Introduction

The ongoing COVID-19 pandemic continues to present new challenges at the frontiers of social risk. Although there has been discussion about the potential of alternative liability structures for COVID-19 vaccine-related injury, there has been less analysis of the right way to compensate and manage other types of injury associated with the SARS-CoV-2 virus. These include long-term illness, disability and death.

In all European Union member states, COVID-19 contracted at work has been recognised as an employment-associated disease. However, there is inconsistency across member states as to the scope of coverage. Further, this position does not address the case of COVID-19 injuries of non-employed persons, such as residents of long-term care facilities—these significant losses are currently being absorbed by social security systems, whether privately or publicly administered.

The significant societal impact of COVID-19 has prompted the consideration of alternative frameworks like no-fault compensation funds to better allocate and price the risks and impacts of COVID-19-related injury. Compensation funds can be considered as the ‘fourth pillar’ of compensation law, alongside tort or liability law, private insurance and social security frameworks. Compensation funds have existed for some time already in the form of guarantee and damage funds. Guarantee funds play a supporting role to liability insurance, intervening when there is no tortfeasor to be found, or the tortfeasor is insolvent (Vanhooff et al. 2016, p. 42). Damage funds act in a way that complements or suppresses liability law by providing a new mechanism for compensation, often on a solidarity basis (Vanhooff et al. 2016, p. 44). Some very large compensation funds combine features of both guarantee and damage funds (Watts 2021, p. 21).

Internationally, there is also a rapidly growing mosaic of compensation funds of different shapes and sizes (Watts 2021, pp. 5–7). Compensation funds are created by different jurisdictions and international actors to address a perceived inadequacy of existing judicial, insurance and/or social security frameworks to compensate (either partially or fully) a class of individuals that have suffered loss in a specific context (van Boom and Faure 2007b, p. 479; Vanhooff et al. 2016, p. 41). This is usually on a ‘no-fault’ basis, meaning that it is not necessary for the claimant to demonstrate to a legal standard the liability of a third person (a liability-based approach) or a legal standard of causation (a strict liability-based approach). A good standard description of a compensation fund is as follows: “an alternative compensation scheme in the form of capital meant for the compensation of victims whose damage is the consequence of certain circumstances, described by law. Eligibility is not connected with potential contributions paid by the victim, nor with the extent of the risk” (Vanhooff et al. 2016, p. 42; Knetsch 2013, p. 499). In other words, compensation funds provide a mechanism for victims to access redress for a specific type or range of loss, as an alternative or supplement to standard compensation avenues such as liability law or insurance.

These funds operate in a range of functions, and the motivations for them are mixed: as well as public pressure to provide victims with compensation as a display of solidarity, it may also be more politically expedient to establish an ex post and ad hoc solution rather than a (potentially expensive and politically unpopular) ex ante solution.

The nebulous nature of compensation funds means that there is often a potential overlap or friction with other compensation frameworks. There may be an overlap between the compensation available under a fund framework and what is available under a work accident scheme. It is also important to remember that the relevance of compensation funds in an individual jurisdiction depends on the surrounding legal landscape. When the ‘jigsaw puzzle’ of the compensation landscape in an individual jurisdiction does not have many gaps, the flexible solution provided by a compensation fund framework may be of limited utility. When a compensation problem is not easily remedied by the other three pillars, a fund structure may be useful.

With an eye on scientific knowledge of best practice in the development and operation of no-fault compensation frameworks, this paper analyses and considers the design and use of such funds in Europe as applied to COVID-19 injury in workplace and non-workplace settings. Special attention is given to the case of France, where the idea of a specific COVID-related compensation fund has been discussed extensively on the political stage. This paper also considers the position of compensation funds in relation to private insurance models and social security systems. The general scope of this paper—and the hypothetical compensation framework discussed—is redress for individuals who have suffered a personal injury due to COVID-19 infection. It does not include no-fault compensation frameworks for vaccine damage, which has been considered already in other scholarship (Watts and Popa 2021; Raposo 2021; Halabi et al. 2020). The economic losses suffered by businesses and self-employed individuals as a result of the pandemic and associated social regulations are also not considered here.

Perception of COVID-related personal injury as a social risk

The individual impact of COVID infection and its relation to compensation funds

As of December 2022, more than 260 million COVID-19 infections have been reported throughout Europe (World Health Organization 2022). Since the beginning of the pandemic, more than two million deaths related to COVID-19 have been recorded (World Health Organization 2022). It is assumed that many cases and deaths remain unreported.

These sobering figures make it clear that the social, economic and financial consequences of the pandemic are greater than the impact of other recent disease outbreaks (e.g. HIV/AIDS, influenza, SARS). The pandemic has already resulted in significant incremental cost—the American Hospital Association estimates that the pandemic has resulted in at least USD 202.6 billion of lost revenue for U.S. hospitals and the wider healthcare system (Kaye et al. 2021). In Europe, the pandemic heavily strained healthcare facilities; the resulting scarcity of resources led to triage policies, sometimes leading to unequal access to quality medical care.

At the individual level, the pandemic’s impact depends, of course, on the severity of the COVID-19 infection. Widespread immunisation has softened the clinical impact of the disease, and severe cases of COVID-19 are now generally restricted to the unvaccinated, the elderly and people with underlying medical problems. Special attention is now also paid to so-called ‘long COVID cases’ (or ‘post-COVID syndrome’), where patients who have contracted the virus may experience breathing issues, heart problems, kidney damage, neurological problems, diabetes and mental health issues for several months or even years (Raveendran et al. 2021).

