In brief - Partner Michael Russell, head of our Class Actions team, shares his view on class action litigation risks for businesses and their insurers resulting from the coronavirus pandemic
Class actions are made for a crisis, and whilst COVID-19 will be no different, the sheer size and scale of the unfolding disaster here in Australia will likely result in very substantial class action litigation across many heavily impacted industries and groups for years to come. These include travel, employers, financial markets, retail and government, with potential for the technology and medical sectors to be impacted as well.
Class actions for a crisis
Over the past two decades we have seen class action litigation as an almost automatic response to a crisis. Prime examples include the global financial crisis (GFC), Victorian bushfires, Queensland floods, NSW bushfires, and various crisis-level corporate collapses such as HIH and One.Tel.
What makes the COVID-19 situation so unique is that the crisis is both an economic and health crisis, something that has not been seen since the Spanish Flu and the Great Depression a century ago.
Early signs suggest that class actions are likely to hit the following industries and groups:
Travel companies will be exposed to class actions from both customers and shareholders.
Customers will likely be seeking refunds and, potentially, damages for injury and economic loss. We have already seen countless reports of proposed class actions against cruise companies for alleged failures to appropriately manage the risks and exposures of COVID-19, including failures to warn passengers and crew of suspected or positive COVID-19 cases.
Shareholders will be looking closely at the steps taken by management of travel companies in response to COVID-19, and whether there were adequate governance and risk measures in place to avoid the potentially catastrophic financial consequences of a pandemic.
Travel insurers are also likely to be fairly in the frame if they have denied claims or unilaterally amended or cancelled policies.
Even before COVID-19, a large wave of class actions had been commenced against employers in respect of alleged underpayments of entitlements (see our May 2019 article Employment class actions - feast or famine?), particularly those for casual and independent contractor staff.
With stand-downs and redundancies becoming more common there is likely to be increased scrutiny on employers by both unions and class action plaintiff firms.
Whilst casual employees and independent contractors are likely to be the most heavily affected group (which in turn will increase the significance of class actions for entitlements), the focus will most definitely broaden to the entitlements of part-time and full-time staff who have been required to stand-down or permanently cease working.
Employers will also be under pressure to ensure that their employees are reasonably protected from the health and safety risks associated with exposure to potential COVID-19 cases in the course of their work. This will be particularly relevant to front-line and essential services employees who will be at higher risk of contracting the virus due to close proximity contact with the general public, as well as suspected and confirmed cases. This is likely to include medical staff, supermarket employees, taxi and rideshare drivers, freight, logistics and delivery drivers.
The losses experienced by the financial markets, personal assets and company valuations have been substantial and these are likely to continue to experience volatility for the foreseeable future. That volatility also has the real potential of causing companies to fail.
As occurred after the GFC, heavy financial losses will often lead to a close examination of the contributing causes. It is very likely that class actions will be investigating losses against investment companies, listed entities, financial services, banks and advisors.
The coronavirus crisis has had a very deep impact on the retail sector. Many retailers have been critical of retail landlords and their decision to remain open for trading, including the expectation that retailers (many of which are small businesses) continue to trade and pay rent.
Class actions against retail landlords and franchisors will certainly be on the radar of class action funders and plaintiffs given the enormous financial losses that are being suffered at the retail level.
There will be considerable reviews and inquires of the state and Commonwealth Governments' handling of the coronavirus, including in respect of quarantine and self-isolation orders and their decision to shut down large and productive parts of the economy.
Whilst claims against Government are always very difficult to pursue, they are not without recent success. Last year the Queensland Government was held liable (together with other defendants) for the 2011 Queensland floods class action, a final damages bill that will likely run into the billions.
The handling of the Ruby Princess has already been roundly criticised and is an obvious starting point for class action funders and plaintiff lawyers.
Technology and medical industries
Risk areas that haven't yet developed may be seen in the technology and medical spaces, as more and more pressure is put on systems that were not necessarily designed or intended to deal with the practical or economic consequences of a pandemic.
One could certainly imagine a situation where a technology provider crashes and cannot deliver working from home for their clients' workforces. The financial consequences would be extreme.
Where to from now
Although we are only at the start of the COVID-19 crisis, it is clear that class actions will inevitably follow. The length of time and severity of Australia's experience of COVID-19 will dictate the scale of class actions and the industries affected.
As the crisis unfolds, businesses and their insurers will need to identify and manage class action risks along with the range of other commercial and legal risks that are emerging.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.