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Published: 16 November 2018
Author: Creon Coolahan

A Better System of Compensation Recovery for St Patrick's Day Bushfire Victims

At the outset I should make it clear that this firm does not undertake class action work, nor do we have intentions of doing so in the future.

Even so, we have received many enquiries from victims of the devastating St Patrick’s Day Bushfires wanting to know whether they should opt out of the class actions that have been initiated in the Supreme Court of Victoria, and what they can do to minimize the cost and delay whilst also getting as much of their losses back as is possible.

Recent media coverage in The Warrnambool Standard in relation to a Ruling made by Justice John Dixon in the Supreme Court has highlighted some of the reasons why much confusion surrounds the rights that bushfire victims have to recover their losses. When even the “leading bushfire lawyers” themselves seem confused about the rights and responsibilities of the parties involved, it is no wonder their prospective clients find it difficult to know which way to turn.

Class actions and compensation

The class action system of recovering compensation for bushfire victims has seen many of those victims receive little, or no, compensation at all. Such is the cost involved in retaining agronomists, forensic accountants, power asset maintenance engineers and other experts to assist in formulating a claim that many see the barriers to justice as insurmountable. That is before you factor in contingency and uplift fees that can amount to a 60% increase on the Supreme Court Scale of Costs (which is already the most expensive Scale of Costs in Victoria before the contingency and uplift fees are bolted on).

Indeed a settlement proposal of a class action initiated in relation to the Mount Victoria Bushfires, if accepted, would see the claimants receive nothing at all out of a $2.86 million settlement, with all of the settlement monies going to the lawyers who represented the claimants as legal costs and disbursements. Media analysis of the reported returns to claimants after the conclusion of previous class action proceedings suggests that outcomes are variable and often fall well short of compensating bushfire victims for the losses they have suffered.

Never before have we advocated that victims of any accident, disaster, or injustice rely upon their insurance company to assist them to pursue the path to recovery of compensation. Too often we are approached by clients, especially in the context of transport accident and worker’s compensation claims, who have been left high and dry by insurers who suddenly decide to reduce income support benefits or deny access to necessary medical treatment.

In the context of bushfire litigation, however, a recent offer made by the insurer group IAG (which consists of CGU, RACV, WFI, and Lumley – who apparently collectively insure about 78% of the property owners affected by the St Patrick’s Day Bushfires) and other insurers, Allianz and QBE (which includes Elders Insurance), warrants serious consideration in our view.

The offer contains a commitment that those insurers will take action upon bushfire victims’ behalves to recover not only the insurance companies’ losses but also the uninsured losses the victims have sustained without charging any legal costs or administration fees (except for specialized loss assessment reports relating to some forms of uninsured loss).

Opt-Out Notice to be issued by the Court

Those concerned that they will be thrown under the bus by the insurers and having their claims settled up short of the mark should take comfort from the comments of Justice John Dixon in his above-mentioned Ruling, which will appear in the Opt-Out Notice when issued by the Court advertised in local media:

“Lawyers appointed by insurance companies to pursue recovery of insured and uninsured losses arising from the St Patrick’s Day fires have duties to act in the best interests of both the insurer and the insurer’s customers (insured group members). It would be contrary to such duties for such lawyers to act in a way that favoured the interests of the insurer to the detriment of the group member.

There is nothing improper about insurers with the legal right to pursue recovery of insured and uninsured losses from Powercor choosing not to do so through class actions commenced by Maddens Lawyers. Further, the insurance companies that provide cover to group members do not insure Powercor, and neither do their solicitors provide legal advice to Powercor.”

On the basis of the statements made by the IAG group of companies, Allianz, QBE and Elders, bushfire victims are almost certainly more likely to recover more of their uninsured losses by having the insurers take action for them than they would if they participated in the class action.

It is important that people who have been devasted by the St Patrick’s Day Bushfires seek urgent independent legal advice before deciding whether to continue to remain a member of the class action proceedings that have been launched. If claimants do not “opt out” they will not be able to avail themselves of the insurers’ offer to represent them free of charge. The Opt-Out Notice is likely to be issued within the next few weeks, giving claimants only a short time to consider their options.

Categories: Insurance, Bushfire