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International Casualty

From climate change litigation to social inflation, we offer our international experts’ predictions on the opportunities and challenges that the international casualty market may face in the coming year and beyond.

International Casualty predictions
#1 Rising healthcare and product liability class actions

The number of COVID-19 related class actions will likely increase globally over the next 12 months, particularly in the healthcare and consumer product sectors where claims could be of a similar nature. In many nations, it is probable that public and private hospitals, healthcare providers and residential care facilities will face mass litigation based in contract or tort relating to their response to the pandemic. Allegations could focus on systematic mismanagement or lack of Personal Protective Equipment use, allowing for the spread of the virus and (preventable) deaths taking place. In addition, we have also already started to see class actions being filed against manufacturers of consumer products for mislabelling, misrepresentations and failures to warn. In the US, for example, hand sanitiser manufacturers have been accused of falsely advertising that their products are effective at preventing the flu and other viral diseases. We predict similar claims will be advanced in the UK and Europe, especially where consumer products being sold in those areas include claims of effectiveness against the coronavirus causing COVID-19.

#2 PFAS – an imminent wave of litigation

Insurers and their commercial policyholders will need to keep a close eye on increasing regulation and litigation concerning the wide class of compounds called PFAS (per- and polyfluoroalkyl substances). PFAS are known as “forever chemicals” because they are incredibly resistant to heat, oil and water, and do not degrade in the environment. This trait becomes a problem because exposure in humans can lead to serious adverse health impacts. As regulation tightens to include a widening group of chemicals, companies will need to reassess the use of PFAS in their own products and in the supply chain. We expect to see litigation become more common and spread beyond the claims against chemical companies for water contamination and pollution to target industries that have used PFAS in their products. Insurers are well-advised to consider the impact of exposure to PFAS risks across their liability portfolio, from casualty and environmental to D&O products.

#3 The globalisation of litigation

ESG concerns, particularly the pursuit of claims relating to social injustice and climate change, will drive transnational litigation with parallel proceedings in multiple jurisdictions. The Dieselgate litigation serves as a case study for the pursuit of claims in many jurisdictions in relation to a single underlying issue. We see a growing recognition by courts and legislators across the world of the need to promote access to justice and to enable citizens to obtain compensation comparable with what would be received elsewhere, namely the US.

#4 The future for group litigation in the UK

Foreign litigants and claimant law firms will increasingly target UK incorporated companies in relation to the impact of their operations worldwide. The Dutch courts are taking a similar approach and we expect other countries to follow suit. After the significant Supreme Court decisions in Lungowe v Vedanta Resources plc and Okpabi and others v Royal Dutch Shell Plc and another, the door to the English courts is now open to foreign litigants. In July, the Court of Appeal overturned previous rulings to allow a claim by 200,000 Brazilians to pursue BHP for compensation relating to the Samarco dam tragedy, in spite of a compensation scheme being agreed in Brazil. It seems the motive of the English courts is to give foreign litigants a voice and promote access to justice. The practical implications for global corporates and their insurers are increased litigation risk and the need for a new strategy in defence of similar cases in the future.

#5 Forum shopping for collective redress in the EU

In Europe, the introduction of minimum standards (through the EU Directive on Collective Redress) but lack of a uniform regime heightens the risk that litigants will pick the jurisdiction most likely to favour their cause. Multinational companies are having to address unprecedented issues around the regulation of product safety, supply chains, climate change and ESG concerns. There is significant procedural and cultural difference between the Member States that means collective redress will be welcomed by some but not others. The risk is heightened for businesses operating across multiple jurisdictions, which may be targeted in the country with the most claimant-friendly environment.

#6 Social inflation: US phenomenon to global trend

Social inflation will become an important consideration for insurers writing business globally. Starting as a US phenomenon in the 1970s, it has become a broad term to describe factors that drive an increase in the cost of claims but are not truly understood. By its nature, social inflation refers to the emotive human element behind an increased frequency of litigation and higher judgments. While the jury system is a key part of this phenomenon in the US, there is a will in other jurisdictions, including the UK, the Netherlands, Australia and Israel, to promote access to justice. Combined with continued public distrust of private corporations and an increase in litigation funding, traditional protection for big business is being eroded. Insurers will need to track developments closely to adjust pricing and reserving accordingly.

#8 A continued rise in social unrest will see political violence insurance go from a niche product to a must-have

The trigger points for mass protest are only going to grow. Whether it is the call for change to bring about a fairer society, the fight against climate change or opposition to government policy, people across the world have found their voice. In 2021, the COVID-19 protests in the Netherlands and Australia follow the riots in South Africa after the jailing of former President Zuma, a resurgence of Colombian protests against proposed tax reform and the storming of the US Capitol Building. As protests spread, so too do the chances of major social unrest in the future. Businesses will need assistance with risk assessment and with putting in place political violence and terrorism products to complement their property insurance programme.

#9 New Irish Judicial Guidelines and a long term decrease in damages

Following the introduction of new Judicial Guidelines, more proportionate court awards for general damages are expected in the long term. With insurance reform a top priority for the Irish Government, the Guidelines have already led to a 46% decrease in the average general damages assessed by the Personal Injuries Assessment Board (PIAB) with 71% of those awards coming under €15,000. In the short term, however, we anticipate that a significant amount of PIAB assessments will be rejected by claimants who will look to test the Guidelines in the context of litigation. At the time of writing, the acceptance of PIAB awards by claimants has already declined from 50% to 41% which signals a likely increase in litigation over the next 12-18 months. Once court judgments eventually start to underpin the Guidelines, it is anticipated the rate of pre-litigation settlement will increase, resulting in significant costs savings for insurers entering the Irish casualty and motor markets going forward.

Contributed by our Dublin office.

#10 Australia looks to fairer returns for group members … but at what cost?

Reform in the class action space continues in Australia as the Government tries to balance the interests of funders, lawyers and group members. Recent regulatory reform now means litigation funders are required to hold an Australian Financial Services Licence and class action litigation ‘funding schemes’ are covered by the Corporations Act 2001. A significant new development is the Government’s proposal to introduce laws designed to create a guaranteed minimum return of 70% for group members. The draft also flags amendments designed to limit common fund orders, nationalise funding requirements, impose written consent requirements, and require funders to irrevocably submit to Australia’s jurisdiction. While the draft attempts to tackle many of the current issues, there’s speculation it will create new ones including incentivising plaintiff firms to seek increasingly high settlements to maintain revenue and increase ‘closed classes’, which will lead to further multiplicity issues.

Contributed by our Australian Legalign partner, Wotton + Kearney.

#11 Backlogs in the Australian court system are expected to fuel social inflation

It is expected that the effects of the pandemic will exacerbate social inflation. In Australia through 2020 and 2021, staff have generally had to work from home and most of the court systems were significantly curtailed because of the lockdowns and social distancing measures. Court closures have slowed the resolution of cases and resulted in a backlog. It is expected that the backlog and delays will influence the value of the cases resulting in larger settlements and judgments. Two class actions have recently been filed in Australia against insurers for failing to cover business interruption losses during extended lockdowns and we expect an increase in claims in the coming years.

Contributed by our Australian Legalign partner, Wotton + Kearney.

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