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.

 

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Class Actions predictions
#1 AVIATION

COVID-19 and air passenger claims: the new DVT?

The London aviation insurance market last saw a major class action in England and Wales nearly 20 years ago when passengers mounted a group action against more than 50 carriers for the onset of deep vein thrombosis (DVT) in the course of flight. Ensuing litigation resulted in a win for carriers in the House of Lords. It also gave birth to a multi-million pound market for in-flight compression stockings.  Dial forward to 2020 and the COVID-19 pandemic presents potential pickings for claimant lawyers. In 2021 we may see group action against carriers for how they have dealt with flight cancellations and ticket refunds: there has been some inconsistency of approach on that front.  What too of passengers who claim to have contracted COVID-19 in-flight? The physical and associated financial impact for some COVID-19 sufferers may be significant and of uncertain duration, so whetting the appetite for claims. Claimants would need to evolve novel legal argument to find the existence of an ‘accident’ necessary to establishing convention Article 17 liability and proving a responsibility on the part of a particular carrier might also be difficult. However, if the stakes are high enough, and evidence related to specific flights can be established, group litigation might well be a runner.

A Canadian perspective: increase in Canadian class actions expected as COVID-19 continues to disrupt business and affect consumers

2020 saw an increase in class actions in many areas, including claims of price gouging and health related claims, more of which are expected to arise over the coming months. The aviation and tourism industry has been hit particularly hard because most flights and vacations were cancelled due to COVID-19. Several proposed class actions, both in Canada and other jurisdictions, have been commenced by consumers seeking refunds for flight bookings that were cancelled because of COVID-19. All of the major Canadian airlines (including Air Canada, WestJet and Air Transat) and a number of foreign carriers are challenging these proposed class action lawsuits. As of January 2021, none of the actions have been certified.

#2 CASUALTY

HSE action on respiratory health will lead to increased fines and claims

The construction industry will see greater scrutiny from the Health and Safety Executive (HSE) due to the risks of silicosis from processes that create high dust levels. This will be part of the HSE’s strategic plan to improve health within the construction industry and maintain a targeted industry awareness campaign for those at risk of developing silicosis. We predict more unannounced HSE inspections and increased prosecutions resulting in significant fines for offending organisations. We are also likely to see a rise in claims for damages by employees who develop silicosis and who may be at an increased risk of lung cancer and further respiratory complications.

An Australian perspective: COVID-19 consumer protection class actions likely to flourish

A representative class action, brought under Australian consumer law, has been commenced in the Federal Court following the spread of COVID-19 on board the Ruby Princess cruise ship in July 2020. This follows the High Court’s decision earlier in the year in Scenic Tours v Moore, which found damages were recoverable for ‘disappointment and distress’ associated with a European river cruise that was modified to a bus tour due to river flooding. As claims under consumer law are not limited by the caps that apply under liability law, it’s likely plaintiff firms will increasingly pursue this option.

An Australian perspective: more ‘concussion in sport’ class actions are inevitable

Sporting clubs and associations have an ongoing risk of personal injury claims resulting from concussions. The NFL has paid more than US$500m to former players as part of the US league’s concussion redress scheme. In Australia, no class action has yet been commenced in this space, although individual claims have been made. However, the recent revelation that another high profile Australian Football League (AFL) former player was suffering from chronic traumatic encephalopathy (CTE) when he died in tragic circumstances has fuelled media speculation that a class action against the AFL or the National Rugby League is ‘inevitable’. There are also repeated reports in the UK of professional footballers suffering dementia, which could be linked to CTE, and the threat of legal action being brought by former rugby players. The risk does not just apply to professional sports people but also amateur players and school children. Increasing awareness and emerging scientific evidence could see the risks of CTE move from traditional high impact sports to those thought to be a lesser risk.

