Increase in insurance litigation heads to Australia and Asia
13 March 2009
The collapse of the subprime market in the United States and the subsequent credit crisis has triggered a wave of litigation and regulatory action against investment and finance companies that will soon hit Australia and Asia, according to a leading insurance lawyer.
Allens Arthur Robinson (Allens) Partner Oscar Shub said more than 120 subprime-related securities class actions had already been filed in the United States, resulting in D&O claims that could cost insurers almost US$6 billion.
Mr Shub said the causes of the economic downturn had not only increased the number of claims, but have also expanded the types of targets for litigation and regulatory action.
'In particular, these targets now include companies and individuals involved in the investment processes and financial markets concerned with, or otherwise touched by, mortgage-backed securities and derivatives,' Mr Shub said.
'Accordingly, new targets of litigation have come to include accountants, appraisers, analysts and other professionals who provided advice in connection with the value of those securities and derivatives, and the risks associated with such investments. They may also face claims by individuals and entities who relied on their professional advice and expertise.
'This trend in the United States is bound to filter out and we are likely to see it occurring in other economies, including Australia and those in Asia.'
Speaking in conjunction with the launch of Allens' Annual Review of Insurance and Reinsurance Law 2008 in Sydney, Mr Shub said many of these claims will also target individuals commonly insured under D&O policies and the companies for which they are directors or officers.
In particular, the types of claims and investigations that have already begun to emerge as a result of the credit crisis and which may trigger coverage under a D&O policy, include shareholder actions against lenders and their directors and officers alleging false and misleading statements to the public about lending activities, and class actions against failed banks and their directors and officers alleging that they misled investors about the financial status of the bank, violated corporations laws, committed fraud or made negligent misrepresentations.
Mr Shub said many corporations (as well as their directors and officers) will be forced to incur substantial sums to defend these claims or to settle them.
Ends
For further information, please contact:
- Jason SilveriiCorporate Communications Manager,
Melbourne
Ph: +61 3 9613 8014
Jason.Silverii@aar.com.au
Notes for editors.
Founded in 1822, Allens Arthur Robinson offers one of the most comprehensive legal networks in Australia and Asia with more than 1500 personnel based in 14 cities and eight countries across the region. Clients voted Allens Arthur Robinson the Best Professional Services Firm (revenue over $200 million) and Best Law Firm (revenue over $100 million) in the annual BRW Client Choice Awards 2005, 2006 and 2008. We have been an EOWA Employer of Choice for Women since 2004.
