Spiking class action defense costs worrying U.S. companies

On Behalf of | Apr 30, 2019 | Insurance Law

As if they haven’t already got a lot on their minds …

Principals at large enterprises in Louisiana and nationally routinely multitask across multiple dimensions. Company decision makers simultaneously focus on matters ranging from new products, financing and cash flow to marketing, regulatory compliance, taxes and myriad other recurrent challenges.

One prominent and increasingly worrisome inclusion in that “other” realm is the fear of litigation. A recent survey of nearly 400 legal officers at major American companies of all stripes reveals that business executives are stressing as never before over lawsuit filings, especially large collective actions.

Class action lawsuits are the standard bearers of that category, being brought by plaintiffs acting on behalf of many other parties (sometimes thousands) all claiming a similar injury. The above survey findings indicate that class action-linked costs for companies have jumped for the past four consecutive years. Reportedly, American enterprises shelled out nearly $2.5 billion defending against such claims in 2018.

Such an outlay, coupled with its upward trending trajectory, is sounding alarm bells in company conference rooms across the country. A recent article on the litigation spike duly underscores management’s worries, noting that “the volume and complexity of the class actions filed continues to rise.”

Culled date indicate that lawsuits focused on alleged wrongdoing in the labor and employment sphere are the biggest concerns, especially those linked with alleged wage/hour violations.

And then there are cyber actions grounded in data privacy breach claims, which the above-cited article stresses “are the next big wave.”

Given the clear exposure-tied risks existing for American companies, managers clearly need to have strong action plans in place to deal with cyber threats and other litigation triggers. Nearly 90% of surveyed businesses say that they have implemented such plans.