#3 CONSTRUCTION AND ENGINEERING

An Australian perspective: infrastructure boom around Australia is likely to contribute to a rise in nuisance-based economic loss claims

Businesses impacted by construction, including prevention of access, are looking to recover losses caused by construction works. The Sydney and Newcastle Light Rail class actions seek damages for economic loss, as well as for psychiatric suffering due to private and public nuisance allegedly caused by unreasonable and avoidable acts or omissions in construction. With a strong pipeline of construction activity, and plaintiff firms and litigation funders looking for class action opportunities, underwriters need to ensure their insureds have taken all reasonable steps to mitigate any potential impact on surrounding businesses from both a property damage and/or a business interruption perspective.

#4 CYBER AND DATA RISK

Widening rights, rising quantum and evolving litigation funding will see data claims rise around the world

The first signs of a real privacy-related mass litigation wave in the United Kingdom started in 2020 and the current climate suggests group and individual privacy claims are here to stay. 2021 may prove a very busy year for businesses defending such actions. Claimant solicitors are adept at exploiting the targeted advertising potential of social media to recruit new clients, with client onboarding even using automated chat bots. The Privacy Pre-Action Protocol in England and Wales introduced in late 2019 is still relatively claimant friendly and, with legal costs often exceeding the sums at issue by many multiples, defendants will continue to offer settlements regardless of the merits, thereby fuelling further claims.

#5 DIRECTORS & OFFICERS AND FINANCIAL INSTITUTIONS

2021 will see an increase in securities class action lawsuits

There was a downward trend in securities class actions against non-US listed entities in 2020 but this is likely just a blip so be prepared for a resurgence in 2021. From January to June 2020, securities class action filings were down 66% compared to the same period in 2019. It is not clear why but one possibility is COVID-19 slowing the plaintiffs’ bar along with the rest of the global economy. We expect to see a significant number of class action cases filed in 2021, with a renewed focus on entities based in Latin America. The pandemic will inevitably lead to economic uncertainty and boardroom pressures, and we expect this to be particularly prevalent in the natural resources industry.  The NYSE for 2020 lists over 20 Latin American entities in the natural resources sector. We predict an upwards trend in securities class action lawsuits arising out of the following key issues: environmental and governance issues which are increasingly important to stakeholders; climate change litigation; and delays to construction and energy projects due to economic uncertainty and the fall in crude oil prices.

An Australian perspective: more securities class actions will run to judgment in Australia

More securities class actions will run to judgment in Australia in 2021 as a result of two key decisions in 2020. In Haselhurst v Toyota, the decision saw ‘soft closure’ orders in class actions (that extinguish the rights of unregistered group members) abandoned and significant uncertainty introduced regarding how the claims of non-registered group members can be addressed in settlement negotiations. Australia also saw its second-ever securities class action run to trial, resulting in a liability finding in favour of the defendant in Crowley v Worley Limited.

An Australian perspective: statutory unconscionability will produce a new wave of class actions

Class actions against NAB, ANZ, Westpac, IAG and Allianz regarding alleged statutory unconscionability in the sale of insurance have produced a new template for consumer class actions in Australia. Previously, mis-selling cases, in which the attributes and circumstances of each consumer differ, have traditionally not resulted in class actions. However, alleged systemic unconscionability has provided a statutory basis for consumers to identify common (or systemic) issues. This was seen in the recent A$138m settlement between group members and IAG over the mis-selling of insurance by car dealerships, one of many actions where statutory unconscionability is a primary cause of action.

A New Zealand perspective: class actions and directors’ duties (still) under the spotlight in New Zealand

There are strong prospects of further claims under the reckless trading provisions of the New Zealand Companies Act. In Debut Homes, the Supreme Court suggested lesser conduct may trigger a breach of the Act and followed the High Court’s approach in Mainzeal on sums to award for breaches. The Court of Appeal’s impending reserved judgment in Mainzeal is also likely to highlight D&O claims. Compounding the issue, the Safe Harbour provisions regarding reckless trading provisions for companies facing liquidation due to COVID-19 expired in September. As a result, creditors may now look to fund liquidators’ claims to obtain some recovery.

