Oral evidence: Mesothelioma Claims, HC 1253
Oral evidence, 13 May 2014.
Witnesses
James Dalton, Head of Motor and Liability Insurance, Association of British Insurers, Mike Klaiber, UK Disease Claims Manager, Zurich Insurance plc, Nick Pargeter, Partner, Berrymans Lace Mawer, LLP, and Derek Adamson, Partner, DWF LLP, gave evidence.
Chair
Good morning, gentlemen, and welcome. Thank you for coming to give evidence to us this morning. We have Mr Pargeter from Berrymans Lace Mawer; we have Mr Adamson from DWF; we have Mr Dalton, who is head of motor and liability at the Association of British Insurers; and we have Mr Klaiber, who is the UK disease claims manager for Zurich Insurance plc. It might be convenient, because it will be fresh in your mind, to ask if any of you, particularly Mr Dalton, want to comment on what has just been said about the understanding between the industry and the Government. You were in the room throughout that exchange, Mr Dalton, weren’t you?
James Dalton
Yes, I was. I shall certainly look at the briefing note again, but I do not have a copy with me. The ABI and the insurance industry worked closely with the Government over a long time, because we recognised the horrific nature of mesothelioma as a condition and, indeed, the fact that there are a number of untraced mesothelioma claims each year. Unfortunately, those people did not get any compensation, and we have worked closely with the Government to develop a framework, which has now been implemented through the Mesothelioma Act 2014, under which those people will now get the help and support that they need and deserve.
Chair
Were you seeking to reassure your members that the obligation they were going to face through the levy would, to some extent, be offset by the other changes that the Government were going to make?
James Dalton
It is important to recognise that the process of getting compensation to mesothelioma claimants is too slow, for the reasons you have just heard in terms of the horrific and very short life expectancy that these people have. The process is too slow and too expensive, and we would like to see the claims that need to be paid being paid much more quickly. That means making sure that things like the pre-action protocols and portals are put in place. If this is some sort of dirty deal that the insurance industry did with the Government, those things have not been implemented, and we want them to be implemented. The Government consulted on them, and they were not implemented.
Chair
Your written evidence on this supports the Government’s original wish to bring sections 44 and 46 into force, but do you recognise the vulnerability of the mesothelioma victims for whom the prospect of a success fee is intimidating? They are at a difficult time in terms of making a decision, and it is a pretty frightening thing to put in front of them, isn’t it?
James Dalton
Part of the conversation that did not just happen was asking claimant lawyers why they charge success fees at the level that they do.
Chair
A question that I put in the previous session.
James Dalton
At the end of the day, it is an arrangement between the mesothelioma claimant and their lawyer. The level of success fee is entirely a matter between those two parties. Do I think that they are too high? Absolutely I think that they are too high, but that is a conversation for the previous panel, who would need to justify why they are charging mesothelioma claimants such extortionate amounts of money.
Derek Adamson
The other point is that nobody could help but be moved by the descriptions of vulnerability, especially by Mr Jewell, the Victims Support person, but, for the most part, these victims are represented by very experienced firms of solicitors who are well used to dealing with these situations and are able to provide the support, along with the support groups. One does not detract at all from the vulnerability of the person who has just been diagnosed with mesothelioma, but there is support. The two solicitors on the previous panel are both from firms of solicitors that are very experienced in this work, and it is their job to try to help them.
Nick Pargeter
What makes me uncomfortable as a lawyer is that there seems to be an assumption on the claimants’ side that the interests of the lawyers and the victims are the same, and I do not think that is right here, because we are dealing with a balancing act between a success fee, which is a profit fee for the lawyer, and an increase in damages. These are two separate things.
Chair
Various of you have views about what the appropriate level of success fee should be. The ABI say that it does not need to be more than 11%. Can you explain the justification for that?
