London market - December 2009
Guest article
We are delighted to have a guest article in
this edition from Cameron McNaught who is a Partner at Brodies LLP
in Edinburgh.
For further information about the
pleural plaques compensation in Scotland, please contact Cameron at
Cameron.mcnaught@brodies.co.uk
or +44(0)131 228 3777.
Please note that there are no formal
ties between Weightmans and any other law firm and the views
expressed in this article are those of the authors.
Pleural Plaques Compensation - The Scottish
Challenge
Any insurers who are called on to deal
with occupational disease claims will be familiar with the House of
Lords decision in Rothwell and its effect on
asbestos litigation. The response to the decision in Scotland
raises the prospect that individuals with pleural plaques will
again be able to receive compensation for their
condition.
The Scottish
reaction
Rothwell finally brought
an end to the longstanding practice of insurers settling claims for
damages for the mere existence of pleural plaques. The court held
that pleural plaques did not constitute actionable damage and, as
a, result claimants in England & Wales lost their ability to
bring claims for the condition.
A surprising twist is that House of
Lords decisions in English cases, based on common law, are not
binding on Scottish courts. Such decisions are “highly persuasive”
but in theory it would have been possible for the courts north of
the border to refuse to follow the reasoning in
Rothwell. In reality, it was accepted that the
decision would almost certainly be followed and any doubts were
dispelled by comments in the Scottish case of Wright v
Stoddard International plc.
There was intense political pressure on
the Scottish Government to reverse the effect of the decision from
a variety of groups committed to securing compensation for those
exposed to asbestos at work. The Government supported a return to
compensation for plaques, but in the absence of support from other
political parties, the issue could have faded away. As it turned
out, there was wide cross party support for government
intervention.
Just over a month after
Rothwell the Scottish Government indicated that it
intended to introduce a bill in the Scottish Parliament to reverse
the decision. Moreover, the legislation would be retrospective. In
the words eventually used in the Act, the critical sections were to
be treated as “as having always had effect.”
Following a brief consultation period,
the bill itself was published in June 2008. The Act was eventually
passed in March 2009 and was brought into force on June 17 of this
year.
It provides that asbestos related
pleural plaques, and pleural thickening/asbestosis which have
caused no impairment of an individual’s physical condition are
personal injuries which constitute actionable harm for the purpose
of an action for personal injuries. Any rule of law which states
otherwise ceases to apply.
Some potential
difficulties
It is unusual in the personal injury
field for there to be divergence between English and Scots law. The
law has developed along very similar lines with Scottish decisions
being influential in England and vice versa. Increased statutory
liability, along with European legislation has meant that for many
years there have been few differences in substantive law. The 2009
Act threatens to give rise to practical difficulties for the first
time. In particular, there is a risk of “forum shopping”.
Brodies has already seen claimants raising an action against an
employer for exposure to asbestos in Scotland, but at the same time
involving other defendants based south of the border in respect of
whom the Scottish courts would ordinarily have no jurisdiction. It
is argued that that existence of the first claim is so closely
related to the other claims that the Scottish courts should deal
with them in a single action. It will certainly be interesting to
see how the Courts deal with this type of problem.
Also, the Act gives no guidance as to
how a court is meant to assess the level of damages for
non-symptomatic conditions. Cases of pleural plaques in Scotland
were previously settled by insurers at around £8-10,000. It seems
unlikely that a court would now be willing to make such a high
award, given the current level of medical knowledge about these
conditions, but who knows?
The challenge
The
speed with which the Act was introduced is in marked contrast to
the approach in England and N. Ireland. At the time of writing, the
result of the UK government’s deliberations following consultation
have not yet been revealed although judging from statements in the
House of Commons, there appears to be a reluctance to intervene. A
Private Members Bill was introduced in the Commons due to lack of
Parliamentary time. A fresh bill has been introduced in the
House of Lords but without government support it is unlikely to
make any impact. It was only in June of this year that a
former minister, Nigel Dodds, indicated his intention to recommend
to the N. Ireland Executive that they look at legislating to
reverse the effect of Rothwell.
The potential financial impact of the
Act and the spectre of compensation for other symptomless
conditions presented serious concerns for insurers. There was
particular anxiety about abandoning a longstanding principle that
the law does not compensate the “worried well.” As a result,
Brodies were instructed by AXA, Norwich Union, RSA and Zurich to
act on their behalf in mounting a challenge to the Scottish
legislation.
A Judicial Review of the Act was
launched in the Court of Session in Edinburgh with the hearing
ending before Christmas. The challenge is being defended by the
Scottish Government and, interestingly, a number of individuals
with plaques, who are potential claimants, have been allowed to
join the proceedings. Attempts to persuade the court to grant an
injunction to prevent the Act being brought into force were
unsuccessful but by a combination of judicial decision and
agreement, all new cases raised in the courts in Scotland have been
sisted (stayed) pending the outcome of the review.
Irrespective of the outcome, it seems
inevitable that the matter will go further. Any appeal would be
heard initially by the Inner House of the Court of Session with a
further right of appeal to the Privy Council.
The main grounds of challenge are
straightforward even if the supporting arguments are far from
simple:
- The Act is incompatible with the
insurers’ rights under Article 6 of and Article 1 of the First
Protocol to the European Convention for the Protection of Human
Rights. It denies insurers the right to a fair trial by, amongst
other things, imposing a retrospective financial burden that the
courts decided they should have to bear. It deprives them of their
funds without any reasonable basis for doing so and runs contrary
to established medical opinion that plaques are not
harmful.
- The Act is the result of an
unreasonable, irrational and arbitrary exercise of the legislative
authority conferred on the Scottish Parliament by the Scotland Act
1998.
And what’s it all going to
cost?
During the Act’s passage through Parliament one
of the most controversial issues was the cost implications of
future claims. The ABI estimates that the cost of Scottish claims
may be anywhere between £1.1 and £8.6 billion pounds. The Scottish
Government suggests a very much lower figure.
Whatever the actual figure, there is no
doubt that the legislation has a price and that the costs will have
to be met by someone. The majority of the burden will fall on
insurers with knock on effects for the industry, policyholders and
premiums.
Cameron McNaught,
Partner
Brodies LLP