"Is it possible to use Form 5329 "Other" reason for waiving the 10% penalty? Covid hardship."

Yes, that's why you use Form 5329, because that 1099-R has code 1.

Other. The following exceptions also apply.
• Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7 of Form 1099-R.

"Qualified disaster distributions, including coronavirus-related distributions. The additional tax on early distributions doesn't apply to qualified disaster distributions, including coronavirus-related distributions. See Forms 8915-C, 8915-D, and 8915-E, as applicable, for more details."