James Dalton
As I was explaining earlier, despite what you heard in the previous session, these claims are horrific, and they are in some cases complex. But because of the legal framework we have in place in terms of joint and several liability, and in terms of the Compensation Act, they are not incredibly complex claims to proceed with against a particular defendant, and the defendants are often known, so a success fee at that level is rewarding the solicitor for doing work that is not terribly complex. In our view, the solicitor’s success fee should be reduced for that reason.
Chair
What about the after-the-event insurance market? Has there been a general effect from the LASPO reforms, not just in mesothelioma cases but in occupational diseases generally, on the use and cost of after-the-event insurance?
Derek Adamson
The use of after-the-event insurance generally was thought not likely to be needed in the new age. We recognise that the ATE aspect is just one of a package of reforms, and I shall come back to that in a moment. Essentially, if ATE cover is needed, the contention on the other side is that it is needed for the risk of the cost disbursements of the claimant law firm and, secondly, the risk of a liability for costs—an adverse costs order—if the defendant should make an effective part 36 offer. Is the Committee familiar with the part 36 process? We would say that in practice with mesothelioma claims, setting to one side the question of cases that never reach the CRU, the reality is that the vast majority of cases that are pursued are successful. That is not to say that they are all successful, but the vast majority are. The number of cases that end up being a battle in court over quantum of damages, which is where a part 36 offer for a specific sum of money would be relevant, is vanishingly small. I have worked in this field for 35 years, and I can barely think of a trial where quantum in a mesothelioma case had not been agreed. That is because, in the main, the claimants are represented by experienced lawyers, as are the defendants, and they come to agreements. That is what happens. We say that, in general, the need for ATE cover is extremely limited. The cost of it will be limited. We have not had provided to us by the other side details of the premiums that are being asked for in the new age, so we cannot help with that, but the fact of the matter is that ATE cover, if needed, is needed for a very limited range of liability for costs, and the costs should not be anything like the costs prior to the introduction of LASPO.
Andy McDonald
Are claimants in a stronger or weaker position if they do not have after-the-event insurance, in terms of their negotiating power with the defendant? Are they in a stronger or a weaker position?
Nick Pargeter
It does not really make a lot of difference. The liability for disbursements will be roughly £2,500. In the grand scheme of things, that is a relatively minor factor. We are talking about after-the-event insurance to cover the victim’s disbursements if the claim fails. We know from the NIESR data that average disbursements come to about £5,000. That includes counsel’s fees—counsel tend to be on a conditional fee agreement, and no win, no fee as well—so we are talking about after-the-event insurance to cover the risk of a liability to pay £2,500 in the event, shall we say a 20% chance, of a claim being unsuccessful. I do not want to diminish it, but it is not a vast amount of money.
Andy McDonald
I have practised for 35 years, and I do not recognise what you are saying.
Nick Pargeter
This is a new funding arrangement. It is a completely different funding arrangement and neither of us will be familiar with it.
Andy McDonald
ATEs have been around and given strength to people’s position; they have given them the assurance that they can pursue their case.
Nick Pargeter
It is to cover the defendant’s costs, but that has completely gone now with qualified one-way costs—
Andy McDonald
It is to cover—
Chair
Let the witness answer the question.
Nick Pargeter
What is proposed under LASPO is a completely different arrangement for the funding of costs in civil litigation. One aspect of LASPO is that, generally speaking, a claimant will not have a liability to pay defence costs if the claim fails. That is largely why ATE insurance was taken out in the past.
Chair
My original question was about the incidence and use of it. Do you agree with the previous group of witnesses, most of whom felt that, on most matters, it is too soon for us to have much clear evidence?
Derek Adamson
There is some evidence that I read about in a survey done by some solicitors in Liverpool. It suggested that a fair number of ATE policies are still being taken out, but we have to put this in the context of cost and recoverability, and whether it is probable that recoverability is also more than covered, like the success fees, by the 10% increase in general damages. The point is that Lord Justice Jackson’s reforms established a whole new scheme, as Mr Pargeter has just said. It was a package of reforms. It is dangerous to look at each of them in isolation because they are a package. The package included qualified one-way costs shifting, what should happen to ATE cover, a 10% increase in general damages and, fourthly, the non-recoverability of success fees. Those four things have to be taken together and considered together. It is dangerous to focus on one single item to the detriment of the others.
