Protecting against COVID-19 class actions

As Australia grapples with the COVID-19 pandemic, the Aged Care industry is particularly susceptible to its impact, including class actions. COVID-19 class action activity has already commenced with plaintiff law firms circling potential targets. In this publication, we explore why such class actions are likely to arise and what you can do to protect your organisation against a COVID-19 class action.

The rise of the class action industry

Over the last 30 years we have seen a steady rise in the number of class actions commenced in Australia. The class action industry in Australia is now mature and it generates scores of new class actions every year, supported by domestic and international litigation funders. Across Australia, our courts have gradually adopted unique court procedures to manage class actions.

Most class actions are opportunistic in nature. They commonly follow events that cause widespread damage, such as natural disasters (including bushfires or floods), and corporate collapses or sharp declines in the share price of a listed company. Class actions have also arisen as a result of products that have caused mass loss, including firefighting retardants (e.g. PFAS), medical products (e.g. breast implants and vaginal mesh) and “faulty” cars (e.g. the fuel emissions “scandals”).

The exposure of the Aged Care industry

The international response to the COVID-19 pandemic has mostly involved the implementation of social distancing and lock down measures, while allowing the continued delivery of “essential services”. The Aged Care industry provides an essential service, so most participants in the industry must continue providing the necessary essential services. By so doing, participants in the industry are exposed to the virus, both in terms of contracting and transmitting the virus.

It is widely known that elderly persons are significantly more susceptible to COVID-19, with notably higher rates of hospitalisation and death, and longer recovery times, when compared to younger members of the community. Where multiple people are infected (including residents, workers and their families) a class action could be commenced on behalf of all impacted persons. It only takes seven people to form a class action.

Minimise the risks of an outbreak

Obviously, the first step for participants in the industry is to take all reasonable steps to eliminate the risk of contracting or transmitting COVID‑19. This reduces exposure to potential civil liability as well as any criminal liability under work health and safety legislation. There are extensive Government resources providing guidance to industry participants on the steps that can be taken to minimise the risks associated with COVID-19.

In the event of an outbreak of COVID-19, a focus of class action lawyers will be whether well-publicised guidance and protocols have been followed. A failure to strictly adhere to such guidance or protocols will inevitably form part of the elements of a class action.

How to respond if there is an outbreak

Even with strict adherence to relevant guidelines and protocols, it is inevitable that at least some participants in the Aged Care industry will fall victim to an outbreak of the COVID-19 virus. If the outbreak affects a wide enough group of people, there is a real risk of a class action forming. In our experience, with this kind of an outbreak the courts will start with a presumption that victims ought to be fairly compensated for their loss, and technical legal or complex expert arguments have limited success in shifting this presumption.

From the claimants’ perspective, there can be very good reasons for not joining a class action. It will be many years before any form of compensation is paid-out. There are usually significant differences between members of the class (or cohorts within the class action) which typically results in more meritorious claims being compromised due to the inclusion of weaker claims forming part of the cohort.

Finally, even though the Court has oversight of settlement payments, once the plaintiff law firm is paid and the litigation funder takes its cut, there is a substantial reduction in the compensation flowing through to claimants. In a recent study, the Australian Law Reform Commission found that the average commission taken from the value of class action settlements by third-party litigation funders between 2013 and 2018 was 30%.

These realities for members of a class action give defendants the opportunity to engage directly with members in relation to their potential claims. A number of proactive strategies can be adopted which result in legitimate claimants receiving fair compensation in a cost effective and timely manner. Those strategies can include:

• establishing a forum (such as a webpage) for claimants to register and provide critical information in relation to their potential claims and loss;
• establishing truly fair and independent processes for the assessment of individual claims, particularly for the assessment of loss;
• potentially offering to fund the provision of independent legal advice for claimants (where that law firm does not have a vested interest in pursuing the class action); and
• making unilateral payments for meritorious claims, even without releases or settlement deeds being entered into.

Properly executed, we have found that such measures and strategies can be very effective in managing legitimate claims for compensation. At the same time, the strategies can undermine or eliminate the economics of a class action for plaintiff class action lawyers and litigation funders. The outcome is better for defendants and claimants, which should be our priority in the current environment.

To learn more about the measures and strategies your organisation can adopt to respond to a potential class action, please contact our below team.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.