Association of British Insurers
Committee for Finance and Personnel
Damages (Asbestos-Related Conditions) Bill
Written Evidence from the Association of British Insurers
The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 24% of the UK’s total net worth and contributing the fourth highest corporation tax of any sector. Employing over 275,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.
The ABI is fundamentally opposed to the introduction of the Damages (Asbestos-Related Conditions) (Northern Ireland) Bill 2010 (the Bill). The Bill would fundamentally alter the law of negligence, by overturning the House of Lords ruling in Johnston1and allow people with pleural plaques, an asymptomatic condition, to claim compensation. Our opposition to this Bill is based on the following reasons:
- Compensation is not the best way to help people with pleural plaques. Paying compensation for pleural plaques sends the wrong message to people that the condition is serious. Instead the Northern Ireland Executive should reassure people with pleural plaques that they are benign and do not impair quality of life.
- There is a significant risk that the Bill’s provisions would breach the European Convention on Human Rights (ECHR). This is especially the case as it is based on the Scottish Damages Act which is subject to judicial review. The Department for Finance and Personnel (DFP) has not considered these issues sufficiently, or fully evaluated alternative means of reaching its stated policy objectives.
- A robust financial impact assessment of the impact of this Bill has not been produced . The Department for Enterprise, Trade and Industry (DETI) provision of £31 million for state asbestos related claims up to 2015 is likely to be a substantial underestimate of actual liabilities. We consider that the cost for pleural plaques claims alone up to 2015 is likely to be approximately £39.5 million.
- Business confidence in Northern Ireland will be undermined. By fundamentally altering the law of negligence the Bill will also undermine general business confidence in Northern Ireland. Any expansion of the law in this way will create a future precedent for claims from people who may have been exposed to risk, but do not have any symptoms.
In addition to these substantive concerns, which we expand on below, the ABI has serious concerns about the time available to the Committee to properly scrutinise this contested Bill. The Committee, as it stands, will not be considering critical evidence, such as medical opinion on pleural plaques, and the Committee has, as far as we understand, not sought legal advice on the complex and substantive issues associated with the compatibility of the Bill with the ECHR. We strongly urge the Committee to give adequate consideration to these important issues before deciding whether to proceed with the Bill.
1. Compensation is not the best way to help people with pleural plaques
1.1 Pleural plaques are not a disease. Pleural plaques are small fibrous discs on the surface of the lungs which indicate exposure to asbestos. They are symptomless in all but a handful of exceptional cases (which are eligible for compensation), and neither lead to, nor increase susceptibility to, any other conditions. They are benign and do not impair quality of life.
1.2 Despite this clear prognosis, there continues to be much confusion and concern among those with pleural plaques and the wider public about what pleural plaques really means for a person’s health. Compensation under the common law system is for disease. Therefore, providing people with pleural plaques compensation, as this Bill will do, will make them think that the condition is more serious than it actually is. As Professor Anthony Seaton, Emeritus Professor at the University of Aberdeen, writes:
“It is understandable that individuals with plaques can be worried about their prognosis if they are given misinformation on their significance. The change in case law that led to individuals with pleural plaques receiving money for a non-disease caused problems in their management. While giving appropriate reassurance and explaining the risks of other asbestos-related diseases in relation to the risks of much more likely diseases, we were obliged to advise them to consult a lawyer – a mixed message with the obvious consequence of causing anxiety. The main beneficiaries have been lawyers and expert witnesses such as me. I believe we have better things to do, to prevent real diseases.
There is a risk that the desirability of raising awareness of the nature of pleural plaques and allaying unnecessary concerns could be undermined by the provision of compensation, as this could send mixed messages about the nature of the condition and increase concerns.” 2
1.3 Similarly, the Royal College of Physicians noted in their submission to the Justice Committee on the Scottish Government’s Damages (Asbestos-related Conditions) (Scotland) Billthat:
“The fatal consequences of asbestos exposure through mesothelioma and lung cancer do not apply to the development of pleural plaques, but there is little doubt that patients can be confused and anxious about “asbestosis” in general and categorise pleural plaques within this group. The College understands this but the medical evidence is clear and competent, and knowledgeable physicians should be in a position to allay these fears. Lawyers seeking to support patients in compensation claims must not be allowed to undermine the medical evidence.”3
1.4 Pleural plaques can only be detected on x-ray or computed tomography (CT) scan, so they are usually found incidentally during the course of routine medical investigations. As such, the majority of people with pleural plaques will likely never know that they have them. Paying compensation to those with pleural plaques is likely to lead to an increase in the number of people who will be tested for the condition, causing them unnecessary concern, requiring them to undergo invasive testing procedures and placing an extra burden on the National Health Service. If compensation were introduced, it could lead to a rise in ‘claims farmers’, who encourage people to undergo unnecessary testing to ascertain if they have the condition.
