discontinue performance of its contractual obligations in certain specified circumstances. What constitutes a force majeure event is determined on a case-by-case basis and depends upon the terms of the relevant contract, applicable law, and the relevant facts and circumstances. Concerned business should be analyzing the following:

  • Reviewing and determining whether a contract includes a force majeure provision, including: (i) the specific events and circumstances that qualify for force majeure treatment; and (ii) other relevant terms and conditions in the contract (including governing law, events of default, dispute resolution, etc.).
  • Analyzing whether the performance of any of the parties to the contract will be impracticable or impossible because of COVID-19, as opposed to for a different reason.
  • Ensuring timely compliance with any notice requirements, including the production of documentary support and the specific method of notice.
  • Maintaining communication with the other party regarding on-going inability or ability to perform contractual obligations.
  • Documenting steps taken to mitigate or avoid the impact of COVID-19 on the ability to perform under the contract, as well as all other relevant facts and circumstances.
  • Considering if/when the impact of COVID-19 is no longer an unforeseeable event; did that happen when the World Health Organization declared COVID-19 a pandemic on March 11, 2020?

For businesses that have received a force majeure notice, they should be:

  • Reviewing the notice to determine whether it falls within the scope of the contract’s force majeure provision or applicable law and whether the form and timing of the notice was proper.
  • Determining when and how to respond, including whether to terminate the contract in response to the notice.
  • Considering whether the notice has an impact on any other contracts and whether a copy of the notice should be provided to other parties.
  • Evaluating whether the party claiming force majeure has fulfilled its other obligations under the contract.

Matt Engle is available to answer questions about Contracts and the possibilities of force majeure claims.

Updates to Contracts

International Chamber of Commerce Comments on Force Majeure Clauses

Additional Resources

Employment & Labor

Don Johnsen
(602) 530-8437

What are our basic legal obligations with regard to the prevention of infection in the workplace?

Employers do not have a legal duty to “guarantee” that no one in the workplace will ever be infected with COVID-19.  But you definitely should take reasonable steps to reduce the risk of infection, as recommended by the CDC, OSHA, and the Arizona Department of Health Services: frequent hand-washing, sanitizing, and disinfecting of surfaces, and other proper hygiene practices.  And you should follow the CDC guidelines when employees show symptoms of or test positive for COVID-19 (see below).

What should we do when an employee has symptoms or actually tests positive for COVID-19?

As Arizona businesses continue to re-open, more and more employers are beginning to see employees who are experiencing symptoms or who are actually testing positive for COVID-19.  Business owners should consider the following steps to respond.

Naturally, the employer must direct the particular employee to stay home and not return to work until he or she meets the CDC’s criteria to discontinue home isolation.  (“When You Can be Around Others After You Had or Likely Had COVID-19”).

Remember that “staying home” does not necessarily mean that one is unable to work.  If the employee’s job is suitable for remote work, and the employee is medically able, then remote work is a viable option.  If remote work is not feasible (and the business employs fewer than 500 employees), then as discussed below, the employer may have a tax-based incentive to provide up to 80 hours of “Emergency Paid Sick Leave” under the “Families First Coronavirus Response Act.”

Then the employer must do some “contact tracing” to determine whether any other employees may be required to quarantine.  According to guidelines issued by the Maricopa County Department of Public Health, persons who had “close contact” with the positive individual (contact within six feet for a total of 15 minutes or more in any given 24‑hour period) should stay home for ten days after their most recent exposure to the positive individual.  According to the County, persons who quarantine for seven days and who then test negative for COVID-19 may be able to return to work at that time.  (As above, consider whether remote work may be a viable option.  If remote work is not feasible, then as discussed below, the employer may have an incentive to provide up to 80 hours of emergency paid sick leave under the FFCRA.)

Employers in Arizona are not under a formal legal obligation to notify customers, contractors, suppliers, or other third parties that an employee has tested positive.

If an employee has to be absent because of COVID-19, is that paid time off?

Absences that are due to the employee’s own illness, the need to care for a family member who is ill, or the need to stay home with a child whose school has been ordered closed qualify for Paid Sick Time under Arizona’s Proposition 206.  Employees who have PST available, therefore, must be permitted to use it to cover an absence caused by COVID‑19.

Absences caused by COVID‑19 also may qualify for “Emergency Paid Sick Leave” under the “Families First Coronavirus Response Act.”  That law applies to all employers with fewer than 500 employees, and offers such employers a tax-based incentive to provide up to 80 hours of paid sick time (subject to certain caps on the rate of pay) for various absences caused by COVID-19.  Employees are not legally entitled to such paid sick time; the mandatory paid leave provisions of the FFCRA expired on December 31.  But covered employers who choose to offer paid leave for such absences may take a refundable tax credit for the compensation that they pay out for such leave through March 31, 2021.

Under the FFCRA, absences due to an employee’s need to stay home to care for a child whose school has been ordered closed also may qualify for emergency paid FMLA leave.  The law provides covered employers with a tax-based incentive to provide up to ten weeks of paid FMLA leave (again, subject to certain caps on the rate of pay) for employees who need to stay home due to a school closure.  Again, employees are not legally entitled to such paid leave; the mandatory paid leave provisions of the FFCRA expired on December 31.  But covered employers who choose to offer paid FMLA leave for such absences may take a refundable tax credit for the compensation that they pay out for such leave through March 31, 2021.

