Welcome to 2022!
With 2022 well underway now, we’ve put together a snapshot of 7 key areas developing in the general liability space this year.
Construction industry pressures
The construction industry in Australia is under mounting pressure due to significant supply shortages, a scarcity of skilled labour and interruptions to labour supply caused by the pandemic.
Key building materials such as timber are in limited supply nationwide, with bushfires over recent years depleting our local timber reserves. Global supply shortages and shipping delays have limited timber imports, resulting in mounting problems for both commercial and residential construction projects. This has put pressure on principal contractors who are rapidly approaching pecuniary penalty periods and scrambling to solve blockages in their supply chain.
In Queensland, surging population growth1 contributed to by interstate migration is causing hefty bumps in housing prices, increasing demand for new land developments and generating growth in residential construction, further exacerbating supply shortages. Further, most homeowners are likely underinsured as they enter 2022, noting these shifts in property values, higher construction costs and inflation impacts on the costs of household items.
Combined with a shortage of skilled labour, these pressure points increase the risk of contractual disputes and liability claims, particularly when on-site resources are stretched beyond capacity.
As a nation, we have a more agile workforce than ever before. There are new online businesses popping up every day, as employees opt for independence and flexible working arrangements or adapt to redundancies and changing work conditions stemming from the pandemic.
E-commerce platform Shopify has seen consistent growth since it launched, albeit with some recent stalling, but with projections for growth to continue into 2022. Unfortunately, the proliferation of user-friendly platforms enables inexperienced business operators to start their home business or side-hustle with little understanding of the legal and insurance requirements.
This is likely to result in an increase in the number of uninsured claims pursued against smaller businesses, which may adversely impact insurers of co-respondents. Problems associated with under-insurance may also unfold in circumstances where adequate policy limits have been sacrificed for reduced premiums by inexperienced operators.
Cyber and defamation
The explosion of online activity globally paves the way for more privacy claims and, particularly in the social media sphere, defamation claims stemming from comments published on online platforms.
In 2021 we saw a number of high-profile cyber-attacks across a range of businesses and government institutions, including large-scale data breaches and the use of ransomware to leverage user data in exchange for hefty payments. Cyber insurance issues will continue to evolve in 2022, with the significant number of attacks in the last 12 months serving an important warning for this year’s trajectory. Businesses should expect that their clients and users will demand more from their cyber security protocols in 2022.
Social media continues to dominate marketing strategies in 2022 and in this light, the impact of the late 2021 High Court decision in Voller2 will play out over the coming year (you can read more about Voller in our Insight article here).
The effects of Voller were swift. ABC News switched off commenting on their Instagram account, stating “we've closed comments on this post to prevent harmful, defamatory or otherwise unlawful user contributions." The potential scope of Voller in exposing non-profit or local community organisations that run public social media accounts has resulted in significant wariness.
In direct response to the Voller decision, the federal government released an exposure draft of the Social Media (Anti-Trolling) Bill 2021 on 1 December 2021. The explanatory note states that the Bill will deem a person who administers or maintains a social media page not to be a publisher of a third party comment, and thereby avoid exposure to a defamation claim. It will also deem the social media provider (e.g. Facebook, Instagram, Twitter, Tik Tok) to be the publisher of the material for the purpose of defamation laws, but creates a conditional defence where a standardised complaints process has been implemented to identify users who publish defamatory material. It also expands the Court’s power to issue disclosure orders compelling the provision of information about these users.
Also of interest, Dr Anne Webster MP also introduced a Private Member's Bill on 25 October 2021, the Social Media (Basic Expectations and Defamation) Bill 2021. The explanatory memorandum does not make any reference to the Voller decision. It states that the intention of the Bill is to give the Minister the power to set basic expectations for social media operators in the context of a more general observation about the current lack of accountability by social media operators for defamatory comments published on their platforms.
These developments are particularly fascinating given Facebook’s transition to Meta in late 2021, citing a future focus on the metaverse in online social interaction and user experience3. The concept of direct legislative interference with the operations of centralised social media platforms is a very interesting comparison to the broader concept of decentralisation associated with the metaverse. (For the tech fanatics, keep an eye out for another Insight on the metaverse, coming soon)!
