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Legal Page - Australian Royal Commission recommends abolishing limitation periods retrospectively

Source: Asia Insurance Review | Feb 2016

Ms Jenni Priestley & Ms Rhiannon Eagles
Ms Jenni Priestley and Ms Rhiannon Eagles of Clyde & Co explains the abolishment of the limitation periods for child sexual abuse claims retrospectively and its implication for liability insurers and reinsurers. 
The Royal Commission into Institutional Responses to Child Sexual Abuse has released a report recommending that all Australian States and Territories abolish limitation periods for child sexual abuse claims, with retrospective action. 
   Given the breadth of institutions which have already appeared at hearings before the Royal Commission, this is expected to have a significant impact for liability insurers and their reinsurers of relevant Australian institutions.
Background to the Royal Commission
The Royal Commission into Institutional Responses to Child Abuse has been running in Australia since 2013. The purpose of the Commission is to inquire into and report on responses by institutions to instances and allegations of child abuse in Australia. A final report is due no later than 15 December 2017.
   On 14 September 2015, the Royal Commission issued a report on redress and civil litigation. The Report notes the current inconsistency in limitation period laws across Australian States and Territories. 
   Generally, existing limitation periods for personal injury are three years. Where a child has been injured, the period will not commence until the child turns 18. The Report has identified current limitation period laws as posing a barrier for survivors of child sexual abuse crimes to seek redress through civil litigation.
Recommendation to abolish limitation periods
The Royal Commission has recommended that all States and Territories remove any limitation period applying to claims for damages where a claim is based on personal injury resulting from the sexual abuse of a person in an institutional context when the person was a child. Significantly, the Report recommended that limitation periods be removed with retrospective effect.
   In Victoria, legislation to this effect has already been introduced by the Limitation of Actions Amendment (Child Abuse) Act 2015 (Vic) which came into operation on 1 July 2015. 
   In New South Wales, the Limitation Amendment (Child Abuse) Bill 2015 (NSW) which will implement these reforms is currently before the Legislative Council. It appears likely that these recommendations will be adopted by most if not all Australian jurisdictions.
Implications for insurers and reinsurers
If adopted, the removal of limitation periods is likely to have significant ramifications for liability insurers and reinsurers with exposures to relevant Australian institutions. 
   This is particularly so given Australia’s prevalent class action and third party legal funding system. Class action proceedings have previously been commenced on behalf of abuse victims and further litigation is expected on the back of any adverse findings made by the Royal Commission. 
   It seems almost inevitable that the proposed reforms will lead to an expansion of the size of any group or class to bring proceedings, and ultimately the quantum, and complexity, of the claims.
   Given the retrospective element of the reforms, insurers and reinsurers may not have adequately reserved or priced for this increased exposure in issuing past or existing policies and collecting premiums. 
   The release of the recommendations contained in the Royal Commission’s September Report will no doubt serve as a trigger for insurers with exposures to relevant Australian institutions to carefully review their policies and consider the impact such reforms could have on their capital and reserving positions.
Ms Jenni Priestley is a Partner and Ms Rhiannon Eagles is Senior Associate, both at Clyde & Co, Sydney.
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