Keep in mind that an employee who needs to be at home for one reason or another might still be able to work remotely.  If remote work is feasible and can be productive in any given case, the employee would not be “absent,” and therefore would not need or qualify for any of these types of paid time off.

We may need to implement some layoffs to deal with the economic crisis. What are the rules concerning reductions-in-force, furloughs, layoffs, etc.?

Non‑union employers with 100 or more workers may need to consider whether a particular reduction or layoff might be subject to the federal plant closing law (the “WARN Act”) or to any state‑law version of the WARN Act.

But in the absence of the WARN Act or similar coverage, non‑union owners and managers have significant discretion to exercise their best business judgment to structure workplace adjustments, reductions, and layoffs in the manner they feel is best for the operation.  Employers can use whatever business-related criteria they prefer to select personnel for a reduction or layoff: seniority, salary level, scores on most recent performance reviews, production levels, preservation of relationships, for example, and/or any combination thereof.  Employers also can weight those criteria however they wish, in the exercise of their own business judgment.  And employers are not legally required to provide workers with any specific “recall” or “rehire” rights.

Don Johnsen is available to answer questions about Employment & Labor issues.

Updates to Employment & Labor

How Does the Most Recent Coronavirus Relief Bill (December 2020) Affect Our Obligations when an Employee Must Miss Work Because of COVID-19?

Can We Mandate That Employees Get the COVID Vaccine?

Should Businesses Require People to Sign Waivers to Come Onto Premises?

Preparing to Re-Open the Workplace; Critical Issues for Arizona Employers

G&K Employment Law Alerts


Chris Leason
(602) 530-8059

EPA Again Delays TSCA Chemical Data Reporting

EPA’s second extension of the 2020 CDR submission period will allow manufacturers, already stressed in the current COVID-19 business environment, to prioritize their environmental compliance and other obligations while attempting to navigate COVID-19 implications.

Although not directly related to the COVID-19 pandemic, in November 2020, the U.S. Environmental Protection Agency (EPA or Agency) announced a second extension of the submission deadline for 2020 Chemical Data Reporting (CDR) pursuant to the Toxic Substances Control Act (TSCA).  The new reporting period is June 1, 2020 – January 29, 2021 (extended from June 1, 2020 – November 30, 2020).

What is the TSCA CDR?

The TSCA CDR is a reporting program administered by EPA wherein manufacturers (including importers) of chemical substances identified on the TSCA Inventory must report information to EPA on a four-year cycle (the last submission period was in 2016, based on 2012-2015 data).

What information must be reported?

EPA requires manufacturers to report information on their production of chemical substances, as well as information on the down-stream processing and use of the substances.  The information reported for each substance includes the (a) company and plant site information, (b) chemical name and Chemical Abstracts Service number, (c) number of workers exposed to the substance during its manufacture, (d) physical form of the substance, (e) down-stream uses of the substance, (f) number of down-stream sites using the substance, (g) types of down-stream industrial sectors using the substance, (h) number of workers exposed to the substance in the down-stream operations, and (i) consumer and commercial uses of the substance (including whether the substance is used in any consumer products intended for use by children).

Are there exemptions from reporting?

Yes, EPA’s CDR regulations identify both exemptions and exclusions from reporting.  However, a manufacturer should thoroughly evaluate the applicability of an exemption/exclusion and document its conclusion in the event of an EPA inspection.

How is information reported to EPA?

Information must be electronically submitted to EPA using the Agency’s Central Data Exchange (CDX).

Why did EPA extend the 2020 CDR submission period?

EPA extended the 2020 CDR submission period because of recent changes to the CDR regulations contained in a March 17, 2020 final rule.  The final rule, which is effective for purposes of 2020 CDR reports, modifies a number of reporting data elements.

Chris Leason is available to answer questions about 2020 TSCA CDR obligations and Dal Moellenberg and Chris Leason are available to answer Environmental Law issues.

Updates to Environmental

OMB Issues Memorandum to Federal Agencies Regarding “Best Practices” in Enforcement Actions and Adjudication

Additional Resources

Financial Distress, Bankruptcy & Creditors’ Rights

Dale Schian
(602) 530-8140

COVID-19 will affect both prosperous and already distressed businesses. Bankruptcy, moratoriums, and other tools implemented to ameliorate the disruption are initially likely to apply to all companies seeking relief. It will be necessary to understand modifications of creditor rights as companies receive an opportunity to see if they can successfully operate in a post-COVID-19 economy.

There will be indirect consequences experienced by individuals and companies as their employees, customers, borrowers, and others struggle to meet their commitments.  It will be necessary to understand how defaults or delays in performance are best addressed and which transactions are no longer possible or prudent.

Below are some initial, practical steps businesses can take in evaluating their current situation and determining how to proceed in the future:

  • Realistically assess your situation.
  • Communicate with those you have relationships with, whether contractual or professional.
  • Understand that we are in this together and it will be much harder to get through it alone.
  • In light of the current uncertainty, it is unrealistic to expect hard commitments. Communicate and agree to set a time to talk again.
  • Do not look for a band aid or stop-gap solution until you understand what happens next.
  • Beware of extraordinary solutions or transactions. Consider those carefully with your advisors.
  • Expect additional delays in performance and remedies.
  • Understand that we will get through this.

Dale Schian is available to answer questions about Financial Distress, Bankruptcy & Creditors’ Rights.

