Question marks still hang over pleural plaques compensation and the correct trigger for employers' liability policies, but what are the wider political, process and funding issues affecting asbestos claims? Lynn Rouse reports.
With Westminster yet to decide whether or not to follow the Scottish parliament in making pleural plaques compensatable - plus the hugely significant appeal on employers' liability trigger litigation set to kick off next month" asbestos claims continue to be dogged by uncertainty.
With this in mind, Post recently gathered a diverse group of experts, in conjunction with Kennedys, to debate four areas: current processes; asbestos politics; funding issues; and future developments. Guests were asked first how the disease protocol and mesothelioma fast-track scheme are working in practice. Is there an opportunity or need for reform?
"As a piece of paper, the disease protocol is good and sensible, but there is a real world problem with it being a bit toothless," commented Mark Burton, partner at Kennedys. "It is difficult to compel people to comply pre-litigation. So people can misbehave in a way that means proceedings are inevitable when they might otherwise have been avoided. That applies on both sides" and I seldom see someone penalised for it."
Caroline Pinfold, partner at Irwin Mitchell, agreed: "I haven't seen anyone penalised in cost. I think you are right" it is a bit toothless."
Andrew Morgan, partner at Field Fisher Waterhouse, added: "What we have seen over the years is a real change in behaviour on the part of insurers and their solicitors. Insurers these days tend to deal with claims far more quickly. And yet, at the same time, for asbestos disease cases, they expect litigation. In a sense, both sides treat the pre-action protocol with a degree of disdain, simply because they know" usually because the claimant is terminally ill" that they will be rushed into issuing proceedings and a speedy trial with Master Whitaker's fast-track scheme, whatever the stances the opposing parties take, and whether they are in principle co-operative or combative."
Consequently, in the context of the mesothelioma fast track, he said there is not much of a place for the disease protocol. "It does have a place in relation to other diseases where the claimant is not terminally ill and where the analysis of causation may rely upon disclosure of documents, such as asthma or dermatitis."
Suzanne Kearney, director of ASL, added: "From an adjuster's and investigative process point of view, the fast-track procedure can get in the way of investigating a claim properly. Because this is so pressured in terms of obtaining information within such a strict timeline, it can impact on completing a meaningful investigation."
Bob Howe, deputy chief executive of Axa Liabilities Managers, echoed Mr Morgan's comment regarding progress on co-operation: "Looking at our own cycle times, for disposal of mesothelioma claims in particular, they have reduced quite dramatically. Under 180 days is quite common, whereas not that long ago, this could have been a few years, which by any stretch of the imagination is too long."
But quick settlement is not always possible: "We can do this where we have single defendant actions, where we insure the only defendant or the only one that has got any liability. These are relatively simple situations to deal with. But the complications set in where there is more than one target for the damages, because there are things that need sorting out before we can part with any money."
Explaining how he was aligned to two interests for the purpose of the debate, Dave Caton, senior technical handler for Resolute Management, commented: "Resolute Management acts as an EL insurer, but we also act in the capacity as agent for a group of uninsured defendant companies that has an historic interest in various industries that involved the use of asbestos. In my experience from acting as EL insurers, I agree with Bob" more mesothelioma cases are now settled pre-litigation. And that tends to be the case where there are fewer defendants or only one.
"The issues our uninsured client tends to face with the disease protocol, however, relate mostly to identifying the actual historic employer, the correct successor for paymaster issues where there is insolvent insurance, and the correct defendant for the purpose of proceedings should the matter litigate."
John Goodwin, managing director of BAI Claims Services, agreed, commenting: "That's essentially our problem when we receive the revenue schedule off employers. It is not unusual for a man to have had five different employers in each year of employment and it can be a nightmare not only establishing how many of our policyholders are involved, but what has happened to them since the date of the exposure. And with all that happens in the construction industry, it is quite a problem." But he stressed the aim is to resolve such issues as quickly as possible, "as we are all conscious of the horrible nature of mesothelioma".
Returning to the protocol, Kieron West, partner at Kennedys, stressed its objective is to promote openness: "The first notice a defendant usually receives of a claim is the protocol letter, but those vary in their form and content. The letter is supposed to contain a clear summary of the facts, details of the illness, allegations of fault, details of the present condition, prognosis and outlines of any financial loss. On many occasions, I see protocol letters that refer simply to an asbestos attributable injury, the actual nature of which is unspecified.
