IAG investors launch pandemic class action
IAG has been hit with Supreme Court filings by Quinn Emanuel alleging the insurer breached continuous disclosure rules for misleading and deceptive conduct.
Insurance Australia Group says it will defend a class action brought against it by investors who claim company executives knew or should have known that its outdated policies could have exposed their businesses to major losses.
Quinn Emanual Uquhart and Sullivan filed the matter on Monday on behalf of shareholders left out of pocket by losses accumulated during the Covid-19 pandemic. They claim IAG’s policies referred to outdated laws.
Quinn Emanuel alleges that exposure led IAG shares to fall after it said it would have to lock in an $865m provision to cover potential pandemic losses in November 2020.
On Monday, IAG said it would defend the action.
The filing from Quinn Emanuel partner Damian Scattini, a veteran of several recent class actions, comes after the law firm flagged its intentions to pursue IAG in December.
Quinn Emanuel alleges investors who bought shares in IAG between March and November 2020 did so on the assurance from the insurer it was protected from pandemic claims.
IAG put aside $100m in early 2020 to cover potential Covid-19 claims in what it spruiked as a “prudent provision”. In March 2020 it told investors its earnings guidance was unchanged.
IAG, like many other insurers, had said pandemic losses would be minimal as pandemics were excluded from coverage.
However, two test cases in the NSW Supreme Court found pandemic-related claims could be made against many IAG policies issued to insured businesses, because they referred to defunct legislation.
This case, which was appealed to the NSW Court of Appeal and subsequently the High Court, resulted in a total loss for insurers.
In response IAG scrambled to cover losses through a $750m capital raising in November.
Following the raising IAG’s shares slid almost 7 per cent, with the insurer’s market capitalisation slumping by about $800m.
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