Modern Law of Marine Insurance Volume Five, The
CHAPTER 1
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Maritime class actions, litigation funding, and the role of after-the-event (ATE) insurance
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Introduction
1.1 The term “ATE insurance” refers to a policy of insurance taken out after a dispute has arisen. ATE insurance developed in England and Wales following the Woolf Report in 1996.1 It generally covers the litigating party against its potential liability for the costs of the opposing party, as well as the party's own disbursements, if the case is unsuccessful. ATE insurance has become an integral feature of modern class actions,2 particularly in cases funded by a third-party litigation funder, or by a law firm acting under a conditional fee agreement or on a “no win, no fee” basis. In these arrangements, the insurer recoups the premium from any award or settlement.3 1.2 The premium charged for ATE insurance is usually between 20% and 40% of the policy indemnity limit, but may be as much as 90%.4 The existence, or otherwise, of an ATE policy may alter the risk borne by a funder or a law firm, or indeed a representative plaintiff, in a way that may materially alter the strategy of the litigation, and which will certainly impact on the quantum and distribution of fees and commissions at the time of seeking court sanction of a settlement or at judgment. The very fact of the existence of an ATE policy will be a signal to defendants, as ATE insurers will only offer cover if they consider the claim is likely to win – typically with prospects assessed at better than 60%. 1.3 In Australia, it is rare for plaintiff (class action) law firms to have much experience of maritime law and, conversely, for traditional maritime law practices to have much experience of class actions. There are eccentricities in both areas of practice. The maritime industry has hitherto been relatively safe, but not entirely immune, from the ever-increasing number of class actions filed in a variety of jurisdictions. Such actions include mass tort and contract claims, both in relation to personal injury and property loss or damage, claims for environmental damage, industrial claims, and shareholder (or securities) class actions. Some of the increase in the number of actions can be attributed to the pandemic, but the pandemic might not have affected the maritime sector quite so badlyPage 2
Maritime class actions
1.7 Amongst the many consequences of COVID-19 is the increasing exposure of the maritime industry to class actions. Cruise ships in particular became very early targets of class actions in 2020 as the virus swept through the industry. In the US, passenger class actions have been commenced against several ships, including the owners and operators of the Celebrity Eclipse, the Costa Luminosa, the Grand Princess and the Ruby Princess, and crew member class actions have been brought against several cruise lines, including Royal Caribbean Cruise Lines, Celebrity Cruise Lines and Princess Cruise Lines.9 Securities class actions have also been commenced relating to failures to disclose matters around health and safety and the risks to the company consequent upon the pandemic.10Page 3
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- A. Coronavirus is a disease that is and was at all material times known to be highly contagious and incurable. Those who are infected can have a mild illness but can also have a severe illness resulting in multiple organ failure, coma, and death.
- B. On 20 January 2020, the Diamond Princess (owned by the Second Respondent, which in turn is owned by the First Respondent) departed Yokohama, Japan, for a round trip across Asia carrying 2,666 passengers. During that holiday cruise, over 700 people were infected with coronavirus. At least seven of those people died before the Ruby Princess left port on 8 March 2020. Similarly, on 21 February 2020, the Grand Princess (also owned by the Second Respondent) departed San Francisco. A number of people on the ship developed symptoms consistent with coronavirus. On 5 March 2020, helicopters delivered coronavirus test kits to the Grand Princess. On 6 March 2020, the Vice President of the United States of America confirmed 21 people of the 46 tested on board were infected with coronavirus. On the same day, one of the Respondents e-mailed future Ruby Princess passengers, stating they “continue to implement increased monitoring, screening and sanitation protocols to protect the health of our guests”, but that anyone departing on a cruise from 9 March 2020 would be eligible for a 100% refund credit. Coronavirus was not mentioned in the e-mail.
- C. Notwithstanding the recent experiences on cruises as set out above, and the obvious danger associated with them, on 8 March 2020, the Respondents let thousands of passengers board the Ruby Princess. In that process, each passenger was asked to fill in a health card, however they were only asked to disclose if they had a fever or were otherwise sick, if they were a coronavirus close (or suspected close or monitored) contact or if they had been to a
list of countries. Anyone else who had a fever, cough or any other symptoms, were let on board.Page 5
- D. On 8 March 2020, the Ruby Princess was at red level sanitation, which was a policy of the Respondents requiring the highest level of cleaning and sanitation and no self-service buffets.
- E. Mr and Mrs Karpik embarked, healthy, on 8 March 2020. Like all other passengers they booked their cruise, and embarked on 8 March 2020 expecting a safe, relaxing and pleasurable holiday experience. They went to their cabin and found in their room a half- empty chip packet, a box full of empty bottles and it was apparent that the shelves of the cupboards had not been cleaned. At around this time they were mustered in the Wheelhouse Bar. They were crammed shoulder-to-shoulder in a small room with about 100 people in it. Moreover, throughout the journey there was self-service food available, including at the buffet and in the form of communal nut bowls, and all the usual amenities were available to be used (and were often crowded).