"I seldom see any details of present condition prognosis nor any outline of financial loss. Seldom is there any medical report or other corroborative evidence. Seldom does a letter detail the extent of the claimant's alleged exposure, nor set out the full working history. HM Revenue and Customs employment records only go back to tax year 1961/62, by which date a 77-year-old mesothelioma victim would have been 30 and, therefore, potentially spent 15 years in the labour market. And I am interested in knowing what happened in his early working history.
"I also don't need a protocol letter containing a three-page critique of the evolution of asbestos knowledge; I need information about the claimant's alleged exposure, working history, medical condition and alleged loss."
Ms Pinfold responded: "One of the reasons personal information, such as medical reports, may not be included is that very often the letter is addressed to the company, and you never know exactly where it is going to end up and who is going to see it. Similarly, the letter from HMRC" and I take on board the limitations of the information" will normally have the National Insurance number recorded on it, which we wouldn't want to fall into just anyone's hands. But I am sure most claimant lawyers would immediately respond, once the letter of claim was acknowledged, with much more detailed information."
At this point, Mr Howe highlighted an emerging difficulty, stemming from a change in the kinds of mesothelioma claims notified: "More are coming from defendants that may only have ever had that particular claim. So, what proportion of 'frequent flyer'-type cases are plaintiffs seeing" where the defendants and insurance history are generally well known" versus those where someone has been exposed in a very intermittent fashion by a number of employers with no great history of asbestos exposure?"
Mr Morgan responded: "It is rare now to see a multi-defendant laggers' case with the usual suspects. We are more likely to see somebody who had scattered and sporadic employment in the construction sector with a bunch of small firms, which poses its own problems.
"Perhaps as a consequence of that, I have noticed we are getting a significant number of part 20 claims, raised in the course of proceedings. And there may be a trend for insurers not leaving the contribution issues until after the claimant's case has been tried. That is a worry for us and an expense for the insurers."
Mr Caton responded: "Certainly, the companies that we act for are no longer trading" they have limited assets. So, from their perspective, they need to manage their cashflow very carefully and will consider bringing another party to proceedings if they are likely to have to fund the settlement, or will make a contribution claim after funding the initial settlement."
So, what potential solutions are there to the various problems outlined? "I would like pre-litigation behaviour governed to a greater extent by some form of health check for matters that go into proceedings," said Mr Burton. "All we have is a box on a questionnaire asking us to what extent we complied with the protocol. Nine times out of 10, the answer is 'yes' but I've had cases stutter because the flow of information has not happened. There is a template letter and yet, in 20 cases, you will probably see 15 different letters. So there is an opportunity to tighten this by way of costs or other sanctions."
Drawing this part of the discussion to a close, Mr Howe concluded: "As insurers, we can only react to the information we receive. It is very difficult to take proactive steps towards settlement if you don't have much, particularly with non-frequent flyer-type cases. It may be our first ever notification of that type of claim against that employer. So we have no track record of previous investigations to lean on; we can't look up another old claim file and see what happened. We have got to start again."
The debate then turned to asbestos politics, with guests asked whether Westminster's decision on pleural plaques" whichever way it goes" really will mark the end of the road. A decision on the Judicial Review mounted by insurers in Scotland could happen at anytime, with the legal arguments set to conclude this Friday, 23 October.
"The likelihood is that the government in England will wait until the judicial process in Scotland is finished, including any appeals," commented Mr West. "Otherwise, it may face the ultimate irony of insurers succeeding in Scotland while in the interim the government south of the border has introduced similar legislation to overturn the House of Lords. Then we would face a reverse situation, where you couldn't bring a claim in Scotland but you could in England, which would be ironic when you bear in mind the lukewarm response Westminster first had to this issue.
"But the issue is a more fundamental one; we should be examining whether it is right for a judicial decision in the House of Lords to be negated by legislation. I just think that is wrong. One of the justifications for following Scotland is that we can't have two different laws operating either side of the border. Why not? We have this already. In Scotland, student university fees are funded by the state; in England they are not."