#6 INTERNATIONAL CASUALTY

Supreme Court ruling awaited on group litigation against multinationals in the English courts

Since the 2019 decision in Vedanta v Lungowe, the trend of foreign litigants seeking to bring group litigation against English domiciled parent companies in the English courts continues.  In particular, we are seeing claims being brought by litigants in Africa and Latin America. The Supreme Court in Vedanta identified two crucial factors for granting permission for claims by Zambian villagers in the English courts: 1) the prospects of establishing parent company control over a subsidiary’s practices in order to establish a duty of care; and 2) the claimants’ lack of access to justice in their own jurisdiction.  In November 2020, the High Court dismissed £5bn group litigation brought by Brazilian third parties against mining giant, BHP Billiton, in relation to the 2015 Samarco dam disaster. The court considered that due to parallel claims in Brazil, allowing group litigation of such a large scale would be an abuse of process. We currently await the Supreme Court decision in Okpabi v Royal Dutch Shell (RDS), an oil pollution case brought by Nigerian villagers. The Court of Appeal dismissed the application in Okpabi on the grounds of insufficient evidence of RDS’s control.  It will be interesting to see if the Supreme Court takes a similar stance to Vedanta, particularly in light of potential new evidence concerning corporate control exercised by RDS (and alleged corruption) and whether the Claimants would have adequate access to justice in the Nigerian courts. 

An Australian perspective: liability risks will continue with glyphosate, opioids and talcum powder – with PFAS and silicosis emerging

Globally, there are increased claims involving glyphosate, opioids and talcum powder, including a notable decision in the US against Johnson & Johnson and a A$10bn settlement of tens of thousands of claims in Australia regarding Roundup. There is also a growing concern around perfluoroalkyl substances (PFAS), with litigation being pursued against the Australian Government regarding PFAS in waterways and land around military bases. Silicosis claims are also emerging from Australian workers exposed to crystalline silica dust associated with the artificial stone industry.

A German perspective: European class action reform continues

After the introduction of the so-called model declaratory action by the German legislator at the end of 2018, an EU-wide ‘real’ class action will be put into effect. It is not limited to certain areas of law, but is meant to be a cog in the wheel in order to minimise the risks of the individual in connection with the prosecution of a claim and to grant effective consumer protection. Abuse tendencies that have occurred in other jurisdictions shall be counteracted by defining ‘adverse cost rules’ and the fact that an award of ‘Punitive/Exemplary Damages’ shall not be made possible contrary to national law.

A Spanish perspective: COVID-19 related class actions

Spanish law does not recognised class actions as they are understood in other jurisdictions. However, Article 11 of the Spanish Civil Procedural Rules allows a similar action to protect the rights and interests of consumers. These actions can be brought directly by consumers, consumer associations or by the Public Prosecution Service. Such groups have already brought these ‘Spanish style’ class actions against public bodies in relation to COVID-19, alleging breaches of regulations governing safety at work and infringements of constitutional fundamental rights. Even though we anticipate that a number of these on-going actions will be dismissed for procedural reasons (eg where the claimants do not qualify as consumers in accordance with the relevant legislation), the remainder will create a very interesting debate not only in respect of the legal decisions but also in respect of the wider convenience of increasing the number of recognised situations where such collective actions can be used.

#7 MEDICAL MALPRACTICE

US perspective: claims against senior care facilities will increase

In the wake of COVID-19, claims will exploit the negative media attention care homes in the US have received for their handling of the pandemic.  There will be more claims for poor infection control that are not necessarily COVID-related. To the extent there is no immunity protection, there will be more claims the later we get into the pandemic as the facilities will be expected to learn how to prevent or reduce the likelihood of transmission. These types of claims easily lend themselves to class actions.  Senior care facilities will also become more difficult to insure and therefore the facilities, stand alone and multi-facility groups, will be forced to self-insure in captives and risk retention groups.