The impacts of COVID-19 infection, both economic and non-economic, are likely to be multifaceted, especially in severe cases. Translated into legal terms, the consequences include medical expenses, loss of income, nursing costs, as well as pain and suffering and, especially in ‘long COVID cases’, the loss of enjoyment of life. This multi-dimensional impact can also be observed in relatives of infected patients. In cases of fatal COVID-19 infection, the resulting loss of family income, funeral costs and bereavement are a significant burden for close family members. During the first months of the pandemic, grief was exacerbated by the fact that, for health reasons, patients were not allowed to see their loved ones before dying (Kentish-Barnes et al. 2021). Even in less tragic cases, relatives often suffer distress, loss of financial support and, more broadly, disruption of living conditions.

Does this mean that the impact of the COVID-19 pandemic represents a new social risk that must be addressed by lawmakers? To answer this question, it is important to delineate the concept of social risk that was developed in European economic literature of the late twentieth century. According to the pivotal work of Esping-Andersen (2003), an individual risk becomes social when the fate of an individual has collective consequences, when society recognises a risk as warranting public consideration and when the risk originates from sources beyond the control of any individual. Incapacity for work because of illness or old age, death, sickness and unemployment have been gradually identified as risks that were in need of an intervention by public authorities due to the failure of private market instruments. In Europe, growing awareness of the need to publicly manage those risks was the seed that enabled the establishment of social security schemes (Alfandari 1997, p. 29).

On that basis, it becomes clear that the COVID-19 pandemic does not give rise to a ‘new’ social risk but merely represents a new facet of classic social risks. In most European countries, social security legislation provides cover for healthcare costs and loss of income. Even though this coverage is only partial, existing redress schemes ensured that basic needs related to a COVID-19 infection were addressed by means of solidarity (Solidargemeinschaft or solidarité nationale) rather than by patients themselves.

Despite the protection offered by social security benefits, COVID-19 patients are not entitled to full compensation of all their losses suffered, even when they are eligible for workers’ compensation schemes that offer wider coverage than ordinary health insurance schemes. For example, there is often no cover for the non-economic consequences of COVID-19 infection, nor may it be possible to access workers’ compensation schemes in some cases. In many jurisdictions, those gaps have led to a legal policy debate about the adequate level of coverage. In the U.S., a study prepared by the National Conference of State Legislatures has shown the challenges policymakers face to adapt workers’ compensation programmes to the COVID-19 pandemic, with coverage requirements and standards varying greatly from one state to another (National Conference of State Legislatures 2022). In other jurisdictions, such as South Africa or Switzerland, compensation for occupational injuries and disease is carried out by dedicated compensation funds or compensation offices. According to the findings of a vast survey commissioned by the Organisation for Economic Co-operation and Development (OECD), in almost all legal systems, the impacts of COVID-19 infection as a social risk led lawmakers to make policy choices that adapt procedures and conditions for obtaining benefits under workers’ compensation schemes (OECD 2020).

In contrast to the legislative activity related to pre-existing workers’ compensation schemes, very few policymakers globally have assessed the merits of establishing a specific compensation fund dedicated to COVID-19 patients. Apart from a similar, less far-reaching initiative in the U.S., it is only in France that the creation of a dedicated ‘COVID-19 compensation fund’ has been seriously considered, demonstrating an original facet of the struggle faced by many legislatures and policymakers to provide balanced coverage of the health consequences of the pandemic within existing legislative structures.

French legislative proposals for a COVID-related injury compensation fund

In May 2020, 13 members of the French Senate submitted a legislative proposal to establish a compensation fund for the victims of COVID-19. According to the explanatory memorandum, “it is a matter for the society as a whole and, thus, for the State to guarantee a simple, quick and equitable compensation of all losses suffered by those who provided assistance in the fight against COVID-19 and who were contaminated and seriously affected by the virus” (Senate 2020, p. 3).

The senatorial bill suggested establishing a specific compensation fund that would be administered by the Office national d’indemnisation des accidents médicaux (ONIAM). ONIAM was created in 2002 to manage the compensation of medical injuries that cannot be attributed to any misconduct and in cases where no insurance coverage was available. A major part of the proposed fund’s budget was to be sourced from a levy on major digital media operators (‘GAFAM’) and a portion of employer contributions to the workers’ compensation scheme (Senate 2020, Art. 6). The fund proposed offering full compensation to “individuals suffering from a disease or health condition due to a COVID-19 contamination, who, prior to their contamination and in the performance of their professional duties or volunteer activities on the national territory, were in contact with other contaminated individuals or objects that may have been contaminated” as well as their relatives. The right to full compensation was “without prejudice to a compensation under the rules regarding occupational diseases” and the bill did not contain any specific provision allowing the fund to reduce the victim’s compensation in case of contributory negligence.

As with other ‘medical accidents’ falling under the scope of ONIAM, the bill called for a simplified compensation procedure. Claimants were to provide evidence that they contracted COVID-19 “in the performance of their professional duties or volunteer activities” and that they suffer from a related disease or health condition (Article 3(1)). ONIAM would establish whether the “conditions for compensation are met” by conducting proper investigations, notwithstanding any objection based on doctor–patient confidentiality. ONIAM would make a compensation offer to approved claimants within a six-month period (Senate 2020, Art. 4). The bill’s procedural provisions were directly inspired by the current framework for the compensation of medical accidents (Knetsch 2021, pp. 90–94).

Following a rather critical report by the Senate’s Committee of Social Affairs (Féret 2020, p. 530), the bill was rejected on 25 June 2020 by a large majority of votes (Senate 2020, p. 6004). Despite the rejection of this first proposal, another initiative was started in the French National Assembly in January 2021 by 36 members of the opposition (Assemblée nationale 2021, p. 3723).