1.5 It is important to recognise that our opposition to insurers providing compensation for asymptomatic pleural plaques is not about insurers trying to avoid paying asbestos-related claims. On the contrary, insurers want to pay all valid claims for symptomatic asbestos-related conditions, such as mesothelioma, as fairly and quickly as possible. Indeed, insurers pay around £200 million a year in compensation to sufferers of these conditions across the UK.4
1.6 Instead of paying compensation to those with pleural plaques, in our view, the Northern Ireland Executiveshould be raising awareness of the benign nature of pleural plaques to help allay concerns of those diagnosed with the condition, and the wider public. At the moment, pleural plaques are not well understood; many people wrongly think that they will develop into lung cancer or mesothelioma. The DFP’s consultation paper on the Bill recognises that additional information should be provided to those with pleural plaques, a position that was generally supported in responses to the original consultation on pleural plaques . Local medical experts have called for information leaflets that set out the difference between pleural plaques and asbestos-related diseases, and that explain that pleural plaques to do not cause any injury to the person concerned.5
1.7 The Northern Ireland Executive could usefully produce leaflets similar to those that the Department of Health for England and Wales is in the process of developing. One leaflet is for medical professionals, including technical literature on the nature of pleural plaques, to be disseminated via professional publications and medical professional bodies. The second leaflet is for those found to have pleural plaques, and for the wider public, on the benign nature of pleural plaques, to be disseminated via GP surgeries, hospitals and so on. However, for the reasons outlined above, there would be little point in aiming to reassure people with pleural plaques that their condition is benign if this reassurance is going to be undermined by compensation payments. For this reason, the Department of Health for England and Wales is only making its leaflets available now that the Westminster Government has confirmed that pleural plaques will not be compensated.
2. Concerns over human rights breaches
2.1 There is a significant risk that the Bill’s provisions would breach employers’ and insurers’ rights under the European Convention on Human Rights (ECHR). Therefore there are real doubts as to whether the Northern Ireland Assembly can, in terms of its powers under the Northern Ireland Act 1998, enact the Bill. We raised these concerns in our consultation responses6 and directly with Ministers and officials but do not believe that these concerns have been sufficiently addressed. It is incumbent on the Executive to ensure that this Bill is ECHR compliant and we do not believe that the necessary steps have been taken to ensure this, nor that our stated concerns have been reflected in the Bill’s Regulatory Impact Assessment.
2.2 By making an asymptomatic condition ‘compensatable’, the Bill would make employers and their insurers liable for a condition for which they would not otherwise have any liability. This would interfere with employers’ and insurers’ rights to property under Article 1 of Protocol 1 of the ECHR, and this could only be justified on the grounds of compelling public interest and where it could be shown to be a proportionate response. In our submission, compensating those who have an asymptomatic condition is not a legitimate policy goal and, even if it were, the benefits, if any, of doing so are not sufficient to justify such a substantial interference with the property rights of employers and insurers.
2.3 In addition, the Bill would make employers and their insurers liable retrospectively for a condition for which they would not otherwise have been liable. This would be contrary to Article 1 of Protocol 1 of the ECHR as it would interfere with settled arrangements. This interference could only be justified on the grounds of compelling public interest which, in our submission, do not exist here. The questionable legality of imposing such retrospective liability is further compounded by the delay of two years between the Johnston decision and this Bill being introduced.
2.4 The Bill might also breach the rights of employers and insurers under Article 6 of the ECHR, which is concerned with fair process. By introducing legislation that overrules a judgment that has progressed through the legal system and has been finally decided in the highest UK court, the Northern Ireland Executive would arguably be removing employers’ and insurers’ rights to have a decision impacting their business decided finally by an independent and impartial tribunal.
2.5 The Northern Ireland Executive should consider alternative means of achieving its policy objectives. Last year, the Westminster Government announced they would not overturn Rothwell to make pleural plaques compensatable. Although the Scottish Parliament has enacted legislation making pleural plaques compensatable in Scotland, this is being challenged in the courts. Indeed, this Bill is almost entirely based on the Damages (Asbestos-Related Conditions) (Scotland) Act 2009 which is subject to judicial review in Scotland on the basis of the legal concerns outlined above. As the Northern Ireland Assembly report on this Bill notes, the Scottish Parliament is the only known example of a legislature that has legislated to make pleural plaques compensatable. 7
2.6 We urge the Committee to seek legal advice on the complex and substantive issues associated with the compatibility of the Bill with the ECHR. We also recommend that the Committee consider the situation regarding pleural plaques in other countries in more depth.