- F. On 10 March 2020 the Communicable Diseases Network of Australia released guidelines for cruise ships, which classified all persons on board the Ruby Princess with an acute respiratory illness or fever as ‘suspect cases' for coronavirus. On 10 March there were already ‘suspect cases' on board. The Respondents did not warn passengers. On 11 March 2020, the World Health Organisation declared a pandemic. On board activities continued as per usual.
- G. On about 17 March 2020 Mr Greg Jackson, the First Respondent's Vice President of Fleet Operations told Mr Peter Little, Senior Vice President and employee of the First Respondent in writing that “Ruby Numbers are going berserk”, meaning the numbers of ‘suspect cases' were spiralling out of control. They did not inform the passengers. By 18 March there were over 100 ‘suspect cases' on board.
- H. On around 16 or 17 March, Mr Karpik went to the on-board Medical Centre reporting symptoms consistent with coronavirus, including fever. Initially he was told he did not need to self-isolate, however on another visit to the Medical Centre later that day he was told to self-isolate. He was not told, at any time by the ship's medical staff, that he might have coronavirus. After the cruise Mr Karpik was taken to hospital by ambulance, placed in a medically induced coma, intubated and ventilated. He almost died. He continues to suffer ongoing medical complications as a result. This has been, at the risk of understatement, extremely distressing for Mrs Karpik.
- I. Purpose and Result Guarantees: It is obvious that any person who goes on a cruise for the purpose of having a holiday wants it to be a safe, relaxing and pleasurable experience from which they come back new®. Passengers expect that the positive benefits of a cruise will last for a reasonable period on their return and that they will not experience any adverse consequences on their return by reason of the cruise. That is the purpose for which passengers go on cruises and the result they desire. The experience of the Group Members as passengers on the Ruby Princess cruise was diametrically opposite. Mrs Karpik was significantly distressed, inter alia, by the mismanagement of the risk of coronavirus by the Respondents, by the fear it was on the ship, by the fear that she might get it, by the fear that if she got it that she might spread it and most of all by her husband
almost dying from it. The Respondents breached the guarantees imposed by s.61 of the Australian Consumer Law.Page 6
- J. Negligence: The Respondents were negligent in letting anyone board the vessel at all. The cruise should never have departed. Further, once they let people on board, they failed to take even the most basic of steps to protect the health and safety of passengers. There are many factors that inexorably lead to those conclusions, some of which are that they did not ask the vast majority of the people boarding the cruise if they had symptoms consistent with coronavirus, they did not test any temperatures of those boarding, they did not warn anyone of the risks of coronavirus on board (before boarding, after ‘suspect cases' came to their knowledge or even when, by their own admission, the numbers of ‘suspect cases' were going “berserk”), they failed to isolate ‘suspect cases', they failed to warn ‘suspect cases' that they may have coronavirus, they allowed self-service food (in breach of their own policy), did not impose physical distancing, and they did not properly clean and sanitise the ship even when they were on red level sanitation (their highest alert level).
- K. Misleading conduct: By letting people on board, the Respondents misled passengers into thinking it was safe to board, and they further misled passengers by promising in their 6 March e-mail to “protect the health of our guests” with “recommended best practices”. As is clear from the above, this was false. They also misled passengers into believing that they would have a relaxing, pleasurable and enjoyable time on the Ruby Princess and would come back feeling new. By no later than midday 8 March 2020 it was clear that this was not going to be the case.
- L. In terms of damage, Mrs Karpik suffered, inter alia, economic loss as well as distress and disappointment damage. She also seeks aggravated and exemplary damages, inter alia, because the Respondents put their corporate profits before her and her husband's health and safety. The Respondents had total control of an enclosed space (being the Ruby Princess) and knew there was a real risk that the passengers who entered into that space may become trapped there with an uncontainable, spreading, contagious, life-threatening virus – as occurred on their other ships, the Diamond Princess and Grand Princess. Accordingly, common sense and human decency would create an expectation that that knowledge of the risk and its dire consequences would be disclosed to passengers before they boarded so each passenger could make up their own minds as to whether they wished to risk their health, safety and life and the health, safety and life of their family members (and friends). There was no such warning or disclosure. It is even more reprehensible that they continued to keep amenities such as bars and the nightclub open as they knew (at the highest levels of management) that the numbers of ‘suspect cases' were going “berserk” (or at any time they had ‘suspect cases'). If they shut down some of the amenities while the numbers were going “berserk” they might have lost revenue.
- M. As a result of the Ruby Princess outbreak almost 40% (663 people) of the Australians on board were confirmed to have contracted coronavirus, and 28 people have tragically died according to the Special Commission of Inquiry (at [14.2]). The overseas traveller infection numbers are not yet known.
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Litigation funding
1.17 As is apparent from the applicant's lawyers' website, Shine Lawyers, the Ruby Princess class action is being funded by third-party litigation funder, Balance Legal Capital (BLC). Potential class members are told that legal costs will be paid by Balance and, as such, no out of pocket legal expenses will be paid by class members. Potential class members are also told thatin return for funding the action, upon settlement or judgment in favour of the applicant, BLC will receive, after reimbursement of all disbursements, legal fees and expense from the settlement or judgment sum, a ‘success fee'. This is a percentage of any settlement or judgment sum. The amount BLC receives will first need to be determined by the Court as fair and reasonable.