Apocalypse 2020 – Key themes for liability insurers

27 March 2020

The covid-19 pandemic will no doubt have a lasting effect on liability insurers and we expect will effectively encourage the modernisation of claims handling, dispute resolution and litigation.

It is already thankfully encouraging team work and collective engagement in responding to meet the challenge of the crisis and that should continue.

The extent of the effect will in part depend on whether the current lockdown measures are maintained (or increased) / for how long and the severity of the downturn, though we highlight some of the key themes to keep an eye on as follows:

Online dispute resolution / mediation

Whilst there has in the past been limited interest in these types of services (probably due to plaintiff solicitors’ reluctance to engage with it), given the present situation the use of such services will obviously greatly increase and the services themselves improve.

This should be a positive development for liability insurers, as it should eventually encourage the parties to engage in negotiations sooner and more swiftly, resulting in faster resolutions and considerable cost savings.

It will also allow easier monitoring for claims professionals and should reduce reliance on lawyers.

The current situation also poses a unique opportunity for parties to work together to try to achieve a positive outcome and hopefully this will spur on additional settlements.

Courts

The NSW courts have already modernised the online system for directions hearings and are conducting online hearings where appropriate (using video link technology) in order to cope with demand during 2020.

Whether this is a positive and lasting development in terms of hearings remains to be seen, though we expect that it will introduce certain efficiencies that will better enable the courts to deal with matters more quickly when business returns to normal, hopefully resulting in costs savings for all parties.

Economic loss claims

The effect of the virus on economic loss claims in respect of personal injury will need to be considered, for example:

  • Where plaintiffs had planned to go back to work in affected industries (such as retail / food service / hotels / events);
  • In terms of the argument often seen that plaintiffs would have been promoted / obtained salary increases which may not now be the case;
  • The availability of alternate employment;
  • The possible exacerbation or continuation of lost time off work; and
  • The possible aggravation of injuries (including psychiatric injury).

It is also possible that the cost of paid care will increase and that there will be limited availability.

This will need to be monitored and appropriate expert advice sought and factored into quantum calculations.

Reduction in injury claims?

With most of the population self-isolating and not attending usual places of business or work, we would expect a decrease in the usual types of injuries and a flow on reduction in injury claims (apart from on construction sites which should hopefully remain open).

There will be an increase in claims against employers by employees (including for psychiatric injury), though the impact on liability insurers is expected to be fairly limited.

We otherwise expect an increase in ‘inventive’ claims which will need to be investigated thoroughly.

Recovery claims

With more difficult economic times we would expect an increase in companies and insurers seeking to recover from other parties, whether by pursuing dual insurance or contribution claims in respect of property damage.

Additional attention will need to be given to investigating whether recovery targets will actually have the capacity to pay.

It is possible that workers compensation recovery claims arising out of ‘work at home’ injury incidents will increase, though this will likely not be seen for several years.

Interim delays

With the current situation and in the transition period as parties and courts adapt there will be delays and we are seeing this in terms of:

  • Getting plaintiffs to medical appointments (flight issues);
  • Availability and willingness of medical experts to see patients (which again will depend on the extent of the lockdown);
  • The flow on effect in obtaining medical and other evidence; and
  • Postponement of settlement conferences and mediations.

This will be some increase in the cost of claims and likely delays in excess payments in the short term, though hopefully this will decrease as the virus is in decline and further experience is gained.

If you have any concerns or require any assistance during this difficult time, please contact Michael Milton.

This article was written by Michael Milton, Partner.

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