Updates to Financial Distress, Bankruptcy & Creditors Rights

Expedited Bankruptcy Relief Extended for Small Businesses

Small Business Bankruptcy Relief

PPP Loan Eligibility for Bankruptcy Debtors

Arizona Bankruptcy Court Rulings Facilitate PPP Loans for Business in Chapter 11

CARES Act Expands Bankruptcy Relief for Small Businesses

Additional Resources

Franchising Issues

Josh Becker
(602) 530-8465

COVID-19 Impact on Franchise Disclosure Documents

The North American Securities Administrators Association (“NASAA”), the national association of state franchise regulators, issued new guidance on Item 19 financial performance representations that several states are implementing immediately. The newly published guidelines (See Additional Resources) require certain franchisors who include historical financial results in an Item 19 financial performance representation to amend already filed Franchise Disclosure Documents that should consist of up-to-date 2020 results. These guidelines will ensure that prospective franchise buyers are aware of the impact that COVID-19 has had on those businesses and reasonably reflect current economic conditions.

In determining whether a franchisor is obligated to file an amended FDD, the franchisor should consider the following factors:

  • Whether the COVID-19 pandemic has significantly impacted the franchise business;
  • The type of data the franchisor includes in the FPR;
  • The reasonable inferences a prospective franchisee can draw from the FPR:
  • When the franchisor estimates a prospective franchisee can expect to open for business after entering into a franchise agreement;
  • Whether and how the franchisor adapts the franchise business to account for current market conditions resulting from the COVID-19 pandemic; and
  • Whether and how the franchisor adapts the franchise business to account for future market conditions resulting from the COVID-19 pandemic.

A franchisor that included actual historical sales and profits data in their 2020 FDD and whose business has been impacted by the pandemic should update their FDD to include disclosures concerning that impact. NASAA did not provide specific guidelines on the required amendments. Still, the State of Washington, which has implemented similar requirements already is requiring franchisors to acknowledge that the virus has negatively impacted their business and to include sales results for the first part of 2020 in their financial performance representation. We suspect that other states will accept similar disclosures. The sale of franchises without these disclosures might increase risk because franchisees may later claim that they would not have purchased a franchise if they knew about the impact that COVID-19 had on the franchised business.

Josh Becker is available to answer any questions about Franchising issues.

Additional Resources

Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

Stan Curry
(602) 530-8222

EPA’s COVID-19 Policy Terminated in Summer Shows No Sign of Returning

The U.S. Environmental Protection Agency (EPA) issued a policy during the early days of the pandemic that authorized agency personnel to exercise enforcement discretion when considering responses to environmental violations.  EPA terminated that policy, effective after August 31, 2020.  EPA’s decision to terminate was based on the gradual reopening of businesses and improved COVID-19 numbers witnessed during the summer. That said, in response to recently increased COIVID-19 cases during the fall, there has been no action to revive the policy.  However, EPA retains its general, long-standing ability to exercise enforcement discretion:

Nothing herein limits the ability of the EPA to exercise enforcement discretion on a case-by-case basis regarding any noncompliance, including noncompliance caused by the COVID-19 public health emergency, before or after the temporary policy is terminated. This includes the situation in which a person or entity makes a reasonable attempt to comply with guidance from the Centers for Disease Control and Prevention or other agencies regarding actions suggested to stem the transmission and spread of COVID-19, which the person or entity reasonably deems applicable to its circumstances.

EPA Memorandum re: COVID-19 Implications for EPA’s Enforcement and Compliance Assurance Program: Addendum on Termination (6/19/20).

Although EPA’s COVID’s policy has been terminated, the concept of regulatory fairness and discretion lives on, at least for now, thanks to a memorandum issued by the federal Office of Management and Budget (OMB) in August.  For more information, see G&K’s update above entitled:   “OMB Issues Memorandum to Federal Agencies Regarding ‘Best Practices’ in Enforcement Actions and Adjudication” (9/27/2020).  In addition, as discussed in prior updates under this topic in G&K’s COVID-19 guidance, businesses and citizens in Arizona continue to enjoy fairness laws that govern inspections and enforcement by administrative agencies.

Stan Curry is available to answer questions regarding Arizona state and county inspections, permitting, and compliance enforcement issues for businesses.

Updates to Government Agencies’ Inspections, Compliance Determinations, and Regulatory Reform in Response to COVID-19 Conditions

A Company’s Rights after the Inspection

A Company’s Rights during an Inspection

Coming Soon after COVID-19:  When the State Reopens and the Regulators Return

Impact on Litigation

COVID-19 Business Response Team

Mike Ross
(602) 530-8498
COVID-19 Business Response Team

Hannah Porter
(602) 530-8175

COVID-19 continues to create significant uncertainty for companies and individuals with respect to business and contractual relationships.  The impact of the pandemic on current and future litigation is dynamic, changing on a daily basis, but some of the key issues businesses are facing include:

  • What, if any, legal duties are on “hold” during the pandemic?
  • Can my business still demand that other people or companies honor contracts?
  • If not in the courtroom, are there practical, efficient ways for parties to resolve disputes?
  • If we have no choice but to file a lawsuit, or if we are sued, are the courts still open and available?
  • Are there quick, available forums for real legal emergencies?

The Federal and State courts throughout Arizona continue to balance the ongoing health risks with the necessity to remain operational.  Courts have adjusted aspects of the process to minimize any potential delay while still ensuring litigants are not prejudiced in the enforcement and protection of their legal rights.  With the exception of civil jury trials, most elements of the civil litigation process are moving forward, albeit with greater reliance on virtual or telephonic proceedings.

