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France weighs allowing class actions

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PARIS—Proposed legislation that would allow class action lawsuits in France could cause liability premiums to spike by as much as 20% and could cost businesses and insurers a combined e1 billion ($1.32 billion) in its first year of application, some of France's biggest insurers say.

The French parliament in February is expected to take up a consumer rights bill that, among other things, introduces a modified form of class action suits.

And while analysts believe passage of that bill is unlikely before presidential elections next April, class actions were high on the list of discussion topics at this year's gathering of the French insurers association, the Federation Française des Societes d'Assurance, held in Paris Dec. 11 and 12.

The Paris-based FFSA conducted a study to estimate the law's potential cost to insurers and businesses. It examined 40 recent consumer cases that could have been class actions under the proposed law, said Emmanuel Argod, director of institutional affairs at AXA Entreprises, a unit of AXA S.A.

Assuming 30 to 40 suits in the first year, the law would raise costs by e1 billion, in the form of additional liability claims, a cost that would be split by insurers and businesses, said Mr. Argod.

"Of course, not everything would be insured; there are certain limits," he said.

The bill creates a four-step process in which judges could hear class-action complaints for consumer goods linked to a contract, and only for cases filed by government-approved consumer organizations. It is expected to cap damages at e2,000 ($2,798), but this limit is not firm, insurers claimed.

Once a judge determines "professional fault," plaintiffs would have to individually negotiate with the company for compensation, then personally appear before the judge if the company refuses to settle.

Punitive damages barred

The bill would not allow contingency fees, punitive damages or civil jury trials. Actions for medical complaints, transportation accidents, or other personal injury or non-commercial disputes, would remain barred, said Nicole Bricq, a French senator who co-introduced the bill in April and served as moderator of a workshop on class actions at the FFSA meeting.

Ms. Bricq said that while the bill had been criticized by sections of the consumer and business community alike, there is a need to find a way to better resolve consumer disputes in France.