The evolution of cyber and defamation claims in 2022 will be a key area to watch.
Expansion of ACL claims for commercial transactions
Amendments to the Australian Consumer Law effective July 2021 will shape ACL claims over the coming year. Having increased the potential scope of commercial transactions falling under the realm of the ACL (the transaction value threshold has shifted from $40,000 to $100,000), there will be a greater number of higher-value claims being adjudicated under these laws.
For businesses that have not already done so, a review of terms and conditions of trade (and perhaps pricing structure) should be conducted to ensure that these changes are taken into account.
The number of class actions will likely continue to increase in 2022. Litigation funders have reported greater investment in class actions, year on year, with the percentage of their portfolio dedicated to class actions also increasing. The pandemic has also created opportunities for class action claims, particularly on issues such as vaccination mandates in the workplace.
It's also notable that 2021 was the first full year where litigation funders were required to hold an Australian Financial Services Licence (AFSL), now regulated under the managed investment fund scheme. Generally speaking, this requirement was designed to curtail the number of class action suits, but it will be interesting to see how class actions develop throughout the year, particularly in the realm of consumer-based actions that don’t necessarily require litigation funding.
Finally, it’s worthwhile noting the High Court decision of Walton v ACN 004 410 833 Limited (formerly Arrium Limited) (in liquidation)4, handed down very recently on 16 February 2022. The High Court upheld an original decision from the Supreme Court of New South Wales (overturned by the Court of Appeal), finding that a shareholder is allowed to examine a former director for the purpose of investigating potential personal claims, pursuant to section 596A of the Corporations Act 2001 (Cth). The auditor and the bank that advised on the original capital raising were also required to produce certain documents. The decision is notable as it confirms that the scope of an examination under section 596A is not confined to situations that confer a benefit on the company, its contributories or its creditors, but extends to a personal claim by a shareholder against a director. It will be interesting to follow any similar applications made pursuant to section 596A over the course of the year, and see whether these lead to an increased number of securities class actions.
Inflation and court delays
“Social inflation” was one of the buzz phrases coming out of 2021, with analysts monitoring the rising costs of claims and claims management. Inflation continues to be a notable economic factor into 2022,5 and will be a key consideration for underwriters.
Court delays caused by the pandemic have extended the timeframes for judgments in many jurisdictions, compounding the effects of inflation. In personal injury claims, stressors in the healthcare industry are also having flow-on effects, with the cost of allied health services increasing and impacting upon various heads of damage. The combined effect of inflation and delays will cause ongoing challenges in accurately reserving litigated claims in 2022, and litigated quantum awards should be monitored carefully.
We can’t wrap up this discussion without a discrete section about the pandemic. It is likely we will see further COVID-19 related issues ventilated in the courts about the exposure and spread of the virus in the workplace setting, as well as vaccination mandates.
Medico-legal assessment in personal injury claims has been adversely affected with severely limited appointment availability, last-minute cancellations by practitioners due to updated government guidelines and challenges establishing rapport in virtual examinations or where face coverings are required.
In the absence of face-to-face interactions, fulsome investigation of claims is challenging, particularly when critical evidence, including witnesses, cannot be vetted in person. We will also see the value of workers’ compensation refunds increase throughout the year because of delays in medical assessments and limited opportunities to undertake host employment.
From a broader industry perspective, limitations in engagement opportunities between insurers and key stakeholders (outside virtual interactions) will continue, but we hope to see these barriers reduce as the year progresses.
Where to from here?
This is already shaping up as another challenging year that requires the insurance industry to build resilience and new strategies to manage these emerging trends.
1 You can see the latest ABS population figures for Queensland here.
2 Fairfax Media Publications Pty Ltd v Voller; Nationwide News Pty Limited v Voller; Australian News Channel Pty Ltd v Voller  HCA 27.
3 You can read their statement here.
4  HCA 3;
5 ABC News conducted a detailed analysis on market trends and inflation into 2022 here.