Here are some key ways in which COVID-19 has impacted Federal and Arizona State Court litigation and some of the ways in which these Courts are responding:

  • The United States District Court for the District of Arizona has postponed all civil jury trials scheduled to begin in December 2020 and additional postponements are possible.  New filings are permitted and cases are continuing to move forward; however, District Court Judges, at their discretion, may postpone trial-specific deadlines for civil cases.  Proceedings are conducted remotely, where feasible.
  • As with the U.S. District Court, new filings are still permitted and cases are still moving forward in the Superior Courts for the counties in Arizona.  In Maricopa County, no new civil juries will be empaneled through February 28, 2021.  Further, the Arizona Supreme Court ordered all in-court proceedings to be avoided as much as possible.  Like the federal courts, Superior Court Judges have wide latitude to determine how cases should proceed or whether individual circumstances merit postponements or extensions.
  • In light of the limitations on in-person proceedings, many Judges are scheduling and conducting appearances by video and telephone.
  • Parties to ongoing litigation are increasingly utilizing electronic means to conduct discovery.  For example, depositions are increasingly being conducted via videoconferencing on platforms such as Zoom.
  • Courts have adopted procedures to handle requests for emergency relief, like temporary restraining orders or other injunctions.  To the extent litigants need emergency relief, the forums are available.
  • Parties and counsel continue to use alternative dispute resolution (“ADR”) methods including private arbitration and mediation to resolve their disputes outside of the courtroom.  As with the Courts, arbitrators and mediators are increasingly willing to use video conferences in lieu of in-person appearances.

Mike Ross and Hannah Porter are available to answer questions about the Impact on Litigation for businesses in litigation or contemplating litigation.

Updates to Impact on Litigation

Maricopa County Superior Court Establishes Late Case Fair Limits Proceeding

Maricopa County Superior Court Guidelines to Reopen

Arizona Supreme Court Authorizes Limited Court Operations

Additional Resources

Insurance Recovery and Protection for Businesses

Community Support & Business Response Legal Team

Jennifer Cranston
(602) 530-8191

Business Losses

Many businesses have been and will continue to be financially impacted by COVID-19.  A number of these businesses have already been denied insurance reimbursement for their businesses losses, forcing them to pursue litigation against their insurance companies. To date, most of these cases have not favored the insureds.

However, each claim is fact-specific and should be evaluated based on the circumstances and terms of the policy.  Below are steps businesses can take to evaluate their potential insurance coverage.

  • Gather all policies.
    • If you don’t have complete or current copies, contact your agent/broker or the insurance companies directly.
    • Don’t be discouraged by warnings from your agent/broker or carrier indicating that coverage is not available; it’s important to check for yourself.
  • Review all polices carefully.
    • Be sure to review all portions of the policies, especially endorsements which can reduce or expand the scope of your coverage.
    • Note any provisions that appear to apply to your situation as well as provisions that confuse or surprise you.
    • For many businesses, the most likely candidates for coverage of business losses are (1) business owner policies and (2) property damage policies with business interruption clauses. Key provisions to review in these policies include:
      • Language requiring “direct” or “actual” loss or damage to property: Such requirements are found in standard form policies and have been deemed by most courts to preclude coverage for COVID-related losses.  However, not all policies use the standard forms and, for those that do, a few courts have agreed with the theory that exposure of property to the virus can meet the actual physical damage requirement.
      • Exclusions for viruses, contagions, or pandemics: Some standard form policies contain these kinds of exclusions. If clearly worded and easily identifiable, these exclusions are typically enforceable to preclude coverage, which is another reason why reading policies in their entirety is so critical. Also, the absence of such exclusions in an otherwise standardized policy may support a claim for coverage.
      • Provisions or endorsements that add additional coverage for “extra expense” or “civil authority”: These provisions may be broad enough to provide relief if your business is forced to shut down due to the virus. They may include prerequisites (such as a requirement that the suspension be caused by property damage or is necessary to provide civil authorities with access) as well as sub-limits to your coverage (limiting the recovery available to a specific dollar amount or cap on the number of days/weeks of suspension).
      • Disease endorsements: Some policies add coverage for losses arising from contagious, infectious, or communicable diseases. Businesses with these endorsements have a strong argument in favor of coverage and have been the most successful in lawsuits filed since the onset of the pandemic.
  • Businesses in specialized industries may have additional policies (such as environmental contamination policies) or endorsements addressing unique businesses losses and needs during emergency and crisis situations, which is why we recommend gathering and reviewing all policies.
  • Contact your agent/broker or carrier:
    • Once you’ve reviewed your policies, contact your agent/broker or the carrier about the specific provisions you believe provide coverage.
    • Be prepared to provide specific examples of your loss (including lost income and additional expenses incurred or expected to be incurred).
    • Make sure you provide notice of your claim using the procedures outlined in the policy or policies (typically found in a portion of the policy describing “conditions” or duties/obligations in the event of a loss).

Liability Defense Coverage

In addition to incurring their own pandemic-related losses, many businesses face the possibility of third-party claims alleging personal injury due to exposure to the virus. While most businesses will have strong arguments for why they should not be held liable, defending exposure claims can be costly, such that businesses may want to tender these kinds of claims to their insurance companies.

Claims alleging exposure liability are typically covered by commercial general liability policies, given that most exposure lawsuits allege “bodily injury” caused by an “occurrence” or “accident.” However, if the plaintiff did not actually contract the virus and limits his or her alleged harm to emotional distress, the insurance company may contest the availability of coverage (even coverage for defense costs) depending on the policy’s definition of “bodily injury.” Also, some liability insurers have added endorsements to their policies excluding or limiting coverage for injuries arising out of communicable diseases or transmissible pathogens.

