Class Actions

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The momentum behind class actions is picking up speed.  We look at the areas being targeted around the globe.

Class Actions predictions
#1 CASUALTY

Glyphosates – time for another round in the UK courts?

Glyphosate and its allegedly carcinogenic properties have been the subject of high profile litigation in the USA. Whilst causation, coupled with the epidemiology of non-Hodgkins Lymphoma, is still under debate, this has not deterred US juries from making headline-grabbing damages awards in excess of US$2bn (£1.5bn). Similar claims have since been filed in Australia and Canada. Germany, France and Austria have also announced proposed bans on glyphosate products. However, the EU regulator maintains that glyphosate is safe to use.  The current licence for glyphosate expires in 2021 and chemicals regulation in the UK currently follows the EU guidelines.  Although the post-Brexit approach to regulation is unclear, the approach of the English courts to potential claims is likely to be circumspect. In the early 2000s, the courts considered the alleged cancer-causing properties of organophosphates (sheep-dip products) and whether group claims could be brought. These applications were considered unviable, due to inadequate expert evidence and the considerable public expense a group litigation order would have involved. At the time, the claimants protested that it was unfair for the courts to consider the credibility of the scientific evidence, without a substantive trial. Twenty years on, with group litigation gathering pace and advances in scientific research, it remains to be seen if the courts will take a different stance to proposed group claims. It will certainly not be a surprise if UK claimant firms explore pesticides as a potential new “toxic tort” area alongside asbestos, particularly with the decline of industrial deafness claims and whiplash reforms.   

Air Pollution: an Employers’ Liability or Public Liability risk?  

We are already starting to see some asthma claims where there is a combination of generic workplace fumes, including diesel exhaust fumes. These claims are governed by the COSHH Regulations 2002. At present there is no agreed limit for diesel fumes so they will fall under the generic dust and fume levels. The Regulations were introduced to control exposure to substances within the workplace. It remains to be seen whether there is an attempt to extend the application to cover atmospheric air pollution for employees who work in areas where pollution levels are exceeded. Issues of action against central government or local authorities for failure to implement clean air policies is also not clear. Claims in tort are difficult given that claims from individuals against public bodies for omissions have tended to fail and there is no clear route for claims under human rights legislation. However many medical experts seem willing to credit poor air quality to illness and reduced life expectancy and this is clearly a fast evolving area.   

The rise of flexible work arrangements will create new and heightened exposures for employers

Litigation funders looking for new sources of profit have found fertile ground in a number of recent employment law decisions in Australia. With a surge in employee class actions, insurers will not be immune to the trend. Companies operating in the gig economy that are reliant on pools of “on-demand” workers, and those using independent contractors and casual workers, risk engagements being re-classified and workers attracting historic entitlements. EPL policies will not meet some of the new forms of pleading and should be assessed for coverage they provide. With more people choosing agile working options, cyber exposures for employers will also rise as home wi-fi networks create gateways for ransomware leading to data theft from the office network.

#2 CYBER AND DATA RISK

Big name IT providers may be the next hit for an ICO enforcement action

The GDPR introduces direct obligations on data processors (the party who processes personal data only on the instructions of the data controller). Although fewer and fewer companies’ operations fall under processor activity, due to the narrow definition applied by the Information Commissioner’s Office (ICO) in the UK and more and more sophisticated uses of data by service providers, the new liability which attaches directly to data processors means that in certain circumstances they can be sued directly by data subjects and fined directly by the ICO for data breaches. With many IT providers having much deeper pockets than their clients, we consider it possible that we will see a big name IT provider at the forefront of an enforcement action very soon.

An Irish Perspective: There will be an increase in multiparty actions under the GDPR

The Irish Government introduced a Public Services Card which the Data Protection Commissioner (DPC) considered was in breach of the GDPR. The DPC concluded that the manner of information collection and retention on millions of citizens was unlawful and is planning to launch enforcement against the relevant government department. A civil liberties group plans to submit a legal complaint on behalf of over 1000 people. This matter is significant and has raised awareness in Ireland of multiparty actions due to breaches of data protection rights. This would also set the stage for the opportunities under the proposed Representative Action Directive.

#3 DIRECTORS’ & OFFICERS’ AND FINANCIAL INSTITUTIONS

International corporate scandals and the availability of litigation funding are fuelling Europe’s appetite for class action-style redress

The US and Australia lead the way when it comes to class actions but pressure is now building in Europe to follow suit, particularly in the wake of international corporate scandals such as VW’s Dieselgate. Eager to yield lucrative returns, powerful US plaintiff law firms and litigation funders are making inroads in Europe, where nations are expressing the political desire to embrace class action-style redress as a means of providing “access to justice” for mistreated consumers. England’s Consumer Rights Act 2015 introduced an opt-out collective redress regime permitting a claimant representative to bring a group action following a competition infringement decision; Scotland’s Civil Litigation (Expenses and Group Proceedings) Act 2018 introduces an opt-out class action procedure which will come into force once the Scottish Government has approved secondary regulation; and Germany has a regime for use by specific consumer not-for-profit agencies. The European Commission’s “New Deal for Consumers” package launched in April 2018 is also paving the way for group actions with its proposal for a new consumer collective redress regime to protect consumers where EU consumer law has been breached. While nowhere close to matching the class action activity in the US and Australia, Europe’s acceptance of the value of class actions in the consumer arena will see claims activity increase significantly.

