Class actions continue to gather pace outside the US
We can expect group litigation to increase, particularly as technology gives rise to new types of claim (for example against social media organisations) and makes it easier for claimants to be located and bring proceedings.
2018 has been an eventful year for class actions, both in the well-trodden US courts and elsewhere in the world. The opioid litigation is gathering pace with a large number of pharmaceutical companies, distributors and pharmacies now targeted in litigation across the US, including a securities class action. In April 2018, a Californian court approved a class action against Facebook concerning the use of facial recognition software, certifying a group of Facebook users as claimants.
In South Africa, the courts have embraced the US-style ‘opt-out’ system. In May 2016, the High Court of South Africa approved the certification of two classes of claimant in the silicosis class action proceedings – both the mineworkers and their dependants. The case was settled in May 2018, culminating in a global settlement of approximately US$400 million. Richard Spoor is now pursuing a class action against Tiger Foods, following the listeriosis outbreak during 2017 and 2018. Approximately 1,000 people have contracted the bacteria, with at least 200 deaths (including unborn foetuses).
In the UK, group litigation has been brought in the English courts against Volkswagen (VW) on behalf of at least 45,000 motorists, following VW’s fitting of cars with a ‘defeat device’ to cheat emissions tests.
Facultative reinsurance – development of the law in Latin America
Over the past ten years, it has become mandatory in almost all Latin American jurisdictions for facultative reinsurance contracts to be subject to the same law and jurisdiction as the underlying risk. This change has been driven by protective legislation and the growth of the (re)insurance markets, particularly in Brazil, Chile, Colombia and Mexico, and also by the re-emergence of Miami as a hub for reinsurance. The shift has left reinsurers in London without certainty.
We have already started to see reinsurance wordings change to reflect this reality, so that the interest in the reinsurance is described as providing an indemnity for the reinsured. Claims co-operation clauses are also changing to reflect the shift in power and this is an area where reinsurers can seek to exert some influence over the claims handling process.
The logical next step in Latin America is for the interpretation and meaning of reinsurance contracts to be tested in the courts. For example, what happens when an insured has accepted terms at the original policy level that are broader or on limits that far exceed those accepted by reinsurers? It is this type of issue that may come to define the development of the local markets and the evolving relationship with international reinsurers.
Good or bad faith – is the London market becoming more aligned to the US?
Under the Enterprise Act 2016 a policyholder is, for the first time, able to bring a damages claim against an insurer for the late or non-payment of a valid insurance claim. This is a major departure from the previous system, where insurers were under no legal obligation to pay valid insurance claims within a reasonable time.
In the US, insurers have long been aware of the risk of ‘bad faith’ claims against them, with the rules varying in each State. Insurance companies owe a duty known as the ‘implied covenant of good faith and fair dealing’, which also exists under ordinary contractual principles. If an insurer breaches this, the policyholder can sue in both contract and tort. This ability to bring a tortious claim means that the constraints imposed in pursuing a contractual claim are not applicable. The upshot is that the policyholder can potentially recover sums greater than the policy limit.
The Enterprise Act is a long way from opening up insurers to tortious claims that could potentially expose them to payments in excess of policy limits. However, as insureds (and brokers) become more aware of this avenue for recovery, insurers are likely to come under increased pressure to pay claims quickly or run the risk of facing a further claim from the insured.
The full 'Insurance Remodelled: 2018/19 Market Conditions and Trends' Report can be accessed here: