QBE tells brokers they can ignore court order to help clients lodge pandemic claims

QBE ‘undermined’ the Federal Court when it wrote to brokers advising them they would receive, but could ignore, a formal court request.

QBE has had to pay out for pandemic losses in the UK after a court found its policies covered Covid-19 losses.

QBE undermined the Federal Court when it wrote to brokers advising them they would receive, but could ignore, a formal court request to contact clients to determine if they wish to lodge a claim for pandemic losses, Justice Michael Lee said.

In a letter to brokers this month, QBE wrote many would receive a notice from the Federal Court after Justice Lee ordered the insurer to reach out to affected customers to determine how many were interested in pursuing a class action against the company.

The company appeared before the court in Sydney on short notice on Friday morning after the judge was alerted of the communications, which Justice Lee said had been misleading.

“This simply should not have happened,” he told the lawyers representing the company.

“Clearly incorrect information has been given in that document about people’s rights that they presented as a binary choice.”

“Why would someone say to somebody, when the court’s requesting to take a step, effectively you don’t have to worry about it and there’s going to be no downside for you if you ignore it. What would someone say something like that?”

“It undermines what the court was trying to achieve, and deliberately (so),” he said.

A lawyer for QBE explained the letter was trying to deal with anticipated enquiries from brokers about whether they could be in trouble. The company has agreed to post a corrective notice.

“Some of these brokers are sole traders. They might be overseas. There’s a question, are they going to go to jail if they aren’t here to respond to the court’s request? That was the sort of matter that we’re seeking to address and we accept … it should be corrected and that’s why we’ve agreed to post the corrective notice,” the QBE lawyer said.

Litigation firms Gordon Legal and Berrill & Watson Lawyers are currently running a case in the Federal Court seeking to force QBE to pay the claims of thousands of businesses forced to shut their doors during the Covid-19 pandemic.

QBE Group chief executive Andrew Horton. Picture: Britta Campion

The insurance industry has been largely successful in fending off claims against business interruption insurance, after a string of test case fights before the courts.

Few businesses have lodged claims.

QBE is seeking to declass the current litigation from Gordon Legal, separating the collective fight into individual contests.

Like many commercial insurers, QBE does not directly deal with its customers but instead relies on a broker network to sell its policies.

Ahead of the move to send out the notices to clients, QBE contacted brokers noting that although they would soon be asked to distribute the questions they could simply ignore the court.

In a note, still available on the QBE website, the insurer told brokers that the court “needs to know how many QBE BI insureds are interested in pursuing a claim through the class action rather than making a claim directly to QBE”.

“This means that brokers will shortly receive correspondence from the Federal Court which asks brokers to forward a copy of the notice to their clients with QBE BI cover as identified in the correspondence,” the insurer said.

“Brokers are not parties to the class action and the court is not ordering the brokers to take any of the steps which the court requests.

“It is up to the individual broker what they do in response to the court’s request and there is no penalty if the broker does not take the steps requested by the court.”

QBE told the brokers, who are obliged to act in the best interests of their clients, that payments to insured businesses as part of a class action “may have legal fees and a commission of up to 27.5 per cent deducted by the litigation funder” – which is Omni Bridgeway.

On Friday, the court heard the company “was trying” to remove the notice from its internal website, but that the information is not accessible to the public.

The company will also have to provide a one-page FAQ memo explaining to brokers “the errors” in QBE’s communications.

Berrill & Watson principal John Berrill said QBE had sought to “deflect, deny and delay” claims coming in from clients for pandemic losses, noting only a fraction of available businesses had lodged claims.

“Insurers’ MO from the start of Covid has been to drive down business interruption claims by denying liability,” he said.

“They are starting to pay out claims now but it’s a fight; this latest conduct by QBE in communicating with brokers ahead of the court approved notice is another example of the insurers behaviours over the last four years.”

QBE maintains it is covered by a win before the full bench of the Federal Court and a series of findings by the Australian Financial Complaints Authority.

But QBE has already been forced to pay out for pandemic losses in the United Kingdom, after a court found its policies covered Covid-19 losses.

QBE was also hammered in the courts after it was found that the insurer had been tardy in paying claims to thousands of British businesses.

The Andrew Horton-led insurer, which reported a $1.36bn profit last week, did not disclose specific provisions in its accounts to cover potential pandemic loses, but noted almost $US180m ($274.5m) of overall provisions in its accounts.

Originally published as QBE tells brokers they can ignore court order to help clients lodge pandemic claims