Unlike the first proposed fund, the 2021 bill suggested establishing a specific compensation fund as an independent body with its own legal personality (Senate 2020, Art. 2). The fund’s budget would come from a proportion of employer contributions to workers’ compensation schemes and a contribution of the state, both funded by a new levy on financial transactions (Senate 2020, Art. 8). A right to ‘full compensation’ (réparation intégrale) would be available to an even broader group of individuals (Article 1), as the scheme was supposed to cover “individuals suffering from temporary or permanent sequelae due to their SARS-CoV-2 infection on the territory of the French Republic” as well as the relatives of persons deceased as a result of COVID-19 infection.

The compensation procedure was similar to the May 2020 proposal, except for the fact that claimants were only required to establish “a temporary or permanent damage to health” and that the compensation fund had to establish whether the claimant’s health condition was COVID-19 related (article 3(5)). As in the first bill, the fund would be required to issue successful claimants a compensation offer within six months (Senate 2020, n.d. Art. 5), with no possibility for limiting the compensation in case of contributory negligence. In order to alleviate the financial burden of compensation, the bill provided for automatic coordination with relevant social security bodies in cases of work-related COVID-19 contamination (Senate 2020, n.d., 4(1) and (2)).

The bill of January 2021 was poorly received by the government and the presidential majority members of the National Assembly and was promptly rejected by a majority of members (Assemblée nationale 2021, p. 1892).

Reasons for rejection of the bills

In order to understand the reasons for the failure of the 2020 and 2021 proposals, it is helpful to examine in detail the relevant legislative debates (Senate 2020, pp. 5989–6005; Assemblée nationale 2021, pp. 1876–1895). Prior to the debates, the Committees on Social Affairs of both chambers had reviewed the bills in depth. The reports of Corinne Féret, Senator (Féret 2020, p. 530) and Régis Juanico, Member of the National Assembly (Juanico 2021, p. 3877) provide additional insight into the circumstances that led to the bills’ rejection. Members of the government as well as opposition members critiqued the proposals on three major points.

First, it was argued that the scope of the compensation funds proposed were neither consistent with the specified need nor economically feasible. The senatorial bill suggested limiting eligibility to those who were exposed to COVID-19 in the context of a professional or volunteer activity. While all senators expressed the need to address the situation of workers in essential services, during the parliamentary debates it was pointed out that the compensation of the consequences of a work-related COVID-19 infection was a task for social security (Senate 2020, p. 5992). As for individuals who volunteered in essential services, the proposal was seen as not providing sufficient guarantees for these victims to easily access compensation (Féret 2020, pp. 8–9). The special rapporteur of the Committee for social affairs also called for a ‘time-bar’ (barre temporelle) for the compensation scheme (Féret 2020, p. 7). Meanwhile, the proposal for a fund became somewhat obsolete during the course of its analysis, as the government decided to include COVID-19 in the list of occupational diseases, giving right to an automatic compensation under the work accident compensation scheme (Decree No 2020-1131 of 14 September 2020). The issue of scheme scope was also raised in relation to the second proposed fund, which suggested a right to full compensation for every individual suffering permanent or temporary harm due to a COVID-19 infection. The rapporteur of the National Assembly pointed out that this was a ‘poorly defined perimeter’ (Juanico 2021, p. 47).

The second argument raised by opponents related to financing and, in particular, to the difficulties in correctly anticipating the necessary financial resources (Féret 2020, p. 9). One of the parliamentary reports quoted a figure of EUR 16 billion, based on an estimation of only 300,000 eligible individuals with an average amount of damages of EUR 35,000–40,000 (Féret 2020, p. 58). From today’s perspective, the financial projections and calculation of eligible victims both seem highly underestimated. Criticisms were also levelled about the appropriateness of the proposed sources of funding. The suggestion to raise necessary funds via an additional levy imposed on the digital sector has been criticised as artificial and unsubstantiated, as the sector is “not the only one that takes advantage of the health crisis” (Féret 2020, p. 34).

Finally, the parliamentary debate also highlighted concerns about giving preferential treatment to COVID-19 patients. It would be difficult to justify a right to full compensation for the impact of an employment-associated COVID-19 infection, while patients suffering from work-related cancer are only eligible to partial compensation under the work accident scheme (Senate 2020, p. 5993).

All in all, both legislative proposals can be interpreted as symbolic gestures rather than parliamentary initiatives with serious chances of success. This also illustrates how the establishment of a compensation fund is ultimately a political and legal choice, albeit one that is influenced by the wider compensation landscape of the jurisdiction. It is very telling that the author of the senatorial bill stated in her explanatory memorandum that “this text, drafted during the darkest hours of the COVID-19 spreading in France and all over the world, is a kind of response to the commitment of some of our fellow citizens” (Senate 2020, p. 5990). The parliamentary debate also revealed that the establishment of a compensation fund is not a politically unbiased exercise—it is effectively an assertion of the liability of public authorities or, at least, their political responsibility (Juanico 2021, p. 19; Senate 2020, pp. 5995–5996). In this context, it is unsurprising that both proposals were submitted by members of the political opposition and were almost immediately rejected by the government.

The use (or misuse) of compensation funds as a partisan tool is not specific to French politics (Juanico 2021, p. 47), as similar motivations were observed in the U.S. In January 2021, a bill proposing the establishment of a federal COVID-19 Compensation Fund was presented in the House of Representatives, with little success (COVID-19 Victims Compensation Fund Act 2021).

Challenges associated with establishing a COVID-19 compensation fund

Delimitating the scope of the compensation fund

The French example shows that it is challenging to delineate the scope of a COVID-19 compensation fund. It is not economically feasible to grant the right to full compensation for every individual who suffered health consequences due to COVID-19 infection. Even if minor cases were to be excluded via a gravity threshold (as is the case in the French medical accident compensation scheme), the financial burden would still be considerable. The establishment of a compensation fund would require further delineation of the category of eligible individuals, raising the question of the fund’s interplay with existing compensation mechanisms for work accidents and occupational diseases.