John Cryer
Following on from those questions, I think you said, Mr Dalton, that success fees are too high. That implies that victims of mesothelioma should shop around for cheaper fees. Considering that from the point of the disease appearing to death is about eight months, possibly slightly longer, how realistic is it to expect people to shop around for a cheaper source of legal representation?
James Dalton
As Mr Adamson indicated earlier, there are a small number of very professional claimant law firms that progress this type of case for mesothelioma victims. I would like to see those firms working with the asbestos victims support forums to negotiate success fees, so that the mesothelioma claimants themselves do not have to do it. If the support groups can sit down and work with their claimant legal teams and have a discussion about what a reasonable success fee looks like, that could then be a framework for all mesothelioma claimants in future.
Mike Klaiber
Awareness of mesothelioma has increased considerably in recent years. It is probably a credit to the asbestos victims support groups, but there is a mechanism of referral from medical specialists and nursing agencies through the asbestos victims support groups to the panel of specialists—the claimant lawyers that we have been talking about. I endorse the point that, generally, claimants are well represented by these firms.
Nick Pargeter
I want to make a comment about the success fee that we have at the moment for mesothelioma claims, which is 27.5%. That success fee was set following a consultation undertaken by the Department for Constitutional Affairs and the Civil Justice Council in 2005. They instructed Professor Fenn, and I think a Mr Hickman, to look at the risk of asbestos claims. They looked at pre-claim failures, which Mr McFall was talking about earlier, and they assessed the risk at 27.5% for all asbestos claims, including mesothelioma. I would say that mesothelioma claims represent a smaller risk than other asbestos diseases. The point is that there is no reason why a similar exercise could not be done in future, looking at the risk of failure in mesothelioma claims and, for the purposes of the claimant lawyer and the retainer that a claimant lawyer has over the claimant, setting a success fee that reflects the average risk, across the board, for mesothelioma claims. That would avoid the need for a mesothelioma claimant to consider the level of success fee, which the victim does not have to do at the moment because it is fixed.
Mike Klaiber
It is worth adding that the success fee was predicated on the basis of compensation for the claimant lawyer in cases that failed. As part of that consultation process, as Mr Pargeter says, all asbestos-related claims were set at 27.5%.
Chair
I am sorry, I missed the last bit.
Mike Klaiber
All asbestos claims were set at a success fee of 27.5%, but it has to be borne in mind that other disease claims, such as stress and RSI, were set at 100%, and all other diseases, notably deafness and vibration claims, were set at 62.5%. It has to be taken as relative. I certainly agree that mesothelioma claims have a uniqueness about them; they are special, but special rules have developed in this area to ease the burden of proving liability, reinforcing the point that 27.5%, which was set nearly 10 years ago, is probably not appropriate at this time.
Derek Adamson
In this respect, and adding to that, in the Sienkiewicz and Willmore cases, where there was a low-level dosage of exposure, Lord Brown remarked that, from the defendant’s standpoint, liability was a lost cause—that is a Supreme Court judge saying that. That has to be taken into account in terms of the success fee argument.
John Cryer
If you take away the ability to claim the success fee, to claim back the ATE premium, which we have already talked about, will that not act as a deterrent? We are talking largely about elderly victims who perhaps have eight to 10 months to live. Don’t you think that removing those two elements will in any way be a deterrent?
Derek Adamson
There is no evidence that it has been.
John Cryer
That is because the system does not exist now as it will do.
Derek Adamson
That is true, yes. I take the point.
Nick Pargeter
It is more inconvenient, certainly.
John Cryer
Do you mean that the new system is more inconvenient?
Nick Pargeter
The new system would be more inconvenient, yes, because the success fee is not fixed. I accept that.
