This article was written before the Court of Appeal's judgment on 17 January 2008 in the Thompstone appeals.
In early 2007, The Washington Post carried the headline ‘Oh, to be Born in The Year of the Pig’. The article reported that the incoming Chinese New Year was regarded an auspicious year of birth, observing that ‘Chinese hospitals have been submerged in recent months under a tide of pregnant women; newborns are arriving in droves; and companies that manufacture diapers are upping their advertising budgets.’
Whether 2007 was a pig of a year for defendant liability insurers remains to be seen. This short article – in somewhat less colourful language than the Washington Post – offers a personal commentary on the main legislative and case law developments in the last 12 months or so.
The polluter pays
One of the themes of 2007 was further extension of the principle that the tortfeasor or the polluter pays. The first example was in January with the extension to EL & PL claims of the recovery of NHS treatment charges from compensators.
In March government announced that it would increase lump sum benefits paid in mesothelioma claims and recover the amounts from compensators. The Child Maintenance and Other Payment Bill will implement this in mid 2008.
In June, a consultation paper examined the potential recovery by government of costs incurred by local authorities in providing care to injured claimants, stating ‘… Government believes that the tortfeasor should pay for the costs of care wherever possible. But those costs should be based on providing appropriate treatment in a cost-effective way.’ The paper went on to quote the following key passage from the case of Crofton v NHSLA in the Court of Appeal in February 2007: ‘It does not seem right, particularly where the care costs are very large, that they should be met from the public purse rather than borne by the tortfeasor. We can see no good policy reason why damages which are about to be awarded specifically for the provision of care to the claimant, needed only as a result of the tort, should be reduced, thereby shifting the burden from the tortfeasor to the public purse.’
Asbestos developments
As noted above, mesothelioma claimants are to receive enhanced benefit payments from mid 2008. Coupled with this, on Action Mesothelioma Day (27 February) government announced a new targeted approach to clinical care mesothelioma cases. Later in the year, NICE also approved the chemotherapy drug Alimta for national use in mesothelioma treatment.
In the earlier part of the year, insurers and claimant interests finalised a draft pre-action protocol for mesothelioma claims, which has been submitted to government for widespread consultation. In the late summer, the draft protocol and a national standardised judicial approach to case management in mesothelioma cases were refined by the Civil Justice Council and a wide stakeholder group.
In Scotland, a Bill was passed in March to allow families to claim damages for grief and suffering after the death of a mesothelioma sufferer, even if the deceased settled their own claim while alive. The Bill was implemented with broad cross party support.
The House of Lords handed down judgment in the pleural plaques test cases in October 2007. The Law Lords unanimously rejected the appeals and held that no compensation would be awarded for plaques. Nor could the aggregation of three non-actionable elements – the plaques, the increased risk of future malignancy, and anxiety about this risk – ground a successful claim.
The decision has been condemned by asbestos action groups, trades unions, claimant solicitors and backbench Labour MPs. Government has been pressed to legislate to overturn the decision, following the precedent in 2006 of Barker v Corus and s3 of the Compensation Act. To date, Westminster Ministers have resisted these calls, stating that: ‘The House of Lords considered the issues very thoroughly on the basis of all the evidence put before them and reached a unanimous decision. Having considered the judgment very carefully, the Government have decided that it would not be appropriate to legislate on the issue.’
In Scotland however, the position is somewhat different. The Scottish Parliament debated the plaques decision in November and agreed to introduce legislation in Scotland only, to overturn the House of Lords decision. The draft Bill is expected to be retrospective and should emerge in early 2008. If - as is expected - this Bill is carried, it will create an unprecedented constitutional clash between the Westminster and Edinburgh administrations. It could also lead to more pressure on the former to legislate, as well as creating a real risk of ‘forum shopping’ in respect of these claims.
Reforming the claims process
Proposals to reform radically the process for resolving low to moderate value personal injury claims were outlined in a Ministry of Justice consultation paper in April. The proposals aim to drive out unnecessary delays and costs in fast track injury claims and seek to do so by reducing the periods for liability admissions by defendants, by introducing staged fixed costs throughout the process, and by limiting the extra costs currently associated with ‘no win, no fee’ claims. The proposed new admission periods are 15 days for motor claims and 30 days for others. This contrasts with the current 90 day period in the relevant pre-action protocols. Prompt claims notification by policyholders and swift and accurate liability decisions by insurers will be crucial to making this new regime work.
