Clayton Utz to lead pandemic class action

A customer class action targeting the insurance industry will be led by Clayton Utz, with the backing of litigation funders ICP.

Insurers are being targeted after denying business interruption claims arising from the pandemic. Picture: Getty Images

Clayton Utz will lead a major class action targeting the insurance industry after litigation funder ICP announced its support.

Almost 100 businesses have already signed up to the class action and ICP is calling on those which wish to sign up to submit their policies for review before registering interest.

The class action will seek to target insurers which have denied coverage to insured customers who hold policies referencing the defunct quarantine act.

A line of attack on the Quarantine Act was opened by the NSW Court of Appeal after the full bench of the court struck down an attempt by lawyers for the Insurance Council of Australia (ICA) to block claims.

Clayton Utz led the attack on the insurance industry’s attempt to block coverage in the courts.

However, industry figures are also looking at making claims under denial of access or entry clauses, which many say presents far greater latitude to businesses seeking to make claims.

The funding announcement by ICP comes at the forefront of a wave of law firms seeking to target insurers which have denied payment of business interruption claims arising from the COVID-19 pandemic.

It also follows a judgment by Britain’s Supreme Court, which ruled in favour of policyholders on January 15.

The court dismissed appeals by six insurers, including QBE, in a case brought against them by the British Financial Conduct Authority.

The Australian Financial Complaints Authority has not brought forward a test case and the case being fought and funded by the ICA has been focused on more narrow questions of coverage.

This means if the High Court of Australia was to deny the ICA’s application to appeal insurers and policyholders would still need to settle further questions.

ICP chief executive John Walker said he hoped the class action did not need to enter the courts and that insurers would simply mediate with customers.

“What is the Australian insurance industry going to do? It’s consistent with its current behaviour that it may simply seek to diminish claims made or delay their resolution,” he said.

“I am concerned that (mediation) is not going to happen in the short term, it may happen in the longer term.”

The class action launched by Clayton Utz and funded by ICP comes after the claims funder sent letters to insurance brokers seeking them to engage with customers and encourage them to come forward.

Mr Walker said despite the insurance regulatory structure being set up for brokers to act in the best interest of their customers, it appeared this was not the case.

“It seems a prevalence in the industry of brokers only acting when claims are made and not facilitating informed decision making by insureds for whom they act,” Mr Walker said.

“The brokers I have been speaking to do not seem to consider their facilitation of claims as part of their duty.”

The insurance industry has long held that policies were not priced to reflect claims that may arise from pandemics.

Many major insurers, QBE, AIG, and Suncorp have set aside significant provisions to cover potential claims that may arise from the pandemic.

Suncorp, which suffered an early setback in a Victorian court case against its business insurance subsidiary Vero in December, has set aside $195m in provisions to cover potential claims.

AIG expects to make a full-year post-tax provision of $865m for its business interruption exposure.

Meanwhile insurance giant QBE, which is exposed to both Australian and UK claims, has set aside $US785m ($1bn) to cover potential payouts.

In a response to The Australian an Insurance Council of Australia spokeswoman reiterated its view that “epidemics were not contemplated for coverage under most business interruption policies”.