Like all other policies, commercial general liability policies should be carefully reviewed, in their entirety to determine available coverages in the face of liability claims. Should your business receive a claim or lawsuit alleging exposure liability, tendering the claim to your carrier – in accordance with any timing or other procedural requirements identified in the policy – can be key to obtaining coverage for the attorneys’ fees and costs associated with defending such claims.

Jennifer Cranston is available to answer questions about coverage and communicating with carriers regarding your business insurance policies.

Paycheck Protection Program (the “PPP”)

Matt Engle
(602) 530-8285

In response to the COVID-19 crisis, the PPP authorizes up to $669 billion in forgivable loans with a fixed 1% interest rate to small businesses to assist them to continue to pay their employees during this challenging time. The payment on the loans can be deferred and businesses may be eligible for complete loan forgiveness if the funds are used only for the following purposes in the first 8 weeks after getting the loan:

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

The loan forgiveness is only available to businesses that maintain their staff and payroll—the amount eligible for forgiveness will be reduced if you decrease your full-time employee headcount or decrease compensation by more than 25% for any employee that made less than $100,000 annualized in 2019; but, if you restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020, eligibility for forgiveness can also be restored. Businesses that receive loans may be eligible for a portion of the loan to be forgiven if used for other costs.

If a business applies for and receives a loan under the PPP, it will not be eligible to defer the employer’s 6.2% of social security taxes nor will it be eligible for the 50% credit on the first $10,000 of wages paid to employees.

See Tax Developments guidance for a more detailed discussion of this deferral and credit.

Matt Engle is available to answer questions about the Paycheck Protection Program.

Updates to Payroll Protection Program (the “PPP”)

Small Business Administration Re-Opening Paycheck Protection Program

PPP Audits

SBA Paycheck Protection Program Loans and Changes of Ownership

SBA Releases Revised PPP Loan Forgiveness Applications, Including New Streamlined EZ Application; Deadline
for New Loan Applications Fast Approaching


President Trump Signs the Paycheck Protection Program Flexibility Act

SBA Issues Additional Guidance Regarding PPP Certifications

Notice 2020-32: Deductibility of Expenses When Loan is Forgiven Under the Paycheck Protection Program

Treasury Announces Audits of PPP Loans in Excess of $2,000,000

Reminder: The Payroll Tax Credit May be Available to Businesses if the PPP is Not

Guidance from the SBA on PPP Funds and Additional Funding Appropriated

Additional Resources

Real Estate

COVID-19 Business Response Team

Jim Connor
(602) 530-8524

For many aspects of a real estate transaction, a pandemic, a public emergency, and perhaps (if applicable) a “stay in shelter” order, may rise to the level of “force majeure” or act of God, which in turn allows for the excuse, delay, extension or waiver of performance. Where the performance by a party to a contract is rendered impossible, or materially and adversely affected, by unforeseeable factors, then under the principles of force majeure that party may be excused.

In assessing whether an event or condition would qualify for such treatment under the concept of force majeure, often the “foreseeability” of the event is a significant factor. At its essence, a force majeure clause is an attempt to recognize that some risks are not reasonably foreseeable, and therefore, no single party should suffer the resulting consequences and losses.

COVID-19 has created significant uncertainty in the real estate industry, and we are currently sorting through numerous issues including the following:

  • How might a pandemic, or a resulting governmental mandate, impact a party to a real estate transaction?
  • Would tenants or borrowers be excused from prompt satisfaction of payment obligations? Or of non-payment obligations?
  • If a purchaser is required to fund an acquisition, and is informed that due to the turmoil in the credit markets the lender cannot perform when required, what is the status of the transaction and what might be the remedies?
  • How are contract provisions interpreted, or in absence of an express contract provision, how is a pandemic to be addressed?
  • Would the economic loss be subject to insurance coverage, including under business interruption insurance?
  • How would a pandemic alter the standard of care, for businesses conducting a retail business?
  • Is there a reasonable, mutually acceptable solution to the situation, where all parties can absorb some of the impact?
  • Is there a requirement – whether express or implied – of prompt notification to the other party in the event of a materially adverse condition?

Jim Connor is available to answer questions about the impact of the current business climate on commercial and residential Real Estate.

Updates to Real Estate

City of Phoenix Extends Several Permit Deadlines Due to COVID-19

Issues When Considering Lease Modifications in a COVID-19 Business Environment

Additional Resources


COVID-19 Business Response Team

Steve Boatwright
(602) 530-8301

Raising Capital with COVID‑19 As a Disclosure Requirement

Securities laws require disclosures of material factors that may impact among other things business operations and financial results. Disclosures are both of existing conditions and prospective impact of macroeconomic events or so called acts of God. Clients raising capital will need to consider how COVID‑19 could impact sales, result in layoffs, create supply issues if components need to be shipped from China or Italy and related logistics of reduced transport options with flight curtailments, consider whether key employees are not able to work due to illness from COVID‑19, and many other factors specific to their business.

For example, a medical facility meant to be a surgical center may need disclosure as it may be repurposed for COVID‑19 patients.

Disclosures need to be in private offering documents and public securities reports both in the form of risk factors and the narrative on the business itself. They may even be in the management discussion impacting liquidity particularly if the client has a blown covenant with a lender. There is no “one size fits all” and working with the management team and auditor will help securities counsel determine the needed disclosures.