The parliamentary debate in France also reveals that the definition of a category of eligible COVID-19 patients depends on various parameters. These include the degree of exposure to sources of infection, the professional or non-professional nature of the exposure, the demands of civil society, existing coverage gaps and, last but not least, the available budget.

Additionally, an attempt to create a specific compensation fund for COVID-19-related harm would have to overcome the objection of a ‘breach of equality’ among victims of infectious diseases. One of the major challenges of contemporary tort law is precisely to bring legal policy choices in line with the principle of non-discrimination, which is enshrined in various international and domestic legal sources. For example, the European Convention of Human Rights contains two provisions on discrimination (art 14 and art 1 of Protocol 12). Under French law, the principle of equality is also recognised in articles 1 and 6 of the 1789 Declaration of the Rights of Man and of the Citizen.

From a traditional perspective, it may seem surprising to scrutinise legislative choices about compensating victims with reference to the principle of equality, as existing tort law rules appear prima facie to favour the tortfeasor. In many jurisdictions, it is a principle of elementary justice that everyone must bear his or her own general risk of life and that it is not always possible to pass a harm on to other individuals (casum sentit dominus) (Koziol 2017b, sec. 2/1). Looking at those rules in historical terms, they help to delineate the range of civil actions that are permitted under law and which types of harms are eligible for compensation. However, this classic approach has been turned on its head by the rise of alternative compensation mechanisms such as private insurance, social security and compensation funds. Indeed, according to some scholars, traditional tort law has now given way to a more victim-oriented ‘law of accidents’ (Macleod and Hodges 2017, p. 620; Lambert-Faivre 1987; Viney 1965).

Given this evolving legal landscape, it is relevant to consider the consistency of compensation rules and equality among victims. It is particularly crucial to investigate on what basis a certain group of individuals should receive preferential treatment for compensation compared to others. As constitutional requirements become increasingly important for legislative action, the reconciliation of legal policy choices with the non-discrimination principle has become a pain point when establishing compensation schemes for certain categories of victims. Equality among victims is an important emerging issue in legal doctrine (Vanhooff 2020, p. 827). In particular, it has been argued that the specific rules for victims of work accidents and occupational diseases would represent a ‘breach of equality’ as they only provide for partial compensation and often act as a barrier to tort law actions against the employer (G’sell and Veillard 2012, pp. 248–249). Even though national courts tend to protect the latitude of the parliament in the field of victim compensation (Decision no. 2010-8 QPC of 18 June 2010), the French examples discussed here reveal that lawmakers are alert to the issue of discrimination and may resist a legislative proposal designed to give privileged treatment to one category of victims.

From a broader perspective, the issue of delimitating the scope of a COVID-19 compensation fund turns the spotlight on the classical question of the legitimacy and the underlying factors of preferential treatment in the field of tort and compensation law. The mere existence of tort law goes against the idea of an absolute egalitarianism, according to which the only criterion of compensation should be the actual needs of individuals and that similar needs should receive the same treatment whatever their source (Cane and Goudcamp 2018, pp. 446–447). The policy discussion on compensation schemes dedicated to COVID-19 victims shows that the reasons why some categories of injured persons should receive better treatment than others are multifaceted and fluctuating. While the ‘industrial preference’ in the social security system and the ‘accident preference’ in larger no-fault compensation schemes, such as the New Zealand Accident Compensation Corporation, are based on socio-economic factors (Stapleton 1978, pp. 254–260), the COVID-19 pandemic revealed that we cannot underestimate the weight of day-to-day politics as well as social and media pressure in the debate on the relevance of specific compensation tools.

Designing a coherent financial mechanism

The flexible shape of compensation funds is also reflected in the diversity of how they are funded. There are three general approaches across common and civil law jurisdictions to funding—public funding, private funding and mixed public-private funding. The vast majority of compensation funds globally are funded by the public purse of their jurisdiction (Vansweevelt et al. 2020, p. 198). The funds that fall into this category may either be funded out of the general public budget, or out of a special tax levied specifically for the purpose of feeding the fund (Vansweevelt et al. 2020, p. 199), as is shown by the French legislative proposals described above. The choice of funding mechanism is directly connected to the scope of the fund. Factors that will be relevant to the design of the funding structure will include the maximum number of possible victims, whether the fund concerns a discrete or ongoing loss or risk, political motivations and public sentiment (Feinberg 2005, pp. 15–17), and proximity of the eligible losses to other losses that are covered by insurance or other compensation funds. The jurisdiction’s own context of how it has designed and executed compensation funds in the past will also be relevant (Watts 2020b).

Public funding out of the general taxation pool is perhaps the simplest way to resource a compensation fund, but it is not necessarily the most coherent. In contrast, a more sophisticated approach to funding is often taken in compensation funds that run over a number of years or decades, for an unknown possible total number of victims. In those cases, funding sources are more often connected to those individuals who potentially created the risk of the loss or benefitted from it.

In the context of a pandemic-related compensation fund, there would be an immediate (potentially large) pool of claimants already in existence and a very large number of potential future claimants. Therefore, a newly established scheme would likely require funding from the state in some way, regardless of how the scheme itself is structured. This can be contrasted with the global COVAX No-Fault Compensation Program. Although that scheme is very large in scope, the rarity of severe adverse COVID-19 vaccine reactions means that there was no large existing pool of claimants (Watts 2021, pp. 487–498).

