Class action litigation increases with pandemic: survey
25% of the class action suits were against insurance companies over business interruption coverage, according to the report.
In-house legal spend on class action lawsuits has increased for the fifth year in a row and will likely increase in the coming years because of the new coronavirus and data privacy laws, according to the 2020 Carlton Fields Class Action Survey published on Tuesday.
“Over the last several months the plaintiffs’ bar has been extremely active. We thought the activity might have slowed down because of the pandemic and the opposite has happened,” said Julianna McCabe, a shareholder at Carlton Fields in Miami and director of the firm’s class action survey.
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The survey was conducted at the end of 2019 before the pandemic, McCabe explained. As of the end of May, when Carlton Fields was putting together the report, 560 COVID-19-related class actions had been filed in the U.S.
According to the report, 25% of the class action suits were against insurance companies over business interruption coverage and another 25% were in the education space for refunds of tuition. Other areas that have faced class action suits because of the pandemic include gyms and entertainment venues, government, and airlines. McCabe said 763 class action suits related to COVID-19 have been filed in the U.S. as of Tuesday.
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Corporate legal departments were on track to increase how much they spent before the pandemic began. In 2018, corporations spent $2.46 billion on class action litigation and spent $2.64 billion in 2019. The report projects that in 2020, corporations will spend $2.73 billion on class action suits.
Beyond COVID-19, data privacy laws, such as the California Consumer Privacy Act, will play a significant part in legal spend on class action lawsuits in the future, McCabe said.
“There are two aspects to it: Data breach litigation has been a big fear for a number of years and most companies are well prepared to handle a [data breach scenario],” McCabe said.
In fact, this year was the first year 100% of respondents indicated they are working on or have a data breach plan.
“The other side of the coin is data privacy legislation. In-house counsel are worried about trying to comply with 50 different state and international laws and being caught up in class action litigation because of a failure to comply with those laws,” McCabe said.
Roughly 58% of respondents indicated that data privacy and security will be a big part of the next wave of class action lawsuits, according to the report. ”We will see many more data privacy actions as states adopt regulations like the CCPA,” an anonymous senior vice president of an insurance company said in the report. “They are almost a new species of law and will continue to be challenging as the plaintiff’s bar continues creative, aggressive suits.”
The results of the survey were compiled from interviews with 415 general counsel, chief legal officers and direct reports to general counsel. Those surveyed work for companies with average annual revenue of $21.8 billion and a median annual revenue of $6.7 billion.
Dan Clark covers cyber security, legal operations and intellectual property for Corporate Counsel. Follow him on Twitter @Danclarkalm.
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