A US Perspective: Securities class actions will continue to be filed against US public companies at a record-setting pace

Despite the last several years seeing the US stock market surge to record highs, securities class action filing against public companies and their directors and officers has continued to soar and will continue to be filed at a record setting pace. Between 2010 and 2016, an average of just over 230 securities class action lawsuits were filed against US listed public companies. In 2017 and 2018, that number almost doubled, to over 430.  In 2019, the number of securities class actions filed against public companies will eclipse the prior year’s record – and this trend is likely to continue into 2020, despite the US stock market’s record highs. 

An Australian Perspective: The appetite of litigation funders and class action lawyers will not abate despite a favourable 12 months for defendants

Despite defendants experiencing a relatively positive 12 months with a series of favourable interlocutory decisions regarding competing class actions, the recent landmark Australian Federal Court decision in the Myer class action and litigation funders being squeezed by plaintiff law firms taking on class actions on a ‘no win-no fee basis’, it seems clear that litigation funders and plaintiff law firms are becoming more adventurous and have an appetite to take on class actions well beyond the securities sphere. The post Hayne Royal Commission environment has spawned numerous class actions which confirm that group proceedings will be a prominent feature of Australia’s litigation landscape regardless of whether or not legislative reform occurs in the securities arena.

An Australian Perspective: Directors’ & officers’ wordings are poised to undergo a substantial tightening in response to the lack of insurer appetite to write side C cover

Australian directors’ and officers’ (D&O) wordings are broad with many of the safeguards in respect of pre-contractual disclosure and wilful or dishonest conduct heavily qualified or waived. This will change as listed Australian companies seek side C entity cover to protect their balance sheets but are met with a substantially decreased appetite from the D&O insurance market. The Australian experience is likely to mirror what occurred in the US in the mid 1990s with wordings tightening significantly as D&O insurers attempt to confine and share the risk with their insureds.

#4 INSURANCE ADVISORY

An Australian Perspective: Regulators will continue to take on digital platforms over privacy concerns and class actions will follow

At the end of October 2019, the Australian Competition and Consumer Commission (ACCC) announced it is suing Google over misleading consumers about its collection and use of personal location data. This action was widely expected following the publication of the ACCC’s Digital Platforms Inquiry Final Report earlier in the year. This is the ACCC’s first case against a major digital platform. The Australian consumer watchdog’s action reflects similar approaches taken by regulators in other countries, including Germany and the United States. There’s no doubt government regulators worldwide will continue to champion consumers and uphold local privacy laws, with further investigations and antitrust reviews into companies like Apple, Amazon and Facebook already announced. As night follows day, class actions will leverage the regulators’ efforts.

#5 INTERNATIONAL CASUALTY

US opioids crisis

Huge settlements look like they are here to stay in relation to the US opioids epidemic. Pharmaceutical companies, distributors and prescribers are involved in multi-district litigation by state departments for increased expenditure on public services, allegedly due to cynical marketing practices that created over-reliance on pain relief medication. One global healthcare company has filed an appeal to a recent US$465m (£352m) judgment, and we expect to see more defendants choose to settle. A US$48bn (£36bn) settlement framework has been proposed by two pharmaceutical companies and three distributors – it remains to be seen whether this will be an acceptable global deal for the plaintiffs. The knock-on effect is likely to be insurance coverage litigation over whether settlements reflect legal liability, given the damages claimed do not arise from injury suffered by the plaintiffs themselves. It is also debateable whether such liability would qualify as fortuitous or unexpected/unintended, if it is proven that the defendants continued to market products despite knowing about the risks of addiction.

Climate change – the force behind a new wave of litigation

Flooding, drought, forest fires, land degradation.  Claimant lawyers are using the evidence on climate change to support a wave of litigation.  In addition to regulatory and reporting requirements, companies will increasingly face the threat of damages to individuals.  All eyes are on the German court’s consideration of the case of a Peruvian farmer’s claim against RWE for the alleged impact of its emissions on farming.  Regardless of the outcome, we expect to see a surge in this category of litigation.  State-owned companies in the fossil fuel industry are at heightened risk, particularly in Latin America and South East Asia, where there is broad recognition of the right to a healthy environment.