Mike Klaiber
While there are special features about mesothelioma claims, if it is deemed that the current LASPO provisions do not prevent access to justice in all other cases, there are equally severe situations with catastrophic injuries and imminent death that would also apply to those cases.
John Cryer
I have one more question. A comment made by Unison in their written evidence is: “Defendant/insurer delay is a standard tactic, to keep hold of funds and put pressure on the claimant to abandon their case or accept a low settlement offer.” Would you give us your reaction to that claim?
Derek Adamson
We believe that there is no merit in that argument at all. There is no financial incentive for insurance companies to delay settlement of any claim. By definition, it is almost axiomatic that the longer a case goes on the more expensive it becomes. As legal suppliers, Mr Pargeter and I, and others, face key performance indicators that are linked to the speed of settlement of cases. We are measured against each other, according to how quickly we can deal with claims in an efficient and competent way, so we do not see any commercial advantage in delaying settlements. If the case can be concluded quickly, the legal costs are less. Moreover, the reserves for those cases can be disposed of, and the financial position is clear.
Nick Pargeter
May I put this in a slightly different way? When you are acting on one side, it is difficult to know exactly what is happening on the other side of the fence. My friends on the claimant side who are doing claimant work have difficulty in getting medical records and the like, and that causes delay on the claimant’s side. There are data to say that there is too much delay on the claimant’s side, but what people on the claimant’s side do not see is that on the defendant’s side there is quite a tricky job getting the funding in place. It may be a question of, “Here’s a claim. Pay up straight away,” but it is not as simple as that. You may have several employers; each employer may have several insurers, and some insurers may give you instructions straight away and some may not. Some may be difficult, and you are sometimes reluctant to make a concession on liability unless all the contributing insurers have given instructions to you. You may ask why it is taking so long for an insurer, or a solicitor working for an insurer, to deal with this, that or the other. It is because, under the surface, we are sometimes paddling furiously, trying to get the funding in place to deal with it. Similarly, I confess that I sometimes do not understand the claimant’s side—“What are you waiting for? Why aren’t you pushing this case quicker?” I often see that, but I am not here to judge one way or the other. I believe strongly that there is a pre-litigation failure in pushing these cases forward. I am not casting blame on one side or the other. Too many cases go to litigation; there seems to be a failure in exchanging evidence and settling cases pre-litigation. We know that roughly 50% of cases go to litigation, and that 99% of them settle. Why are they not settling pre-litigation? I am not saying that is one side’s fault or the other side’s fault. I am saying that it is exceptionally important that someone looks closely at this failure for mesothelioma victims pre-litigation, because there is a failure at the moment, and there is nothing to address that.
Chair
Talking of delay, but a different one, do you understand why the Government have not brought into force the Third Parties (Rights against Insurers) Act 2010?
Mike Klaiber
I am not sure that we are aware why it has not been brought into force. We certainly support the comments of the previous panel that it would be a good thing. The ABI responded to consultation from the MOJ in 2009, and we were supportive. It is non-contentious, and it would remove the need for a claimant to restore a dissolved company to the register for the purpose of suing. I do not think it adds much, one way or the other, to the risk or otherwise of presenting a claim, but its implementation would certainly improve the speed with which those claims were progressed. The only caveat that the ABI has presented is to ensure that defendants preserve a right to pursue a claim against a co-defendant should the need arise, but we would certainly support fully the implementation of the new Act.
Mr Llwyd
You all argue, if anything, that these cases are less complex and less risky from the perspective of the claimant than other personal injury cases, including some caused by exposure to asbestos. As you know, that is certainly not the message that comes across from claimants and their representatives. Could you briefly explain the basis of your view?
Nick Pargeter
There are two simple points. Legally speaking, mesothelioma is caused by asbestos. It is as simple as that, so you do not have to consider other causes. Asbestosis is a fibrosis of the lung that can be caused by many things, and cancer can be caused by many things, but with mesothelioma there is no issue: it is caused by asbestos. That is the first point. The second thing with mesothelioma is that because of joint and several liability you do not have to pursue all culpable exposers; you just have to find one party who is responsible for any bit of the exposure and you get home 100%. Those are two clear reasons why, for a claimant lawyer, mesothelioma is much easier to pursue.
