South Africa is, from a COVID-19 litigation-trend perspective "behind the curve" when compared with development in other jurisdictions – probably because the virus spread from the Northern hemisphere to the Southern hemisphere. Development in other jurisdictions can therefore be considered in order to predict trends in South Africa.
A very hot topic in all jurisdictions is the potential response of business interruption insurance, which typically provides protection against closure of a location because of damage to insured property at that location. Multiple "non-damage" extensions can be added in standard policies, such as for example a communicable disease extension, as well as extensions in relation to damage in the area surrounding the insured property. Given the variation in these policies, they will need to be considered on a claim by claim basis with reference to the specific policy wording. There is not, for example as we interpret issues, a uniform answer in respect of causation and policy trigger issues. The situation is complicated by the fact that politicians on both sides of the Atlantic have weighed in on the debate with opinions, announcements and threatened legislation.
It is too soon to predict or to express an opinion as to whether there will in any jurisdiction be a COVID-19 class action trend or not, and whether such actions will in fact be practical and possible in the context of complex COVID-19 interpretation issues and having regard to procedural requirements for class actions. COVID-19 interpretation issues are quite nuanced issues and we do not deal in this article with any detail as context will be required on a case by case basis in order to do justice to the subject.
However, at this stage there are indications of attempts to institute class actions. In the USA, a number of class action lawsuits have been launched against underwriters and all seek to draw broad definitions of the intended class. For example, a restaurant group in Florida is pre-emptively seeking a declaratory order for COVID-19 insurance coverage in a proposed class action. The proposed class is defined as: all entities suffering COVID-19 related losses that have entered into standard all risk-commercial property insurance policies with underwriter defendants, and whose policies do not exclude pandemic coverage.
The UK has up to now resisted adopting an American style class action approach. The UK does not allow typical US class actions in which every individual or business belonging to a defined "class" is automatically included unless it opts out. The UK does have a system of group litigation, but Claimants have to opt-in first and share legal costs.
In England, a number of policyholder groups are forming with the intention of collective action against identified insurers, which may include group litigation under the English procedural rules. Those groups have appointed solicitors and, in some cases, obtained funding from litigation funders.Collective litigation has, up to now, been rare in the UK because of procedural constraints; but only time will tell whether the high number of businesses facing financial collapse under the lock down may make a case for them to band together, or not.
In South Africa class actions follow a two-stage approach. A certification application is the first stage. SA Law requires that before a class action may be instituted, potential Plaintiffs must obtain permission from a court, resulting in certification of the class. The Constitutional Court and the Supreme Court of Appeal have played an important role in developing in the class action process in South Africa.
The Supreme Court of Appeal has developed 7 broad guidelines in Children's Rescue Centre Trust and Others vs Pioneer Foods (Pty) Ltd 2013 (1) 213 (SCA). In Mukaddan vs Pioneer Foods (Pty) Ltd 2013 (5) SA 89 CC, the Constitutional Court held that the guidelines are not requirements, but merely factors to be taken into consideration as the overriding test is the interest of justice.
The guidelines are as follows:
In the absence of legislation regulating class actions in South Africa, there is little guidance on dealing with "opt-in" and "opt-out" classes and currently each matter is dealt with on its own merits. An opt-in class is one where members of an identified class are required to give written consent to be included in a class action. An opt-out class allows members of the identified class to choose to be excluded through written notice after certification.
Having regard to the above guidelines it should, in principle, be possible to define a proposed class in South Africa in the context of COVID-19 insurance litigation. The proposed class guideline is that the individual's membership of the class must be objectively determined. In a COVID-19 class action, policy holders in respect of specific policy wording can for example constitute a proposed class.
In terms of the guidelines, sufficient issues of fact or law must however also be common to all members of the class. In theory, a number of policy holders with the same policy wording may in this regard, in principle, be in a position to launch a class action.
There are various business interruption policy wordings and permutations in the South African market. It is fair to say that Insurers are customising and streamlining their claims assessment processes in order to adapt to and cope with the unique circumstances thrown up by COVID-19 to ensure an efficient claims assessment process. But that does not mean that they can be resolved in generic fashion.
Insurers faced with the suggestion that claims should be brought in a class action will need to consider a number of factors, including:
Given the differing policy wordings and multiplicity of factual situations, it is not obvious that these questions can be satisfactorily answered by policyholders seeking to form a class. As ever, however, the devil will be in the detail.