Example study – Insurance Tracing
EMPLOYERS’ LIABILITY INSURANCE
Asbestos claims and Insurance Archaeology & Insurance Tracing
How many of you reading this article could locate your household insurance policy from five years ago, let alone 30 years ago? This is the problem many companies in the UK find themselves in when it comes to historic Employers’ Liability (EL) claims. Many UK companies have inadequate insurance histories to respond to these claims. Often companies have merged, disposed of business, or exited a non-core business and do not have the records or corporate knowledge to defend themselves when faced with a legacy EL claim, on a subsidiary dating back to the mid 1960s. So what is driving the majority of these legacy claims?
Asbestos – UK businesses are being impacted by legacy asbestos claims with the deadliest form being Mesothelioma, a terminal condition whose symptoms manifest themselves decades after exposure and result in the victim’s life expectancy being cut to between twelve to eighteen months. Mesothelioma is caused by one fibre that may have been ingested many decades previously and which has been floating in the lungs harmlessly since that time. It causes no harm unless it attaches itself to the lung and starts to metastasise into a cancer. It has been accepted that the incubation period from that first creation of cancerous cells to diagnosis is around ten years, but in the recent Durham v BAI & Others, Mr Justice Burton noted that this period could be as little as five years.
The UK has more Mesothelioma claims as a percentage of the population than the United States and that the use of “blue” asbestos was more widespread than the UK.
The Compensation Act 2006 allows for joint and several liability in respect of Mesothelioma claims. The claimant can seek 100% compensation from a single defendant, although the Act specifically allows for the findings of contributory negligence and also allows for the one defendant (a responsible person) to recover from other “responsible persons” on an exposure basis or other mutually agreed basis of apportionment.
Currently there has been some litigation about EL trigger wordings for pre-1972 policies (period prior to compulsory cover). In November 2008 at the High Court Mr Justice Burton found for the status quo in Durham v BAI & Others though this is only a court of first instance judgement.
These recent court cases on Mesothelioma have brought asbestos problems to the attention of the public and the insurance industries. Mesothelioma and the costs of managing an organisation’s exposure to this deadly disease have emerged as a social and business challenge in the developed world.
Asbestos – the facts
The UK Health and Safety Executive (HSE) estimates that 5000 people die every year from asbestos-related diseases. UK HSE projections suggest there will continue to be around 2,500 mesothelioma deaths per year for the rest of this current decade, before annual numbers begin to decline.
Further information from the HSE shows:
There were 2,515 mesothelioma deaths in Great Britain in 2014, a similar number to the 2,556 deaths in 2013, and 2,549 deaths in 2012.
The continuing increase in annual mesothelioma deaths in recent years has been driven mainly by deaths among those aged 75 and above.
There were 2,130 new cases of mesothelioma assessed for Industrial Injuries Disablement Benefit (IIDB) in 2015 compared with 2,215 in 2014.
Men who worked in the building industry when asbestos was used extensively are now among those most at risk of mesothelioma.
Marsh is seeing asbestos-related fatality claim settlements averaging around £200,000 to £250,000 inclusive of legal costs, although with considerable individual claim variance
It has been noted by many commentators that Mesothelioma claims are now more random and spread out and as a result are impacting on a wide cross-section of organisations, which can range from the expected pipe fitters to clerical staff and even TV cameramen.
The impact of legacy EL claims – The high level of mergers and acquisitions activity in the last half of the twentieth century has in many cases been followed by a contraction back to “core” business. The long term nature of Mesothelioma means employers should not assess their exposure based on current operations, but instead should appraise in detail the operations of every company they have ever owned.
This involves looking at the activities of these companies, the number of locations and historic employees involved, whether or not asbestos was directly used in these activities, and the workforce profile in terms of age, turnover of staff and occupations.
The clear implication for employers is that claimant solicitors prefer to act against solvent companies who are capable of meeting the full cost of the claim and their expenses. If the target company can not locate its historic insurance, for example because the target is a business they purchased back in the 1970s, they may have to fund the cost on their own.
Members of the judiciary have made it quite clear that they will not accept the excuse that the defendant is still trying to track down the relevant broker and insurer, especially in respect of Mesothelioma. Their view is that it is the duty of the defendant to investigate liability within the pre-action protocol period. The report’s findings again emphasise the need for organisations to have reviewed their historic portfolio businesses and, where deemed appropriate, undertaken the necessary research in respect of historic employers’ liability carriers.
To quote Judge Master Whitaker – Senior Master of the Supreme Court in the Queen’s Bench Division: “I would urge any companies that may be exposed to asbestos-related risk to do their “due diligence” well in advance – and bear in mind that risk may result from simply having owned, or even occupied, a building containing asbestos at some point in the company’s history.”