Politics

Kudlow voices support for shielding companies from coronavirus-related lawsuits

Key Points
  • White House economic advisor Larry Kudlow said Wednesday that he was in favor of shielding companies from coronavirus-related lawsuits as the administration eyes a speedy reopening of the economy.
  • Kudlow, speaking on on CNBC's "Squawk Box," said that businesses, and particularly small businesses, should not be held liable to what he called "trial lawyers putting on false lawsuits."
  • But Justin Wolfers, an economics and public policy professor at the University of Michigan, wrote in a widely circulated post on Twitter last week that reining in corporate liability was "bad economics and bad policy."
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Kudlow: Companies should be protected from coronavirus liability lawsuits

White House economic advisor Larry Kudlow said Wednesday that he was in favor of shielding companies from coronavirus-related lawsuits as the administration eyes a speedy reopening of the economy.

Kudlow, speaking on CNBC's "Squawk Box," said that businesses, and particularly small businesses, should not have to face what he called "trial lawyers putting on false lawsuits."

"You've got to give the businesses some confidence here that if something happens, and it may not be their fault — the disease is an infectious disease — if something happens, you can't take them out of business," Kudlow said. "You can't throw big lawsuits at them. And I think liability reforms and safeguards are going to be a very important part of it."

The comments from the director of the National Economic Council come as business groups are lobbying Congress for protection from liability if customers or employees are sickened when business activity resumes.

The U.S. Chamber of Commerce, a lobbying group that advocates for business, called exposure liability "the largest area of concern for the overall business community" in a letter the organization posted online last week. The Chamber proposed a "safe harbor" from negligence lawsuits for companies following the guidance of public health authorities. 

On Monday, President Donald Trump addressed the topic at a White House press briefing, saying, "We have tried to take liability away from these companies." Trump said a "legal opinion" would be forthcoming. 

"We just don't want that because we want the companies to open and to open strong," the president said. 

Kudlow, in his interview, cited a Wall Street Journal opinion article written by Evan Greenberg, CEO of insurance giant Chubb, that was published Tuesday.

Greenberg warned in the article of a coming "wave of litigation filed against managers and boards of every kind of organization."

"Litigation may help the tort industry but it doesn't serve the national interest. It would add to uncertainty, crippling prospects for an orderly recovery," Greenberg wrote. 

Kudlow said he was "quite concerned about" the prospect. Asked about how safety standards would be enforced if private legal action was curtailed, Kudlow pointed to the efforts of state and city regulators.

"There will be constant monitoring, state by state. I think the states do a good job," Kudlow said. "I have a lot of confidence in the states and the cities for that matter."

Some economists have expressed skepticism about reining in corporate liability for coronavirus risks. 

Justin Wolfers, an economics and public policy professor at the University of Michigan, wrote in a widely circulated post on Twitter last week that such a proposal was "bad economics and bad policy."

"The whole point of making employers liable for risking the lives of their staff is to prevent them from exposing their staff to undue risk," Wolfers wrote. "Businesses are asking for the right to expose their workers to fatal risks with no consequences."

Disclosure: Larry Kudlow is a former CNBC contributor.