#8 MOTOR

A Canadian perspective: arrival of no-fault insurance in British Columbia could increase class actions

The pending arrival of no-fault insurance will have a significant impact on the number of new cases for claimant counsel. As a result, the British Columbian legal industry will see a marked increase in medical malpractice and other class action claims as focus shifts to replace motor vehicle related legal work. According to the Canadian Bar Association’s National Class Action Registry, there were 13 new class actions filed in September and October 2020 compared to only four in the same period the previous year.

 

#9 PRODUCT SAFETY, LIABILITY AND RECALL

Diacetyl and vaping - the new ‘tobacco’?

Alongside State Recoupment claims emanating from the US Opioid epidemic, the London Market is being hit by losses from the US Diacetyl litigation, which are now breaching local policy limits. Diacetyl may be found in processed foods that contain buttery flavouring, from dairy products and baked goods through to caramel, popcorn, wine and beer. At low levels, it is not said to present a risk to consumers. However, when heated and inhaled (eg during the popcorn and coffee manufacturing processes) it has been associated with serious and irreversible respiratory disease (known as popcorn lung) in food producers’ employees, due to its volatility and irritant properties. Similar problems have been found with substitute flavourings which are structurally similar to diacetyl. Diacetyl is also found in many of the vape flavours used in e-cigarettes. Toxicological studies are ongoing, but there is no doubt that flavourings-related lung disease is on the increase.

The EU directive on class actions will reshape the future of consumer litigation

The Directive on Representative Actions for the Protection of the Collective Interests of Consumers has been published by the European Commission. It will require all Member States to implement class action mechanisms, whereas currently only 19 (out of the 27) members offer collective action as a form of legal remedy to victims of mass harm. This Europe-wide harmonisation will shape the future of national and cross-border consumer litigation, and increase pan-European litigation risk. The Directive will also increase the ability of authorised bodies to take action on behalf of multiple claimants for breach of consumer protection legislation. Mass data breaches and trading practices detrimental to consumers – potentially a ripe area in the wake of COVID-related disruption – are key areas of focus for this. There is also express provision for the losing party to pay the costs of proceedings.

A Canadian perspective: suppliers and distributors will shift legal costs and litigation expenses to manufacturers

2021 will see suppliers and distributors shifting legal costs and litigation expenses to manufacturers. Contribution and indemnity claims will increase as suppliers and distributors seek to claim against manufacturer’s risk insurance programs. This will lead to increased contracting and agreements for third party coverage by suppliers and distributors against manufacturer’s defect claims.

#10 PROFESSIONAL LIABILITY

Solicitors: the tub-thumping threat posed by claimant law firms

The threat of claimant law firms attempting to drum up forms of class litigation against lawyers is likely to continue as there are several funds looking to support such work and the pandemic slowdown has created the appropriate background circumstances.  In the past, we have seen this in areas such as the right to buy litigation; vibration white finger claims; buyer-funded investment scheme actions and multiple dwelling relief claims, often leading to group litigation orders or multiple sets of proceedings being jointly managed.  The nature of future claims is inevitably less certain, although a deepening trough could lead to another wave of lender litigation.

#11 PROPERTY

An Australian perspective: climate class actions will force underwriters to consider risk of natural disasters

In addition to injury, property damage and business interruption claims, natural catastrophes can also give rise to class actions. In late 2019, the Supreme Court of New South Wales found in favour of the plaintiff/class in the Queensland Floods Class Action (brought against the dam operators for causing the floods) regarding the Wivenhoe and Somerset dam floods in South East Queensland in 2011. An appeal is currently pending. Underwriters must continue to consider the risk of natural disasters for their customers/businesses, particularly in high risk areas, such as the cyclonic north-west coast of Western Australia, or the flood prone south-east of Queensland.

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