Immediate funding could be sourced by way of an injection of seed funding from the general budget. For ongoing support of the scheme, a new specific tax or levy, or dedicated social security contributions are potential funding sources. A specific tax or dedicated social security contributions would need to be designed with close reference to the scope of the scheme and victims. For example, if a scheme was limited to employees affected by long COVID, then a tax or social security levy linked generally to the workplace sphere would be appropriate. In contrast, a scheme that seeks to compensate ‘non-earners’ (such as elderly care home residents, children and unemployed persons with long-term illnesses and disabilities) is more challenging to levy. This is because non-earners are a fluid class of individuals who may have very different degrees of financial capability to pay any levy, or may be wholly dependent on another person who could be levied in a different way (Watts 2021, p. 294). If the purpose of such a hypothetical compensation fund is to separate out from general social security expenditure the cost of supporting and compensating individuals in this category, then some specific source of funding ought to be found. One potential solution is a modest increase to goods and services/value-added tax that is levied across the whole population (Watts 2021, p. 295). Alternatively, a specific adjustment to an existing social security levy could be utilised.

The social acceptability of devoting already pressured public financial resources to COVID-related impacts, or creating new levies, must also be considered. Public (and political) patience for the cost of pandemic impacts may be wearing thin, but that does not mean that the costs of those impacts are not actually being borne by the social security system and individuals. The cost of COVID-19 impacts seems less visible if they are absorbed by the social security system or individuals. Indeed, the socio-economic impact of afflictions like long COVID is still being uncovered, and there is speculation that the true social cost may never be known (Rajan et al. 2021; Collis 2022). This speculation is likely to prove accurate if the broad costs of COVID-19 are not allocated to ‘society’ as a whole via a compensation scheme framework and are absorbed into existing structures.

Building an efficient fund administration

Once a coherent financial mechanism has been designed for a compensation scheme, it is necessary to match it with an efficient fund administration mechanism. International best practice and scholarship points to a number of possible administrative options.

Firstly, an ad hoc compensation fund could be chosen that is designed by policymakers and politicians to respond quickly—and temporarily—to the burden of COVID-related impacts on individuals and the need for a solidarity-based response. In Austria, a temporary scheme that offered lump sum payments to a mixed social risk category, the unemployed and children, was established after a political summit (Eurofound, n.d.). As with ad hoc compensation funds established for other kinds of losses, such quickly established administrative responses to COVID are typically given the task of paying a fixed and invariable amount of compensation. For example, the Belgian and Dutch asbestos compensation funds, the Dutch Bijlmer air disaster fund and the U.K.’s HIV and Hepatitis C blood contamination schemes (Vansweevelt et al. 2020, pp. 200–201). Recent Irish ad hoc schemes established in response to public health scandals and cases of historic abuse have also been politically designed and offer fixed, banded amounts of compensation (Watts 2020b).

The advantage of an ad hoc scheme is that it can be quickly established by policymakers to meet an urgent compensation need, with little scrutiny or hold-up from legislature or other influence groups. The disadvantage of an ad hoc approach is that it blocks civil society and the public from engagement with the design and establishment of the scheme. Additionally, ad hoc schemes tend to be established without regard to legal coherency or following a standardised approach based on international best practice—or a standardised framework based on prior domestic experiences (Watts 2020b, pp. 82–85). Generally, international comparative research has identified that compensation funds (as a field) require a stricter approach to the relevant procedure for their scope, design, operation and management (Vansweevelt et al. 2020, p. 213). As noted above, it is currently unclear how many potential individuals might fall within the scope of a COVID-related fund that tackles the wide social impacts and compensation requirements of this risk. A COVID-related fund should arguably also be established with a clear mandate to separate the costs of this risk from the wider social security and healthcare system.

Another administrative possibility is the extension of existing compensation funds. This is naturally only sensible—from a legal coherency perspective—if a broadly relevant compensation fund already exists. For example, Belgium’s Fedris is a federal umbrella organisation that combined previous occupational injury and disease funds into a single federal agency for occupational risks (Vanhooff 2020, pp. 16–17). It is already providing compensation for COVID-19-infection-related loss for high-risk workers and in cases of an outbreak. A specific extension has been created to provide compensation to family members of volunteers or student workers who contracted COVID-19 and died between March 2020 and January 2022. However, an extension of an existing fund to include such a large and potentially expansive pool of new victims could put severe administrative pressures and costs onto that scheme. In general, it seems appropriate that a hypothetical broad compensation fund for the social costs and impacts of COVID-19 should be located in general proximity to social security frameworks and/or broad occupational risk frameworks.

Finally, it is possible for authorities to directly create a scheme, ideally by way of legislation. In more populous jurisdictions, this could be organised at the local or state level. This would enable authorities to create a highly flexible legislative device that is suited to the needs of potential victims, an approach favoured in Germany (Knetsch 2020, p. 64). Such an approach is likely to face fewer political obstacles and complexities. In contrast, attempts to create broad COVID-related compensation schemes at the national level have typically not borne fruit. For example, multiple attempts in the past two years to create general COVID relief funds at the federal level in the U.S. have failed (COVID-19 Victims Compensation Fund Act 2021).

The costs of fund administration must of course also be considered. This is a matter that will need to be considered in conjunction with the style of the scheme administration, its design and the level of available award. Ad hoc schemes that are established without reference to international best practice or prior local experience could risk inefficient and costly administrative design. Simpler, more generic compensation will also aid in reining in fund administration costs. For example, administrative cost blow-outs in older Irish schemes that tried to offer highly tailored compensation to victims led to a preference for simpler schemes with banded levels of compensation, where the state could achieve better control of costs and complexities (Watts 2020b, p. 67). Further, the approach to claims processing taken by the compensation fund will also affect costs. A scheme that takes a streamlined, fact-based causative approach to claims approval is likely to have much lower administrative costs than a scheme that requires each claim to be subject to careful legal analysis.