Steve Boatwright is available to answer questions about Securities Law, Raising Capital, and Disclosure Requirements.

Helpful Articles

Tax – Federal Developments

Tim Brown
(602) 530-8530

Administrative Relief

  • Extension of Tax Filing and Payment Deadlines – Pursuant to IRS Notice 2020-23, the deadline for filing any tax return and paying any tax (including self-employment taxes and 2020 estimated tax payments) that has a filing or payment deadline on or after April 1, 2020 and before July 15, 2020, has been extended until July 15, 2020.  This relief is automatic and no election or other filing is required by a taxpayer.  This extension does not apply to any return that was due on March 15, 2020 (e.g., partnership tax returns).  Returns due on July 15, 2020 may be further extended to October 15, 2020 by filing an extension request on or before July 15, 2020.
  • Extension of “Time-Sensitive Actions” – IRS Notice 2020-23 also provides relief with respect to “time-sensitive actions” that are due to be performed on or after April 1, 2020 and before July 15, 2020.  These actions include filing all petitions with the Tax Court, seeking review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax.  In addition, the list of “time-sensitive actions” includes the following:
    • Like-Kind Exchanges – Under Notice 2020-23, a taxpayer whose 45-day identification period or 180-day exchange period ends between April 1, 2020 and July 14, 2020 has until July 15, 2020 to complete the identification or exchange, as the case may be.
    • Qualified Opportunity Funds – Under Notice 2020-23, a taxpayer’s deadline to invest in a qualified opportunity fund (QOF) under IRC Section 1400Z-2(a)(1)(A) is considered a “time-sensitive action.”  IRC Section 1400Z-2(a)(1)(A) requires a taxpayer to generally invest in a QOF during the 180-day period beginning on the date of the sale or exchange giving rise to the gain.  Under Notice 2020-23, a taxpayer has until July 15, 2020 to make its investment in a QOF if the taxpayer’s 180-day-period ends between April 1, 2020 and July 14, 2020.
  • IRS’s People First Initiative – On March 25, 2020, the IRS announced its People First Initiative in news release IR-2020-59, which provides additional administrative relief on several fronts including the following:
    • No New Audits – Until July 15, 2020, the IRS will not start new field, office, and correspondence examinations and will continue to work refund claims where possible and without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.
    • Installment Agreement Payment Deferrals – For taxpayers under an existing Installment Agreement with the IRS, payments due between April 1 and July 15, 2020, are suspended, although interest will continue to accrue on any unpaid balance.
    • Offer-in-Comprise (OIC) Relief – The IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support a pending OIC. The IRS will also not close any pending OIC request before July 15, 2020, without the taxpayer’s consent. Taxpayers also have the option of suspending all payments on accepted OICs until July 15, 2020, although interest will continue to accrue on any unpaid balances. The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018, provided that it is filed on or before July 15, 2020.
    • Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will also be suspended until July 15, 2020. New automatic, systemic liens and levies will also be suspended until July 15, 2020.

