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Class action investigations continue despite BI test cases

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Legal firms are continuing their investigations into potential class actions over business interruption cover despite Insurance Council of Australia (ICA) test cases that aim to bring clarity over key issues.

Gordon Legal says it has been contacted by hundreds of businesses over unpaid claims and litigation is probable given a lack of progress in resolving issues with insurers.

Partner Andrew Grech says the firm is gathering information related to major insurers and some smaller market participants, with separate class action proceedings against different insurers likely if matters proceed.

None of the firm’s clients are parties to the ICA test cases, which Mr Grech says 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 told insuranceNEWS.com.au. “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.

The ICA’s first test case over Quarantine Act wordings is heading to the High Court, while a second case is likely to be heard in the Federal Court in September. The disputes have been referred from the Australian Financial Complaints Authority (AFCA).

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.