If an insurance-type approach is used to structure and manage scheme costs, the underwriting choices for the compensation fund will also be relevant. Experience from the field reveals that a publicly underwritten scheme will typically have lower capitalisation requirements and lower operating costs than privately underwritten schemes (PriceWaterhouseCoopers 2008, p. 395; Watts 2021, pp. 316–323; Fronsko and Woodroffe 2017, pp. 42–43).

Finally, designing the architecture of a compensation fund requires making decisions about how long the scheme will exist. After all, choices about underwriting, staffing and administration will all be impacted by the temporary or permanent nature of a scheme. If a general COVID-19 fund is simply attached to an existing compensation fund structure, then the choice may be less challenging—the parent scheme already exists, and a new compensation programme can be added with a view to either winding it up or making it indefinite, depending on performance. A compensation fund might also be later eclipsed by a larger, more general scheme—for example, the French contaminated blood compensation was eventually absorbed into the general compensation fund for medical accidents (Knetsch 2020, pp. 48–49).

However, in the case of COVID-19, it may be difficult to know at the time of establishment how long a compensation fund might need to exist. A good example is the 9/11 Victims Compensation Fund in the U.S., which was originally designed to primarily compensate family members of deceased victims. Its primary scheme closed in 2004. However, in recent years, many first responders, volunteers and survivors started to develop dust diseases and cancers. To ensure that these—and future—victims with latent effects could continue to receive compensation, the compensation fund was recently extended to the year 2090.Footnote 1 In fact, it is estimated that more people have now died from toxic exposure at the World Trade Center attack site than from the terrorist attack itself (BBC News 2019). Given the unknown long-term impacts of COVID-19 infection, it may be difficult to predict how long a hypothetical fund might need to operate.

The potential of compensation funds as a redress mechanism in the context of a public health crisis

A compensation fund is just one potential option available in the legal toolkit to handle redress needs linked to the public health crisis caused by COVID-19. A new wave of recent scholarship has identified the potential advantages and applications of this flexible socio-legal compensation option (van Boom and Faure 2007a; Knetsch 2013; Macleod and Hodges 2017; Urho 2018; Vansweevelt and Weyts 2020; Watts 2020b; 2020a; Watts and Popa 2021; Watts 2021). Yet, there is certainly no such thing as the perfect legal solution to a compensation problem. Comparative law analysis indicates that the best solutions emerge from a thoughtful consideration of what model is best matched to both the legal landscape of a jurisdiction and the immediate compensation needs of victims.

In this section, the potential of compensation funds as a satisfactory redress mechanism will be compared to three other classic sources of compensation: tort law, insurance and social security benefits.

Comparison to tort law

Liability-based tort systems are the classic mechanism in both civil and common law systems by which individuals who have been harmed by another’s actions or failure to act can seek justice and (financial) redress (Koziol 2015). To access compensation under this classic system, plaintiffs must establish duty of care, breach and causation. This can be a protracted and complex legal process. Even in systems that use a modified strict liability approach, it will still be necessary for claimants to prove a legal standard of causation and attempt to access justice via the court system. This can be contrasted to a compensation fund, which uses a structural approach to guarantee compensation to victims who satisfy certain factual criteria (Vansweevelt et al. 2020, p. 197).

No-fault compensation funds are recognised as an alternative justice mechanism that enable enhanced access to justice, compared to tort law (Rhode 2006, pp. 189–190; Cappelletti and Garth 1978, p. 291). This is because they typically have faster claims processing processes, significantly reduced legal costs and greater ease of accessibility (Watts 2021, pp. 425–427).

The issue of compensation quantum is a point upon which no-fault compensation funds are often perceived by legal scholars to be inadequate (Koziol 2015, pp. 719–720; Wagner 2012). Yet even though tort law typically allows the recovery of full compensatory damages (something that many no-fault schemes do not), success is not guaranteed, and lump sum compensation may not be suited to the ongoing needs and challenges of a victim (Vines et al. 2017).

A logical query that naturally arises in relation to the issue of no-fault compensation funds is deterrence. How can moral hazard (to either take sufficient care to not harm another person, or sufficient care to avoid loss oneself) be avoided if compensation is paid on the basis of basic factual loss, with no regard to the behaviour of the individuals involved? There are solutions to this issue within the domain of compensation funds. Firstly, the potential for regulating behaviour can be allocated to another legislative instrument. Indeed, a central dynamic in the field of compensation funds is the dissolution of the bond between liability and compensation, and the factual and legal consequences of that decision (Watts 2021, p. 8). In the context of a COVD-19 compensation fund, requirements to, for example, prevent the reckless spread of infection can be specified in a more suitable venue, such as public health or workplace legislation. Secondly, there is the potential to arm the compensation fund administrator with the power of subrogation. This enables the efficient payment of compensation to the victim, and enables the fund (as a better-resourced plaintiff than an individual) to pursue an identified ‘tortfeasor’ for recovery of the compensation paid.

In contrast to a ‘no blame’ (Macleod and Hodges 2017, p. 620) or no-fault compensation scheme, general COVID-19-related losses may be difficult to handle in the tort law sphere. Firstly, it will be challenging for a potential victim to prove liability. Who is/are the potential tortfeasor(s)? Consider the case of an outbreak in a retirement home, which leads to a rash of severe infections and deaths among residents. Upset family members of the victims may perceive that the retirement home operators did not take sufficient steps to protect their loved ones from infection. But how can this be established, legally? Factually, it may be very difficult to pinpoint the cause of an outbreak and whether it could have been prevented by different sanitary procedures. A jurisdiction may have useful prior legal precedent and liability rules in place associated with the spread of disease—or not. The investigation, legal analysis, medical witness expertise and hearings associated with the determination of these issues are likely to be lengthy, expensive and with no certain chance of success for the plaintiff victim.

