Litigation Increasing Dramatically In Argentina – QBE and Others Say They Need Tort Reform and
Does this story sound familiar? Tort claiming, constitutional law, and demands for tort reform are now playing out in Argentina. Under the heading "Compensation Culture," LATAM Insurance Review includes an interesting article on the rapidly increasing rates of litigation in Argentina. The article also ncludes numerous comments from a representative of Australia’s QBE, including the thought that perhaps there is a need for additional intelligence in underwriting now that damages are not capped. Others comment about a need for so-called "tort reform." Set out below are key excerpts from the article:
"As well as the aforementioned change post-2004 which allowed employees to take legal action against the employer, in addition to the ART, in a civil court, in 2009 – following what Gonzalo Paz Saguier, legal manager at QBE Argentina, describes as “almost seven years of progress and setbacks due to lack of consensus among different sectors of the system” – the Argentina government issued Degree 1694/2009 which, among other things, eliminated the limits of sums insured (previously set at AR$180,000, or around $40,000) while establishing a minimum compensation limit of the same amount. This, according to Towers Watson’s Guaita, “led to a premium increase of 50%”.
And while this law has been in place for over two years, it has not been without its problems. “The courts have repeatedly ruled on the unconstitutionality of several pillars of the law, opening the way for the employer’s civil liability, and in some cases, also for insurers, leading to sentences for amounts in excess of coverage,” says QBE’s Saguier. “This has been fought by an active policy of negotiation in those cases that can be traded, and litigating hard in all those other cases that do not require it. It has also led insurers to increase the intelligence in underwriting risks.”
According to Marval, O’Farrell & Mairal’s Kelly, such reform would likely result in an increase in the costs and consequent re-adjustment of premiums as necessary for insurance companies in the region.
“However, given the current scenario, involving many interests implicated that have materially delayed the negotiations between governments, employers’ associations, unions and ARTs, even if the current draft of the reform was sent to Congress in March, a hard debate is expected,” he adds.
Indeed, it seems there is much more discussion to be had before any final decision is made. “There are still many different points of view within the administration and many different projects and ideas with regard to this law ongoing within the administration,” says Carlos Marin Rodriguez, a partner at Bullo Tassi Estebenet Lipera Torassa Abogados. “However, most consider the current system to be a more progressive, open system and the proposed changes to be a step backwards.”
But should this reform – a draft of which is expected to be sent to Congress next March – come to pass, it will be only the latest in a number of changes that have taken place in the workers’ compensation market in the region."