In Austria, popular ski resort Ischgl is currently facing potential class action for failing to respond quickly enough to the COVID-19 outbreak affecting 600 of its patrons. According to the Vienna Consumer Protection Associated website, “the global Coronavirus pandemic qualifies as force majeure and nobody can be held responsible for any damage suffered…However, keeping ski resorts open, even though authorities knew or should have known of a threat of mass infection, is certainly a reason to consider claims for damages.”
In Australia, law firms are now anticipating a raft of class actions brought by litigation funders against companies for any, or a combination, of the following actions through COVID-19:
- mismanagement of the company
- failure in their continuous disclosure obligations
- breach of insolvency trading regulations, or
- wrongful dismissal or standing down of employees.
Furthermore, earnings revisions are set to impact companies’ share prices, which is often a trigger point for litigation funders. As a result, the Australian Institute of Company Directors has already written to Treasurer Josh Frydenberg with a request to amend the Corporations Act; thereby creating a safe harbour against regulatory lawsuits and class actions. Further calls for sensible legislative protections will likely be made.
At present, the Coronavirus Economic Response Package Omnibus Bill 2020 (CERPO Bill) provides a degree of safe harbour for insolvency trading for six months if affected by COVID-19, however is no certain panacea to the aforementioned risks. While such liabilities are yet to be realised or tested in the courts, it is prudent for businesses, listed or not, to assess their potential risk exposure to future COVID-19 related claims.
At Honan, we are currently advising all clients to consider the following:
- Impact to markets and investments
- Do you have adequate risk management strategies in place, including business continuity plans?
- Are you working with your broker to communicate these strategies and your Board’s (potential) oversight to your insurers?
- Impact to business operations
- Do you have enough staff or resources to continue delivering your services and any duty of care as expressly required by existing contracts? If not, you may need to consider amendments to existing business contracts during the COVID-19 crisis.
- Impact to customers and business partners
- Have you taken reasonable steps to ensure the safety of your customers and business partners? If services or goods cannot be provided, are you offering refunds or credit to your customers?
- Has your business implemented protocols to ensure you are following government guidelines relating to hygiene, personal protective equipment, travel restrictions, quarantine, and social distancing?
- Impact to your employees
- How are you protecting your employees? Whether on the front line or working from home, the safety of your people, both physical and mental, must be proactively managed. If your workforce is working remotely, do you have the necessary IT infrastructure and security in place? Are you assessing ergonomic risks, and providing necessary equipment to keep your workforce comfortable, healthy and safe?
- Can you rely on contractual provisions to stand down your workforce in a general economic downturn? If you are reducing hours or pay, do you have consent in writing? Businesses that are trying to prevent laying off staff may expose themselves to wrongful dismissal claims for employees who are temporarily stood down, or have pay reduced without expressed consent.
With you all the way
At Honan, we’re working proactively with all our clients to mitigate their business risks ahead of time. To learn more about how we can protect and support your businesses through COVID-19, please reach out at any time.
Poppy Foxton– Head of Claims