19 December 2017

Insurance Europe: Position paper on collective redress published

Insurance Europe has published a position paper on collective redress, which says that, because many member states either have only just introduced or are considering introducing collective redress mechanisms, it is too early following the 2013 recommendations to take action at EU level.

Insurance Europe welcomes the European Commission’s current focus on the need for appropriate collective redress mechanisms in the EU; a focus that is timely in the light of recent mass-harm instances and the required review of the 2013 Recommendations0

It is, however, not clear that regulation on a European level is currently necessary. If the EC were to take action at EU level, Insurance Europe favours a soft-law approach which distinguishes collective redress from injunctive relief, and does not tag collective redress on to injunctive relief proceedings.

The need to balance the effect of such mechanisms between, on the one hand, achieving effective redress for consumers impacted by breaches of EU law, with, on the other hand, the effect on insurers (as defendants, legal expenses insurers or liability insurers), should not be overlooked.

It is therefore imperative that any collective redress mechanism be sufficiently thought through to prevent unintended consequences such as:

• collective actions becoming investment opportunities for third party funders with no interest in the outcome of proceedings other than the return on investment,
• blackmail settlements becoming a regular feature of business risk, and
• abusive use of collective redress mechanisms to pursue malicious or vexatious claims. 

Insurance Europe therefore reiterates the need to maintain safeguards such as those set out in the 2013 Recommendations, while not undermining the value of alternative dispute resolution (ADR) mechanisms, including:

• ADR mechanisms should be preferred over court-related collective redress,
• the opt-in principle,
• the use of non-profit designated entities to bring claims on behalf of consumers,
• the loser pays principle,
• compensation without any punitive element,
• an active role for the competent authority/judge to assess claims, particularly pre-admission, 
• transparency of funding arrangements, and 
• strong safeguards to prevent contingency fee-based remuneration.

Position paper

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