He stressed that the law of negligence has evolved over centuries and is constantly being reviewed where the judiciary sees that an injustice will result from interpreting the law too strictly. "And a good example of that would be the Fairchild decision."
Ms Pinfold countered that Fairchild is a good example of where parliament should intervene, "because it reflected the moral will of the people. And that is the point of the Scottish parliament's decision; it felt there was a debt from the nation to those people that had worked and been exposed to asbestos, particularly in the shipyards in Scotland. And I believe Westminster may take the same moral view."
"But the government could take that moral view without interfering with the law of negligence, couldn't it?" responded Mr Howe. "It could find ways of paying compensation to people who have plaques, without having to interfere with the law of negligence" for example, by making it a notifiable disease and paying benefits."
Mr Morgan conceded that remedies other than civil contributions through the courts are possible, but added: "At the same time, the government can express a view" by enacting legislation" that the Lords got it wrong. That is certainly my view. I don't see there is any recourse to a European remedy, so when Westminster makes a decision, that will be it."
Ms Pinfold added: "But why should the taxpayer pick up the bill if it comes through the benefits system, rather than insurers that have had premiums paid every year?"
This promoted Mr Howe to stress: "Whoever the compensators may be, the medical evidence was agreed in the House of Lords. Their lordships may have come to the conclusion that it was better to spend money on people who actually have a substantial disability, in many cases a fatal one. I believe that broader issue played on the minds of those making the decision."
But Mr Morgan countered this with a firm view of his own: "The point that is perhaps lost is that the Court of Appeal, while it decided these claims were not actionable and the House of Lords upheld that, did have something to say on quantum. It said these claims were typically worth £15 000 to £20 000, which for most claimants is a substantial sum of money. So, the court recognises these are serious events, but simply refuses to accept they are compensatable. I find that frankly absurd and illogical."
At which point, Mr Caton raised a point perhaps overlooked in the debate about reinstating compensation for plaques and the consultation by Westminster on this. "In preparation for today, I spoke to our uninsured client about this particular issue, and the company secretary was unaware of an awful lot of this. Given that they are potentially going to be funding a lot of claims, it struck me as wrong that they hadn't been more involved in the consultation process."
Mr West agreed, adding: "It seems very shortsighted because the Chancellor will be picking up these liabilities in 30 years' time if the insurance industry and/or these other uninsured entities cannot afford to meet the damages."
This turned the debate to tackle funding issues" both in terms of the threat of corporate and insurer insolvency in relation to asbestos claims, and renewed calls to set up an Employers' Liability Insurance Bureau as a fund of last resort.
"I know a handful of small family building companies facing extinction because of their asbestos liabilities," said Mr Burton. "This is because of the inability to find insurance records or because of insurer insolvency. It's difficult sitting across the table from the financial director of a family business that has been running for 40 years, who has little or no comprehension of the claims market, to explain the sums of money involved. Under Master Whitaker's fast-track procedure, the first time we meet they are told that if they can't produce information about their business practices 30 years ago, they are going to have to find £50 000 in two weeks' time."
Ms Kearney shared these concerns, having experienced the same situations: "It goes to the broader issue about whose opinions the government canvasses. I don't think it went wide enough; people are unaware."
This is a major problem for claimants too, said Mr Morgan. "The last thing we want is a defendant with no money. That stops a significant number of claims proceeding" anecdotally between 10% and 20% of mesothelioma cases." At which point Mr West pointed out that these issues may not have arisen if, when compulsory EL insurance was introduced in 1969, there had been a simultaneous requirement for insurance details to be kept on a central registry. "This would have been to everybody's benefit" both for claimants and the insurers paying more than their fair share of claims." Referring to the substantial databases built up by individual EL insurers and specialist claimant lawyers, he proposed: "So why not put our heads together and have a voluntary scheme for putting this information on a database we can all share?"
Explaining that he believes insurers have agreed to contribute post-1999 data to a central database - with the Association of British Insurers in discussions with government about the creation of one" Mr Howe responded: "That is an interesting point; whether we could augment the database with other details of cover held elsewhere, by a plaintiff's law firm, for example. We, as insurers, will contribute whatever data we have got, but we only have the policies we know about."
