If America is going to restart its economy, at whatever pace, it needs to think about a major roadblock: liability from COVID-19. If a university or workplace reopens, and some employees or students get sick, should they have the right to sue?

In the absence of clarity on this question, many risk-averse institutions will simply wait, as their lawyers will be reluctant to give them clearance to reopen.

Yet the path forward is tricky. The coronavirus relief act passed by Congress last month waives or limits liability for volunteer health care providers, as well as those providing “pandemic countermeasures.” But how do businesses and other institutions fit into this picture?

If employers are waived of liability altogether, they might not take enough precautions, such as introducing more social distancing in the workplace or providing more soap in the restrooms. Yet putting all the liability on employers doesn’t make sense either.

If an infected but asymptomatic worker shows up at work and sickens coworkers, for example, should the employer be liable? The answer is far from obvious. Liability exists not to shift unmanageable risk, but rather to induce management to take possible and prudent measures of precaution.

Another problem with liability law in this context is that the potential damages are high relative to the capitalization of most businesses. COVID-19 cases often pop up in chains; there have been many cases from a single conference, or in a single church choir, or on a single cruise ship. If a business or school is host to such a chain, it could be wiped out financially by lawsuits. In these cases the liability penalties do not have their intended deterrent effect because the money to lose simply isn’t there.

This problem is especially severe for nursing homes, a major center of COVID-19 deaths. Under a regime of strict liability, if the lawsuits were allowed to proceed, many nursing homes would likely become insolvent. That could leave the 1.3 million Americans who stay in nursing homes without a place to live.

Another problem with liability in this setting has to do with jury expertise. Are random members of the public really the best people to determine acceptable levels of COVID-19 risk and appropriate employer precautions? Juries are better suited for more conventional applications of liability law, such as when the handyman fixing your roof falls off your rickety ladder. Given the unprecedented nature of the current situation, many COVID-19 risk questions require experts.

Finally, there is the issue of testing. Businesses could be of immeasurable help by testing their employees for COVID-19, as additional testing can help limit the spread of the virus (if only by indicating which workers should stay home or get treatment). Yet the available tests are highly imperfect, especially with false negatives. If businesses are liable for incorrect test results, and their possible practical implications, then business will likely not perform any tests at all, to the detriment of virtually everybody.

So what is the best way forward? More than likely, it involves some mix of regulation and limitations on future liability. If neither businesses nor workers nor customers can do enough to make any given activity sufficiently safe, current restrictions on it should continue. Given the confined space and the number of yelling fans, for example, it may be a while before anyone attends an NBA game.

For sectors that are allowed to reopen, liability should be capped at some modest level and limited to cases of extreme recklessness, gross negligence or criminal misconduct. Lawsuits thus could be very costly to businesses, in both monetary and reputational terms. That might be incentive enough for firms to impose additional safety precautions. Nonetheless, under such a system, most of the allowed reopenings could proceed — and help the U.S. economy rebound.

For low-risk activities, it might be better to proceed with no COVID-19 liability at all. Younger people seem to be at less risk, so maybe it makes sense to reopen college dorms, for instance, even though some cases will occur. It is not clear the dorm owner can eliminate risk, beyond simply postponing the reopening of the dorm.

New Zealand for some time has had an accident compensation system under which personal injury victims receive small payments from the government, but business usually gets off the hook. A version of this system could work for COVID-19 in the United States, but with modest liability obligations on business in some cases.

Regardless of what exactly is the best approach, the liability question for COVID-19 is a major issue. As President Donald Trump has indicated, it will need to be addressed before any economic reopening gets very far.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “Big Business: A Love Letter to an American Anti-Hero.”

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