The first tranches of COVID-19-related litigation in the U.S. and Europe are instructive about the complexities facing plaintiff victims, defendants and the legal system in using tort to resolve redress and liability questions. Particular challenges have included hurdles in the form of identifying a duty of care and demonstrating causation (The Changing Landscape of Business Liability for COVID-19 Exposure 2021). Cruise ship passengers, for example, have struggled to prove liability claims against cruise ship lines—regardless of whether claims border on frivolous (Weissberger v. Princess Cruise Lines, Ltd. 2020) or relate to a deadly exposure to the virus in the context of a defendant’s inadequate sanitary procedures (Martin 2021). In the latter case, victims have often been blocked by the effects of comprehensive liability exemptions that also limit the potential of victims to band together and use class action mechanisms. A lower court in Germany awarded EUR 250 for pain and suffering to an individual who was deliberately coughed at by another person during the COVID-19 pandemic. The claimant went into a voluntary self-quarantine and suffered from sleepless nights for at least a week due to uncertainty of possible infection (Brand and Becker 2020).

Additionally, it may be unjust and unreasonable to allow liability claims to be brought against certain categories of defendants in the context of the pandemic. Consider the example of a doctor who, due to the sheer tsunami of COVID-19 patients being cared for at his or her hospital, must work outside of their normal scope of medical competence to care for these patients and support their colleagues. In some countries, public authorities decided to grant legal immunity to medical professionals, for example when participating in the COVID vaccination campaign (Knetsch 2022). If the doctor makes a medical error during the treatment of a patient, is it (morally) conscionable to allow a liability claim to be brought against the doctor by the patient victim or their family? In the context of a public health crisis where an overwhelming majority of doctors may be affected by moral distress (Rimmer 2021), it would seem more appropriate to devise a compensation mechanism than use liability tools to resolve redress problems.

Finally, no-fault compensation funds may be used as a convenient tool for policymakers to elude the question of whether contributory negligence of claimants shall be taken into consideration for the purposes of their compensation. The proposal to use COVID-19 vaccination status as a criterion for admission of patients to intensive care units under conditions of resource scarcity has led to a highly sensitive public debate on the exact outlines of individual responsibility in the context of a pandemic (Shaw 2022, pp. 883–890). As we have seen with both French legislative proposals, a no-fault compensation scheme is able to ‘deactivate’ the issue of contributory negligence arising from tort law, contributing to finding a more consensual solution.

Comparison to insurance coverage

A contrast can also be made between compensation funds and insurance coverage. An advantage of a compensation fund is that it does not require a contract of coverage to be concluded, or a levy to be paid, in order for a victim to be eligible for compensation. Additionally, as noted already, there can be administrative cost savings if a compensation scheme is publicly administered and underwritten. However, many legal scholars argue that it is better to increase the insurability of and ex ante preparation for misfortune instead of expanding the use of compensation funds (whether niche or comprehensive) (Bruggeman and Faure 2018, p. 90; Koziol 2017a).

Yet there are many overlaps between insurance coverage and compensation funds; indeed, many schemes use the functional tools of insurance to administratively manage their liabilities (Watts 2021, p. 48). Parametric insurance contracts, which pay out compensation automatically when a certain factual triggering event occurs, have many similarities with compensation funds. And a number of compensation funds are actually administered by private insurers: the guarantee funds of European Motor Insurance Bureaux are one example, and the Belgian terrorism insurance scheme that is jointly operated by insurers is another. Most notably, the World Health Organization’s COVAX No-Fault Compensation Programme is operated by private insurers and private claims handlers (Chubb 2021; COVAX AMC n.d.), and Canada’s new no-fault vaccine injury compensation fund is operated by an insurance and consulting firm.Footnote 2

The most successful large compensation funds internationally are similar in many ways to insurers: they use a full funding rather than ‘pay as you go’ approach to their financial obligations, they raise income from levies rather than from the taxpayer, they are financially sustainable, they involve actuarial principles in their design and administration, and they may use reinsurance to cover long-tail risks (Watts 2021, pp. 316–323). Yet they are still publicly rather than privately administered. In New Zealand, an attempt to privatise the accidental injury compensation fund and involve private insurers in the late 1990s was politically fraught and quickly reversed, but the insurance-based principles of fund management were retained (Watts 2021, pp. 77–78).

This indicates that for a general COVID-19-related fund, which would likely have a very wide scope, it would be wise to consider having the scheme either run by private insurers, or publicly administered but using insurance-style principles of administration and financial management. The choice between these two options will depend heavily on the existing insurance frameworks that are available within the jurisdiction. For example, in Europe and the U.S., where there is a dynamic and well-resourced insurance market, a private insurer may be a logical choice.

Comparison to social security benefits

The design of social security systems varies widely depending on legal tradition and other political and economic influences. Typically, social security is designed to cover a basic level of need—even if the generosity of schemes varies wildly depending on the particular jurisdiction.

The role of a general COVD-19 compensation fund and the compensation tasks allocated to it will be highly influenced by the jurisdiction’s style of social security system. Where there is a wide-ranging social security framework in place that offers a broad or multi-layered safety net for a range of social risks, then the scope of a hypothetical compensation fund can be smaller or simply more targeted (Watts 2021, pp. 197–204). A legislature that wishes to provide more compensation for general COVID-19-related harms must therefore decide whether it is preferable, for purposes of legal coherency and efficiency, to bestow extra compensation functions and funding on social security institutions, or provide a new no-fault compensation framework. However, where the scope of COVID-19-related compensation is very wide, legislature must be cautious. This is because social security systems—unlike large no-fault compensation funds, as noted above—do not generally use private insurance principles of funding and administration and have a closer link to state coffers (even in contributions-based systems). There is a risk of cost blow-outs (that will need to be covered by the public purse) and administrative chaos unless thoughtful design and planning of how the social security system will absorb these new compensation tasks is carried out (Resodihardjo et al. 2018). This is especially important given the significant impact that the pandemic has already had on welfare systems (Baptista et al. 2021).