These radical proposals have been widely welcomed by insurers, with many regarding it as a once in a generation opportunity to deliver an efficient and publicly accessible injury claims process. Perhaps unsurprisingly, some claimant lawyer interests appear to have been hostile to the proposals.
The Ministry received some 300 responses to its consultation and has undertaken to provide feedback on these responses and to outline the way forward ‘early in the new year’. If it adheres to this timetable, then the likelihood is that the new approach could be implemented by April 2009.
Health and safety matters
The Corporate Manslaughter Act 2007 will be implemented for fatalities occurring after April 2008. Despite the name, the Act applies to virtually all organisations whether incorporated or not, and whether in the private, public or voluntary sectors.
The Act creates the new offence of corporate manslaughter (corporate homicide in Scotland) for which an organisation will be convicted if ‘… the way in which its activities are managed or organised (a) causes a person’s death, and (b) amounts to a gross breach of a relevant duty of care’.
The relevant duties are very widely defined and cover virtually all the normal duties owed by organisations, for example:
- to employees
- as the occupier of premises
- in supplying goods and/or services
- in construction or maintenance operations
- in the keeping or use of vehicles and plant, and
- in carrying on any other commercial activity.
Sentencing options for corporate manslaughter include an unlimited fine, a remedial order to rectify the breach, and a widespread publicity order requiring the organisation to notify its stakeholders of the conviction. The guideline unlimited fine is likely to be set at 5% of turnover – twice that for a fatality arising from a breach of the Health & Safety at Work Act 1974.
The key issue for insurers is whether and to what extent liability and D&O policies might respond to requests for legal defence cover in a corporate manslaughter charge.
In late spring, the UK Government successfully defended a prosecution by the European Commission, which had alleged that the 1974 Act (above) breached the relevant European framework directive by qualifying an employers’ safety obligations with the phrase ‘… so far as is reasonably practicable’.
Most member states have not adopted this type of qualification and adopt a strict liability regime. In defending the case, the UK Government referred to the preparatory negotiations leading to the directive and presented strong evidence demonstrating that the UK has the best health and safety record in the EU, despite being one of only two states without a strict liability regime. There would almost certainly have been a long term wholesale review of UK health and safety legislation had the outcome gone against the government.
Catastrophic injury claims
The Fourth UK Bodily Injury Study was published in October. It reported average annual claims inflation over the last five years of 15% in injury claims of between £500,000 and £2 million. The equivalent figure for claims over £5 million is 30% annually.
The sixth edition of the Ogden Tables was published in May. It incorporates further improvements in life expectancy in the UK, which modestly increase lifetime multipliers by around single figure percentages. The sixth edition also features a new approach to calculating post-accident earnings, which is based on levels of disability and educational attainment. If supported in the courts, this approach could see the demise of Smith v Manchester awards.
Of greater significance perhaps is the matter of the indexation of periodical payment awards in these cases. Claimants successfully ran a series of cases during 2007 in which earnings inflation was held to be the appropriate index. The lead case is Thompstone v Tameside & Glossop Acute Services NHS Trust.
The claimants’ argument essentially is that to uplift a periodical payment award for annual care based on retail prices inflation would undercompensate them, because their care costs are largely linked to and rise with earning levels as opposed to prices. Expert evidence in the cases generally put the differential between prices and earnings inflation at between 1.5% – 2% annually.
The indexation cases – all clinical negligence claims – were appealed and heard together by the Court of Appeal in November. Judgment is expected to be given in January 2008. The impact of the court upholding the earnings index would be dramatic: it could increase awards in relevant claims by several dozen percentage points. With so much at stake, it is all but inevitable that the indexation argument will be taken to the House of Lords, regardless of the outcome in the Court of Appeal.
Where next?
As has been seen, many of the key developments of 2007 remain firmly on the agenda during 2008. Further expansion of the polluter pays approach should be expected and the debate on asbestos compensation throughout the UK is entering an interesting political phase. Reforms to the injury claims process, if implemented, could provide a real opportunity to lower claims handling costs and deliver quicker and more efficient compensation to claimants. And the debate on periodical payments will almost certainly be taken to the House of Lords.
So, as the year of the Pig draws to a close, the Chinese proverb ‘May you live in interesting times’ seems particularly appropriate. Perhaps the Chinese calendar sounds a note of caution for 2008 – the Year of the Rat.
Alistair Kinley
Head of Policy Development, Berrymans Lace Mawer