Mr Llwyd
Doesn’t that gloss over the fact that there is a small matter of culpability, liability and negligence?
Nick Pargeter
Negligence has to be proved.
Mr Llwyd
Exactly, and that is often a big job, isn’t it? Otherwise, the law of tort would not exist.
Nick Pargeter
We live in a system that provides compensation only where legal culpability has been established. I accept that entirely. In some cases—with mesothelioma, I submit that they are relatively rare—it is difficult for the claimant to prove that the employer has been negligent, because the exposure is so low. Given the knowledge of asbestos risks at the time, the court will not assume that that employer had sufficient knowledge to have avoided the risk. I accept that harsh judgments have to be made.
Mike Klaiber
With mesothelioma, a special show cause court has been developed by Master Whitaker, which effectively reverses the burden of proof in mesothelioma cases, something that does not apply to other sorts of case. A defendant has to show good reason why they should not be liable, something that does not apply to any other sort of case.
Derek Adamson
That occurs right at the outset of the litigation.
Mr Llwyd
One other thing that occurs to me, having listened to the previous panel, is the apparent increase in the number of claimants to low-level exposure. That cohort of cases is going to be more difficult, I guess, than what I might call the fairly obvious one Mr Pargeter referred to, if I can put it that way.
Nick Pargeter
Yes, I think that is fair.
Mr Llwyd
If you bring those into the mix, it is not straightforward and simple, is it?
Nick Pargeter
Some on the periphery are tricky cases, but I would say that they represent about 10%.
Mike Klaiber
In establishing causation, medical experts will readily accept, if there is evidence of asbestos exposure, that that will be the cause of the mesothelioma. At least the medical causation element is rarely in dispute.
Andy McDonald
Has the Government’s consultation asked a single question about whether sections 44 and 46 should be brought into force? That question was apparently predicated on the introduction of the other reforms to the mesothelioma claims process contained in the consultation document. Do you accept that critics of the decision feel that they have not been given an opportunity to put forward their overall views about the likely effects of bringing sections 44 and 46 into force for meso claims?
James Dalton
There are two points to make on that. The first is that this is currently before the courts; it is the subject of a judicial review proceeding. The second is that, as far as I am aware, every person who has given evidence to you today responded to question 15, which would indicate to me that people realised that this was a question that was being asked.
Andy McDonald
Would you not agree that it would have been better to review sections 44 and 46 separately, rather than it being part of a wider consultation exercise? Should it not have focused on that to the exclusion of all else?
James Dalton
That is not really a question that I can comment on. It was clearly a decision that the Ministry of Justice made—that it was an appropriate way to seek the views of all stakeholders about a whole range of reforms, including the review required by LASPO.
Andy McDonald
The Government and the Secretary of State, in reaching their decision, were particularly mindful of whether there was anything that distinguished mesothelioma claims from other claims. Would you not agree that the section 48 review should have asked consultees to give their views on that point, about the particularities of mesothelioma claims? It did not ask that.
James Dalton
For the reasons we have articulated already, particularly Mr Klaiber, the particularities and specificities of mesothelioma as a condition are well known, and the particular legal framework that exists for mesothelioma claims is obviously already well known by the Ministry of Justice.
Andy McDonald
Do you accept that some of the special attentions that are paid to mesothelioma claims, in terms of first-instance consideration, are simply a reflection of the urgency of these cases—that they are special and different? The very fact that somebody who has been given this diagnosis will be dead within the year, more often than not, does mark them out for separate and distinct treatment.
James Dalton
Absolutely. That is why there is a whole range of specific legal frameworks to deal with mesothelioma claims. The Compensation Act and the show cause hearings that we have just been talking about are frameworks established by the courts, and law passed by Parliament, and they give specific treatment for the very reasons that you have articulated.