There are certain advantages to using social security frameworks to compensate for COVID-19-related harms. Firstly, there is no need for legislature to establish a new administrative mechanism, as there are already pre-existing structures, staffing and claims management expertise in place. Secondly, victims will likely be treated equally by the social security system in terms of claims processing and handling. However, if the social welfare system is already overloaded with claims and suffers from understaffing, then adding general COVID-19-related categories of claimants to the over-stressed system is likely to produce poor compensation outcomes. Alternatively, a well-functioning social security system may have refined effective procedures for compensating individuals quickly and tracking their ongoing needs. In that situation, the expertise within the social security system is a source of valuable institutional knowledge that should be harnessed for tackling the problem of compensating COVID-19-related harms.

A disadvantage of using the social security system is that it is certain that full compensation will not be available to claimants. Although capped compensation is also typical of no-fault compensation funds, some (like the Fund for Medical Accidents in Belgium and France) do provide full compensation to eligible claimants. Further, there is nothing in the doctrine and comparative practice surrounding compensation funds that prohibits full compensation per se. It is financially realistic for a compensation fund (particularly if it uses insurance principles of funding, with careful management) to provide full compensation to at least some categories of claimants (Watts 2021, pp. 461–65)—for example, severely injured claimants or those suffering aggravating circumstances. Finally, if compensation for COVID-19-related harm is absorbed into the general social security system, then it may be difficult to tailor the response specifically to the needs of COVID-19 victims and their families. Indeed, a flexible, targeted response is one of the main advantages of choosing a compensation fund structure. It may also be more difficult for policymakers to fully comprehend and calculate the costs of COVID-19 losses on the wider community, as a social risk, if the compensation process is fully absorbed into ordinary social security frameworks.

As with insurance, there are a great deal of similarities between compensation funds and social security. However, no-fault compensation funds (particularly large ones) generally sit in a category of their own, because they cover losses that might be of a social security nature and a tort law nature and an insurance nature (Watts 2021, p. 43). This can be clearly seen in relation to general COVID-19-related losses: they are general social risks (an ongoing pandemic) that might be in some ways attributable in law to the actions of others (a failure of public authorities or private actors to manage or stop the spread of disease, for example) and are potentially insurable risks. This multi-faced nature is something that gives compensation funds their unique and very dynamic nature. Compensation funds can be regarded as the ‘Swiss army knife’ of compensation law: they can be shaped according to the desires and good will of lawmakers, in accordance with the specific needs of certain claimant categories.

Conclusion

The establishment of a compensation fund is not a panacea and will not provide a miracle solution to the significant compensation and loss challenges arising from the COVID-19 pandemic. A compensation fund is one of many legal instruments that can address the socio-economic consequences of the health crisis and, more specifically, the needs of those who suffer from health issues related to the virus. From a social policy standpoint, the pandemic has confirmed the importance of the coverage of ‘traditional’ social risks such as illness, professional incapacity and unemployment. Countries with solid and well-functioning social security systems have performed better during the pandemic than countries with weaker ones. In this respect, the pandemic has exacerbated the pre-existing social protection gap between countries with high- and low-income levels, underlining the need to build comprehensive and shock-responsive social security systems (International Labour Organization 2022).

One of the major advantages of compensation funds is their flexibility and adaptability. In comparison with traditional loss-shifting systems such as social security, private insurance or tort law, compensation funds enable the conception of a tailor-made compensation solution. This allows the state to carefully control the scope, funding, operation and subrogation policy of a compensation fund. Further, in the context of a health crisis it may be preferable to encourage COVID-19 victims to seek compensation from a fund rather than to bring a civil legal action against private persons or public authorities. A compensation fund structure may also be a more reliable protection framework than individual insurance coverage, as willingness to take out private insurance is highly dependent on the cultural, individual and insurance market context. There is also great symbolic value in a compensation fund—it would give greater public visibility to COVID-19 victims, recognising their particular situation and sacrifices.

However, it is also crucial to take into account the legal context in which a new compensation fund would be operating, and the pre-existence of proven alternative compensation mechanisms. In jurisdictions where a comprehensive social security system, either publicly or privately administered, covers a substantial part of health expenses and rehabilitation costs, it is not unreasonable to ask whether there is a genuine need for a specific COVID-19 compensation fund. In fact, the French examples discussed in this paper show that a proposal for a compensation fund can also be used as a way to blame the government under the guise of improved compensation for COVID-19 victims. Additionally, unless a compensation fund features strong subrogation policies and there are well-designed parallel legislative frameworks in place, the fund can also distort the liability and legal responsibility landscape—potential plaintiffs will be awarded compensation through the fund, and there will be no deterrent effect against potential defendants.

Ultimately, the most important challenge for lawmakers is to design a compensation fund so that its scope, financing and level of compensation is consistent with identified policy needs. As indicated in this paper, the entrenchment of a right to compensation for COVID-19 victims goes hand in hand with important questions about how to reconcile this sectoral approach with the principle of equality. For example, although it is possible to connect a specific compensation scheme to existing fund administrations, such as ONIAM in France or Fedris in Belgium, these funds typically offer full compensation (in contrast to many compensation funds in other jurisdictions). Yet, the wide scope of potential COVID-19 victims means it is not politically feasible to provide full compensation under a fund framework. It may also be difficult politically and legally to allow different compensation levels to different classes of victims.

Although a compensation fund is a useful and flexible tool for addressing new manifestations of social risk, the application of this model to general COVID-19-related loss is potentially fraught with difficulty and unmanageable expense. Legislature and policymakers should proceed with caution, and consider international best practice, when selecting this as a solution to the problem of COVID-19-related compensation.