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Insurers may face series of BI class actions

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Gordon Legal says it is looking at launching a series of class actions against multiple insurers after being contacted by hundreds of firms over unpaid business interruption claims.

Partner Andrew Grech says class actions are a likely option given the lack of satisfactory progress in resolving the issues affecting policyholders that have contacted the firm.

“Certainly, our instructions are to use whatever legal avenues are available to them to pursue their rights under their insurance contracts,” Mr Grech told insuranceNEWS.com.au.

“Based upon the pretty poor response of insurers so far, I don’t think they are leaving people with very much option but to have recourse to litigation.”

Mr Grech says the firm is gathering information related to the major insurers and some smaller market participants, with each insurer likely to be the subject of separate proceedings if the matters proceed as class actions.

The Insurance Council of Australia (ICA) is currently pursuing two industry-funded test cases, with the dispute over Quarantine Act wordings heading for appeal to the High Court, while a second case on other matters is likely to be heard in the Federal Court in September. The cases relate to matters referred from the Australian Financial Complaints Authority (AFCA).

Once final rulings have been obtained from the courts, insurers say they are committed to applying the relevant principles in an efficient, transparent, and consistent way when assessing claims.

An ICA spokeswoman says the call for class action participants is premature given the test cases that are underway, and those that sign up will have to pay substantial fees and disproportionate legal costs to litigation funders and lawyers.

“Based on past class actions, policy holders who sign up with a class action syndicate, many of whom are small businesses, risk losing up to 40% of any payment to class action funders and lawyers,” she told insuranceNEWS.com.au.

“For claims that fall outside of the test case parameters or cannot be resolved using insurers’ own dispute resolution processes, AFCA is able to make binding decisions on claims up to $1.085 million free of charge for policyholders.”

Mr Grech says none of the firm’s clients are parties to the test cases and they are not particularly pertinent to the proceedings it is examining.

“I don’t think the ICA test cases are properly constructed nor will they resolve all of the issues in dispute, nor do they involve all of the insurers,” he said. “They won’t provide any binding findings that will affect the clients for whom we act.”

A number of other legal firms including Slater & Gordon and Maurice Blackburn Lawyers are also looking at actions, while Bannister Law has invited businesses to register their interest on its website.

Litigation funder ICP said earlier this year it was looking at funding a collective action on behalf of small businesses if matters can’t be resolved and would work with law firm Clayton Utz.

Shine Lawyers has received more than 60 inquiries and has commenced proceedings in court on behalf of at least one business owner, but is not planning a class action.

Courts in various jurisdictions could join some proceedings together if multiple representative actions are filed by competing firms.