Legislative Tax Relief

  • Families First Coronavirus Response Act – President Trump signed the Families First Coronavirus Response Act on March 18, 2020. The Act provides the following two new refundable payroll tax credits to employers, which are designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees:
    • Paid Sick Leave Credit – For an employee who is unable to work because of COVID‑19 quarantine or self-quarantine or has COVID‑19 symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. For an employee who is caring for someone with COVID‑19, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the COVID‑19, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are also entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
    • Child Care Leave Credit – In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the COVID‑19, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
  • CARES Act Tax Provisions – President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. The CARE Act includes several tax provisions affecting business and individuals, including the following:
    • Business Tax Provisions
      • Exclusion of Forgiveness of Paycheck Protection Program Loans from Income – IRC Section 1106(i) of the CARES Act specifically excludes the forgiveness of any loan under the Paycheck Protection Program from income.
      • Deductibility of Expenses when Loan is Forgiven under Paycheck Protection Program –The COVID-related Tax Relief Act of 2020 (COVIDTRA) clarifies that eligible taxpayers may deduct otherwise deductible expenses paid with PPP loan proceeds.
      • Deferral of Employer Social Security Taxes and Self-Employment Taxes – The 6.2% portion of an employer’s social security taxes and an individual’s self-employment taxes due after the enactment of the CARES Act may deferred. Fifty percent (50%) of any such deferral is due on December 31, 2021 and the other 50% is due on December 31, 2022.
      • Payroll Tax Credit for Employee Retentions – The CARES Act generally provided for a refundable tax credit in the amount of 50% of eligible compensation (up to a $5,000 credit per employee) if certain conditions were met. The Taxpayer Certainty and Disaster Tax Relief Act (TCDTR) of 2020 modified this payroll credit as follows:
          • The credit has been increased from 50% to 70% of eligible compensation;
          • The maximum amount of the credit has been increased from $5,000 per employee per year to $7,000 per employee per quarter; and
          • Increases overall availability of the credit by Reducing the amount of year-to-year decline in gross receipts from 50% to 20%;
          • Allowing some larger employers, with up to 500 employees, to be eligible for the credit; and
          • Allowing certain employers that were not in existence in 2019 to be eligible for the credit.
      • Extension of NOL Carryback Period – The CARES Act provides a five-year carryback period for corporations for calendar years 2018-2020, and the 80% taxable income limitation for pre-2021 tax years is eliminated.
      • Deferral of Retirement Plan Funding – Employer retirement plan contributions due in 2020 may be deferred until December 31, 2020.
      • Relaxation of Business Interest Expense Limitations – The CARES Act increases the adjusted taxable income (“ATI”) used in calculating the business interest expense limitation from 30% to 50% in 2019 and 2020 (2020 only for partnerships). The Act also allows partners to deduct 50% of their 2019 excess business expense limitation passed through from a partnership in 2020. Taxpayers may also use their 2019 ATI for their 2020 ATI.
      • Repeal of Excess Business Loss Limitations for Non-Corporate Businesses – For businesses other than C corporations, the CARES Act repeals the excess business loss limitations for years prior to 2021.
      • Increase in Charitable Contribution Limitation for Corporations – The CARES Act increases the taxable income limitation in 2020 for charitable contributions by C corporations from 10% to 25%.
      • Deductibility of Business Meals – the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR) allows eligible taxpayers operating a trade or business to deduct 100% of the cost of restaurant supplied meals as ordinary and necessary food and beverage expenses.
    • Individual Tax Provisions
      • Charitable Contribution Deduction for Non-Itemizers
          • For contributions made in 2020, individuals who do not itemize may deduct up to $300 of charitable contributions per return (the $300 limit also applies to married couples filing jointly).
          • For contributions made in 2021, COVIDTRA increases the above-the-line deduction for charitable contributions from $300 per return (as established in the CARES Act) to a maximum of $600 for married couples filing jointly (for individuals, the limit remains at $300).
      • Charitable Contribution Deduction for Itemizers – prior to the TCDTR, individual taxpayers who itemized their deductions were limited to a deduction of not more than 60% of their contribution base on charitable cash contributions made to 50% charities.  For 2020 and 2021, the percentage limitation rules for individuals making qualified charitable cash contributions to 50% charities do not apply.
      • Exclusion of Employer Provided Student Loan Benefits – The CARES Act allows individuals to exclude from income up to $5,250 received prior to 2021 from an employer for use in repaying student loans.
      • Waiver of Early Withdrawal Penalty – The CARES Act waives the 10% penalty for early retirement plan withdrawals up to $100,000 by individuals affected by COVID-19 and allows the tax on such withdrawals to be paid over three-years or avoided by recontributing the withdrawal.
      • Waiver of Required Minimum Distribution (RMD) Requirements – The CARES Act waives the RMD requirement for 2020 for individuals required to start taking mandatory distributions at age 72.

Tim Brown is available to answer questions about the challenges in Tax Developments for businesses.

Updates to Tax- Federal Developments

IRS Extends Filing and Payment Deadline for Individuals to May 17, 2021

Notice 2020-32: Deductibility of Expenses When Loan is Forgiven Under the Paycheck Protection Program

IRS Adds New FAQs on Faxing Refund Claims, NOL Carrybacks Under CARES Act

Federal Tax – Administrative Relief

Additional Resources

Tax – State and Local Developments

Tax Law Attorney Tim Brown

Tim Brown
(602) 530-8530

The vast majority of states have extended state income tax filing deadlines commensurate with the federal extensions. A more limited number of states have recently begun providing various forms of relief for sales taxes, at least for small businesses meeting certain annual gross revenue thresholds. These forms of relief may include: extended deadlines for sales tax returns; waiving penalty and interest for late-filed sales tax returns; and granting use tax deductions for COVID-19 related donations.

The states currently offering some form of sales tax relief include: Alabama, California, Colorado, Connecticut, District of Columbia, Florida, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New York, North Carolina, Pennsylvania, South Carolina, Texas, Vermont, Virginia, and Wisconsin.

Work-from-home and Nexus: Multistate businesses whose employees are required to work-from-home should be mindful of physical presence nexus and monitor guidance from states in which employees work from home.  The District of Columbia, Indiana, Minnesota, and Pennsylvania have issued guidance that in general, employees required to work from home do not establish nexus for the employer while a federal, state, or local government order is in effect. Maryland has issued a notice that nexus determinations are based on the specific facts and circumstances of each taxpayer.

Information on the Arizona and New Mexico responses to COVID-19 is below.

New Mexico: New Mexico Taxation & Revenue Department (TRD) COVID-19 Response

Income Taxes and Estimated Payments:

  • Annual Returns: The deadline for New Mexico personal, fiduciary, and corporate income tax returns, which were originally due on or before April 15th, 2020, has been extended to July 15th, 2020. Penalty and interest will not be assessed if the tax due is paid by July 15th, 2020.
  • Estimated Payments:
    • The deadline for estimated payments, which were originally due on or before April 15th, 2020, has been extended until July 15th, 2020. No penalty or interest will be assessed if the amount due is paid by July 15th, 2020.
    • The deadline for estimated payments originally due between April 16th and July 14th, 2020 is also July 15th, 2020. No penalty will be assessed, but interest will apply to payments made after their original deadline.


  • Withholdings that are reported and paid using the Combined Reporting System (CRS), and that were originally due between March 25th, 2020 and July 25th, 2020 are now due on July 25th, 2020. No penalty will be assessed for late withholding, but interest will apply to payments made after their original due date.

No Other Extensions:

  • TRD has not extended deadlines for any other tax programs. Thus, the ongoing deadlines for Gross Receipts Tax, Governmental Gross Receipts Tax, Compensating Tax, Leased Vehicle Gross Receipts Tax, the Leased Vehicles Surcharge, Insurance Premium, and other taxes remain unchanged.