Andy McDonald
Finally, on the complexity of the cases, we have heard a lot about the cause of mesothelioma; we know what it is, and that perhaps simplifies matters to some extent, but is it always so straightforward when we are dealing with loss of services claims and other special damages heads of claim? Are they always straightforward and simple to resolve, or are there particular complexities in mesothelioma cases that need to be considered?
Derek Adamson
I do not think that there are complexities in the quantum element that are any different from other cases. If you took a catastrophic injury case, and you had complex care evidence on both sides, the claimant in that case may have very difficult decisions to take—for example, if a part 36 offer is made. There was questioning about catastrophic injury cases before, but in that respect I believe that there is no distinction. The evaluation issues are there, and there is a fairly defined bracket for general damages, and there are the care elements and the loss of services, but those are consistent with most fatal accident cases.
Chair
In the previous session, and also in written evidence, we had some discussion about non-occupational cases—for example, school pupils. How will they be affected by bringing in sections 44 and 46, and are there any other factors relevant to that point that you want to mention?
Mike Klaiber
I gave evidence in the employers liability policy trigger trial in 2008. As part of my evidence, I obtained some data from the CRU on EL and public liability claims. If I am permitted to give some figures, in the year 2002-03 there were 863 EL claims compared with 14 PL claims. Over a range of six years, until the year ending in 2008, there were 1,806 EL claims compared with 58 PL claims, rising from 1.5% to 3%. I accept that 2007-08 is now six years ago, so the data is now a little out of date, but it gives the proportionality between EL and PL claims. I am certainly not aware, within my own company or in the market, that there has been a significant rise in the number of PL cases. They are still considered to be the small minority of claims.
Derek Adamson
There is another factor. The EL tracing of insurance issue has been dealt with by the new Mesothelioma Act, but with the public liability policies that would operate to respond to these claims you do not go back to the date of exposure for the policy that is triggered. The law is unclear, but essentially you go back 10 years. The policy history is not as difficult, because the policy that will apply will have been in existence 10 years before, because that was the date of injury.
John McDonnell
May I go back to the original question put to you, Mr Dalton, by the Chair, but which you failed to answer? It is the allegation that there is a link between the insurance industry’s agreement to fund the Mesothelioma Act’s costs and the LASPO exemption. Already, we have seen that a public statement has been put out that the insurance industry did see this as a package, so on the nature of the discussions between the Government and the insurance industry, are you aware that these issues were on the same agenda during those discussions? Are you aware of a discussion about some informal or formal agreement of payment for the Mesothelioma Act and the exemption from LASPO in return?
James Dalton
As I said in answer to the earlier question, what we said clearly to the Government as part of our discussions in relation to the establishment of an untraced scheme for mesothelioma payments was that on the costs and delay of getting compensation to people—whether traced or untraced—the delay is too big and the costs are too high, and that as part of a broad package of measures, including the introduction of an untraced scheme, the Government should look at that.
John McDonnell
You are going to have to stand for election. With responses like that, you should become a politician. May I be clear? It is a specific question. In those discussions, was there a link between the payment for the Mesothelioma Bill costs and the lifting of the exemption?
James Dalton
There was a discussion about the framework and the package that would be delivered as part—
John McDonnell
Those two elements were within that package?
James Dalton
There were lots of elements within it.
John McDonnell
Those two elements were within that package?
James Dalton
There was a discussion about the costs and delay of mesothelioma claims—
John McDonnell
Were those two elements within the package as discussed?
James Dalton
I do not know whether I can be any clearer.
John McDonnell
I think you can. You can say yes or no.
James Dalton
There was a whole range of discussions over a long period between the ABI and the Government—
John McDonnell
In which these two issues came up?
James Dalton
The legal framework for mesothelioma claimants in particular was discussed, yes.
John McDonnell
I think we’ll take that as a yes.
Chair
Thank you very much indeed for your evidence. We are very grateful to you. Oral evidence: Mesothelioma claims, HC 1253 19