Fund of last resort
Debate then turned to creating a fund of last resort for mesothelioma victims that cannot currently secure compensation. Guests were asked whether the moral case for an ELIB" based on the model of the Motor Insurers' Bureau for compensating victims of uninsured and untraced motorists" is important enough to overcome the inherent practical difficulties. "I wonder to what extent this need would be mitigated by the creation of a central database?" said Mr Burton. "At the moment, I have no idea of numbers, so a feasibility study is crucial. After all, during the Ministry of Justice's consultation on plaques, the government came up with some pretty concrete figures in terms of the actual financial impact of different options."
Mr Goodwin agreed such a study would be very useful "to establish just how many aren't going to be catered for elsewhere".
So, provided checks and balances are incorporated and a feasibility study found only a small proportion of mesothelioma claims would qualify, would it then be fair to spread the levy throughout the EL market? Surely this might only add pence onto a policy?
"Well, would it be pence?" queried Mr Goodwin. "You have to remember the value of mesothelioma claims tends to be much greater than the average MIB claim." Mr Morgan offered a quick 'back of the envelope' calculation: "If the average cost is something in the region of £200 000, including costs, and there are 1000 claims made a year, the total bill would be £200m. If 10% of those currently go uncompensated, you are talking about something in the region of £20m a year."
He stressed that how funds are collected and paid for would depend, in part, on the numbers in the pot. "There is cost in administration and, if the outflow is low enough, an inequitable system of raising funds may be bearable, because it is the cheapest administratively. So, for instance, increasing insurance premium tax across the board could be a solution, which would be simple to do in terms of legislation, albeit inequitable for property insurance providers. Across the domestic insurance market, £20m a year then becomes a tiny fraction of a fraction. On the other hand, you could have something more like the Financial Services Compensation Scheme where there is a specific levy on certain sectors. Administration then starts adding to the total costs of the package. So I agree: the first step must be to properly estimate the size of the problem with reliable statistics."
Mr Howe added: "If you can solve the funding issue of an ELIB, the actual administration shouldn't be too much of a challenge. There are already plenty of examples of insurance claims departments that deal with these claims every day, and perhaps some way could be found to get them involved. You would then need a mechanism where they can access funds, but this proposal has been looked at a number of times and always seems to fail because no one can agree on the funding aspect."
To complete the debate, guests were asked to turn their attention to the imminent appeal in the EL trigger litigation. The first instance decision left the status quo: mesothelioma claims should continue to be paid out on exposure basis, whatever the specific wording, to prevent policy black holes" and victims going uncompensated.
As a party sitting in the 'Boltonite' camp, representing insolvent insurers, which are heavily dependent on reinsurers and the FSCS paying out, Mr Goodwin was asked whether he is neutral and simply requires certainty.
"We should be fair to the FSCS: it will only respond if there is a policy in force that is triggered. And so the decision about policy liability is a matter for the insurer, not the FSCS. And yes, as far as the insolvent insurers are concerned, the scheme administrator for BAI and provisional liquidator for the Independent simply don't know how they should handle these claims. So we are looking to the court to tell us. If we can get that clarity, we are happy to go either way."
So, if the first instance decision is upheld by the Court of Appeal, will that mark the end of the road for the EL trigger debate? "There are huge amounts of money involved," responded Mr Goodwin. "Certainly from the insolvent insurer's point of view, we are seeking clarity and if we can draw a line under the Court of Appeal's decision, then fine. But the insurers in solvent run-off are in a very difficult situation. In those circumstances, they may well feel that they want to take it as far as they can."
Mr West commented: "I could see the government intervening again if it doesn't like the decision." Mr Goodwin added: "The question is at what stage: it is hardly likely to do so after the Court of Appeal. So we would probably have to wait until after the Supreme Court decides."
Mr Burton explained why the decision is far from a foregone conclusion: "The difficulty is, despite the social policy dimension, the points raised by the Boltonites are technically arguable, otherwise they would not have survived this far." And he concluded the debate with a final thought: "I never imagined as a personal injury lawyer that I would have to wade through dusty acquisition agreements to work out the implications for corporate transfer of liabilities. So I would encourage any initiative that would minimise the pool of uninsured defendants."
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