To address the growing popularity of class actions in Australia,
Aon is set to launch a new form of insurance that will make it easier to file legitimate class actions, it has been reported.
The new product, called the after-the-event (ATE) insurance and underwritten by
Ironshore Australia, was designed to protect class action law firms and litigation funders against the risk of adverse costs order,
The Weekend Australian reported.
Adverse costs order has been defined by Legal Aid NSW as the court order requiring a party to court proceedings to pay the other party or parties costs in relation to court proceedings.
Outside the US, class actions that affect the insurance cover for company directors and officers are more common in Australia than in any other country in the world, the report said.
Jennifer Richards, managing director of specialties for Aon Risk Solutions, said: “Australia is the most likely jurisdiction outside the US in which a corporation could face significant class action litigation.
“That is the environment we find ourselves in and it has been that way in Australia for a significant period of time now.”
Aon believes that “given the growth in litigation and the market’s appetite for emerging risks and innovative solutions” in Australia, it will find a ready market for ATE insurance.
“The risks and costs of fighting these cases are high. With a local solution now available, this provides claimants and solicitors with an opportunity to pursue more valid cases given they will have the protection of this insurance. The intention of this policy is not to encourage litigation. The manner in which premiums are payable provides an incentive to settle early rather than progress deeper into trial,” Richards told
The Weekend Australian.
Richards said Aon’s ATE insurance was not intended to encourage litigation, and would only be made available after Aon’s assessors has concluded that its policies would be supporting legitimate claims.
“The underwriting process is quite rigorous. The claim has to have at least a 60 per cent chance of success in order to be insurable,” she said.
Damian Scattini, litigation specialist and partner at Quinn Emanuel Urquhart & Sullivan, welcomed the launch of ATE insurance, saying that it would provide class action claimants security and a less expensive option to British ATE policies available in the Australian market.
“It is expensive cover, so competition is welcome. The risk of an adverse costs order has a chilling effect on many meritorious claims; that’s just a fact,” he said.
Scatinni believed that the launch of Aon’s policy might help litigation funders lower their rates and take a smaller proportion of settlements,
The Weekend Australian reported.
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