Forum shopping in the UK

The Supreme Court decision in Vedanta v Lungowe signals an increasing trend of foreign litigants being permitted to pursue group actions in the UK courts.  At the heart of the decision to allow a group action by Zambian citizens to proceed against a UK-domiciled parent company and its Zambian subsidiary was the desire to ensure access to justice.  The case also gives foreign claimants renewed encouragement to pursue UK companies by opening up the test for parent company control.  Combined with the global reach of claimant law firms and litigation funding, we fully expect to see more claimants coming to the UK for their forum shopping.

#6 MEDICAL MALPRACTICE

Globalisation of medical malpractice class actions to impact the UK

We expect a continued trend of large class actions to be seen in the UK, as experienced in the US, Australia and Canada with vaginal mesh implants, allergan breast implants, and Valsartan class actions to name a few.  As well as a continued focus on the use of alleged defective products, we should continue to expect heightened appetite to pursue individual clinicians in group litigation orders.  Following the Paterson litigation, in the UK in particular focus will be drawn to the findings of Bishop Graham’s Inquiry into Paterson.  Now expected to be announced in the New Year (deferred due to the general election), the Inquiry is charged with reporting on the accountability and responsibility for the safety and quality of care in the independent sector, and the arrangements for medical indemnity cover in the private sector. 

A US Perspective: Cyber threats will evolve in healthcare - software risk is on the rise

Data breaches will continue to dominate the risks faced by companies in the healthcare industry in 2020.  The industry is facing a new and significant threat with the emergence of web-based software platforms utilised by established companies as well as start-ups in the drive for medical innovation.  These platforms are often designed to evaluate troves of patient data or to enable interconnectivity across systems or platforms, but adequate data security is often neglected.  Currently, companies in the global healthcare industry are unintentionally leaking sensitive information about millions of patients.  Class action lawsuits are likely to occur before the risk can be effectively mitigated.

#7 PRODUCT SAFETY, LIABILITY AND RECALL

The hidden health risks of 3D printers

Insurers will need to ensure that insureds involved in the manufacture or use of 3D printers are providing adequate warnings and risk assessments to make sure this technology is used as safely as possible, especially as use extends into schools and homes. Studies report links to adverse health conditions including asthma and cancer, with the printing producing high amounts of ultrafine particles and volatile organic compounds while in use (potentially for extended periods of time), which can pass through the lungs and travel to other organs and also transfer toxic material into the body. It is thought that critical to these levels is the formulation of the filament (for example additives to increase shine) and the temperature to which it is heated.  This continues the trend requiring increased awareness around the health risks of emerging technologies.

NDMA contamination of ranitidine medicines

Drug makers have been withdrawing various ranitidine drugs - widely used to treat heartburn and stomach ulcers - after the discovery of higher than recommended levels of NDMA, a possible carcinogen, in the medicines. The impurity was possibly introduced by changes in manufacturing processes. The recall has already triggered litigation in the US and Canada with claimant lawyers predicting an explosion of lawsuits. Concerns have been raised that litigation in the UK could follow. However, in November 2019 the US Food and Drug Administration (FDA) dismissed the health risk in a press release stating the levels of NDMA found “are similar to the levels you would expect to be exposed to if you ate common foods like grilled or smoked meats.”  Moreover, the FDA concluded that consuming ranitidine didn't cause NDMA to form in the stomachs of patients, as had been previously suggested. The FDA is requiring manufacturers to continue to test the drugs and in the UK the Medicines and Healthcare Products Regulatory Agency is continuing to investigate products which may be affected. Predictions of a flood of ranitidine litigation need to be treated with caution at this stage.

A German Perspective: Sugar is the new fat

Fat was identified to be the most harmful nutritive substance twenty years ago, and the food industry engaged in large campaigns advertising low-fat products. It is now generally accepted that sugar and sugar-related ingredients are a more relevant factor to food-based diseases or deaths than fat ever was. Litigation against manufacturers of sweets has once failed in Germany due to the doctrine of self-induced risks, but hurdles will be much lower where product ingredients (and their quantities and potential harmful effects) are not clearly advertised.

#8 PROFESSIONAL LIABILITY

Solicitors: Get rich quick schemes bad news for the profession and insurers

Claims by investors arising out of so-called buyer funded investment schemes are flooding the insurance market.  Investors have lost money purchasing parking spaces, storage and office units, hotel rooms, student flats and even carbon credits, on a buyer investment model which emerged after the credit crunch.  The investors, mainly based overseas, allege that the solicitors failed to advise them about the risks involved in paying up to 80% of the purchase price on exchange of contracts with the developer/vendor having the right to use the deposits to supposedly fund the developments. The solicitors acting on either side of the transactions are potentially exposed to both claims and Solicitors Regulation Authority (SRA) investigations.  These claims have had a huge impact on firms and insurers.  The SRA has warned that “a single scheme that goes bad could wipe out the £48 million compensation fund.” 

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