New Mexico Taxation and Revenue Department Bulletin 100.35

Operations and Tax Enforcement Actions:

  • Until further notice, TRD’s five district offices and the Compliance Bureau are open on an appointment-only basis to limit in-person contact. Appointments can be made through the contact numbers listed here.
  • Tax liens, seizures and injunctions will cease until July 1, 2020.
  • Taxpayers undergoing audits can request a 60-day suspension of the audit.
  • Taxpayers on payment plans can request 60-day extensions to make payments.

Arizona: Arizona Department of Revenue (ADOR) COVID-19 Response

2019 Income Taxes and Estimated Payments:

  • Annual Returns: The deadline for filing and paying 2019 Arizona state income tax- for individual, corporate, and fiduciary tax returns- has been extended from April 15th, 2020 to July 15th, 2020. Penalty and interest will not be assessed on 2019 income tax returns that are filed on or before July 15th, 2020.
  • Estimated Payments and Contributions: However, the due dates for certain estimated payments and contribution applications remain April 15th, 2020 and have not been extended, including:
    • Any estimated payment that was originally due April 15th, 2020; and
    • Contributions to certified school tuition organizations, public schools, and qualifying charitable organizations.
  • Credit for Increased Excise Taxes and Property Tax Refund: The due dates for these credit claims have also be extended to July 15th, 2020.


  • Customers requiring in-person assistance a ADOR’s customer service locations in Phoenix, Mesa, and the Southern Regional Office in Tucson must schedule an appointment with a ADOR representative by
  • Customers can also access most information, and make payments, at or


Unemployment Reports and Payments:

  • Arizona Department of Economic Security (“DES”) has extended the first quarter 2020 unemployment tax and wage report from April 30, 2020 to June 1, 2020.
  • DES will not charge unemployment benefits, during the current crisis, to an employer’s experience rating.

Tim Brown is available to answers questions about State and Local Tax Developments for businesses.

Additional Resources

Tort Liability for Businesses

COVID-19 Business Response Team

Shannon Clark
(602) 530-8194



Potential Liability for Exposure to COVID-19

As the coronavirus pandemic continues to rage while businesses struggle to remain afloat, many employers and businesses have expressed concern about civil liability arising from exposure to COVID‑19. Companies are wondering about their potential liability to persons who claim they were exposed to COVID‑19 while on their property and became ill following that exposure. Such allegations will require a careful analysis of the facts and circumstances relating to the particular claim.

Indeed, in December 2020, one company and its owners were sued for wrongful death with allegations that the company failed to take reasonable COVID-19 mitigation precautions and failed to maintain a safe workplace.  Claims for sickness and injury to an employee may be subject to worker’s compensation laws, such that an employee’s exclusive remedy, with limited exceptions, would be through the worker’s compensation system (assuming the employer had worker’s compensation insurance). During that process, the employee would need to establish that the injury resulted from exposure in the workplace while performing a function in the course and scope of the employee’s work duties.

For non-employees, a company may face claims from a social guest or business invitee if the business knew or had reason to know of a dangerous condition that caused the guest or invitee harm. The elements of such a claim would include establishing (1) the existence of a legal duty owed by the company to the claimant, (2) the company’s fault, (3) injury sustained by the claimant, and (4) a causal connection between the company’s conduct and the claimant’s injury. Of these elements, fault and causation will likely be the key focus of most disputes. Specifically, claimants will bear the burden of proving that the business failed to act as a reasonably careful person would act under the circumstances, including following any industry-specific standards, and that the business’s conduct helped produce the injury and that the injury would not have happened without the business’s conduct.

Accordingly, in addition to following all requirements established by federal, state, and local authorities in connection with re-opening, businesses should research any guidelines or recommendations applicable to their industry and develop reasonable policies and practices based thereon. Likewise, businesses should carefully document all efforts to implement their adopted standards, as that documentation be used as evidence in defending future exposure claims.

Liability Waivers

Many businesses routinely require customers, guests, or other persons coming onto the premises to sign “waivers of liability” or other “assumption of risk” documents.

Businesses and property owners should be extremely wary about relying on such waivers to avoid potential liability for exposure to COVID‑19. As one might expect, judges tend to scrutinize prospective waivers very carefully, and in any given case, can be tempted to search for some way to void the waiver (and permit the injured person to proceed with his or her suit).

Under those circumstances, businesses and property owners who are considering using such waivers should not use any “pre‑coronavirus” forms but should consult with legal counsel to develop documents tailored to the particular nuances and risks of the COVID‑19 pandemic.

Arizona Legislation

In 2021, Arizona’s legislature passed SB 1377 and Governor Doug Ducey signed it into law on April 5, 2021.  The law provides liability protection for a person or entity acting in good faith to protect members of the public from injury from a public health pandemic unless it is shown by clear and convincing evidence (a higher burden of proof than the “preponderance of the evidence” standard required in most civil lawsuits) that the person, business, school or healthcare company acted willfully or was grossly negligent.  This legislation is consistent with legislation in other states that provides additional COVID-19 liability protection to schools, business and healthcare organizations.  This legislation applies to all causes of action that are based upon an act or omission that occurred after March 11, 2020, and applies retroactively to matters from March 10, 2020, forward.  It is anticipated that numerous court cases will challenge this legislation under various theories, including as violative of the Arizona Constitution.

Shannon Clark is available to answer questions about the interaction between tort liability and workers’ compensation laws and risk management best practices.