3. Cost impact on the Northern Ireland Executive
3.1 We have serious concerns that the DFP has not produced a sufficiently robust financial impact assessment of the impact of this Bill. It is very difficult to predict future pleural plaques claims. Of those who were exposed to asbestos, it is unknown how many people will develop pleural plaques, how many of these might make a claim, and how the cost of a claim might increase over time. In 2008, the Ministry of Justice for England and Wales estimated that, based on a combination of the medical estimates, between 1 and 2.5 million people will develop pleural plaques, and between 200,000 and 1.25 million people will be diagnosed with the condition.8 There are a number of medical studies which give an indication of the prevalence of pleural plaques:
- In his report of 10 November 2004, Dr Moore Gillon suggested that for every person who develops mesothelioma in any given period, there will be 20-50 people who develop plaques, i.e. 30,000 to 75,000 per year in the UK;9
- A study of autopsy results for males over 70 years old near Glasgow showed a 51.2% incidence of pleural plaques;10
- A study by SJ Chapman concludes pleural plaques “are found in as many as 50% of asbestos-exposed workers”;11
- Professor Tony Newman Taylor, previously chair of the Industrial Injuries Advisory Council, stated that about a third to half of those occupationally exposed to asbestos will have calcified pleural plaques thirty years after first exposure12.
3.2 History shows us that it is very difficult to accurately predict how many claims are likely to arise following changes to legislation: at the outset of the British Coal Chronic Obstructive Pulmonary Disease scheme, 150,000 claims were expected; by the time the scheme closed, 592,000 claims had been registered. This substantial underestimation was despite data with a greater degree of statistical certainty than exists for plaques.
3.3 However, we do know that the costs of the Bill are likely to be very high. Due to the uncertainties outlined above, the Ministry of Justice for England and Wales was only able to estimate a wide range of the potential costs for compensating those with pleural plaques in England and Wales: between £3.7 billion and £28.6 billion.13 Based on the Northern Ireland population of 1.75 million, Northern Ireland could expect to bear 2.9% of this cost, meaning costs of between £111 million and £858 million.
3.4 We also know that the majority of claims in the near future would sit with the Northern Ireland Executive given their Harland and Wolff liabilities. DETI recently made provision in its spending proposals for potential liabilities of £31 million up to 2015 in relation to asbestos-related liabilities, estimating about £3 million a year for pleural plaques claims. We believe this to be a substantial underestimate – we estimate that the cost up to 2015 is likely to be approximately £39.5 million for pleural plaques claims alone.
3.5 In the absence of further information from DETI, we have made some basic calculations based on our understanding of Harland and Wolff liabilities. An average of 200 pleural plaques claims were closed per year between 2006 and 2010. The cost of a pleural plaques claim in 2004 was £11,000, which on a moderately low claims inflation rate of 3% per year would bring the cost in 2011 to £13,800 per claim.14 If the claims trend continued on the same basis, this would amount to around £3 million per year in pleural plaques compensation. However, this does not take into account legal costs, which at £14,000 per claim15, would amount to an additional £3 million per year. So annual costs would be £3 million in compensation plus £3 million in legal costs. We also understand there are 557 plaques claims outstanding from pre-Johnston. So immediate costs would be £7.7 million in compensation plus £7.8 million in legal costs. In other words, the state could be facing an annual cost of £6 million, plus an immediate cost of £15.5 million, for pleural plaques claims alone i.e. only a part of the overall asbestos-related liabilities.
3.6 At a time when the block grant funding for Northern Ireland has been reduced by £128 million a year and government departments are being asked to save a further £398 million a year, taxpayers’ money should not be diverted unnecessarily from other important priorities. We therefore believe that DETI have substantially under budgeted the potential impact of this legislation.
4. Changing the law of negligence: impact on businesses
4.1 Northern Ireland Executive liabilities on pleural plaques are only part of the future possible picture and the full extent of that wider exposure is unknown.
4.2 Apart from the cost factor, the Bill would undermine general business confidence in Northern Ireland. Overturning Johnston represents a fundamental change to the law of negligence, undermining the stability of the legal environment in Northern Ireland. Parties should be able to rely on certainty of House of Lords’ decisions, to shape their business practices accordingly. Any expansion of the law in this way, however narrowly drafted, creates a future precedent for claims from people who may have been exposed to risk, but do not have any symptoms. This could open up a potential ‘floodgate’ of claims based on circumstances where no actionable damage has occurred and, even more widely, claims for risk of an illness occurring or for worry that something might happen. This potentially increases the level of litigation and likelihood of spurious claims, and also exposes the Northern Ireland Executive and defendants to potentially significant costs. The resulting legal instability would make Northern Ireland a less attractive place for investment.
4.3 The Bill would also alter the determination as to whether a particular disease or condition constitutes an injury which is compensatable, which has traditionally been a matter for the courts under common law. The Johnston decision was based on clear medical evidence that pleural plaques do not constitute negligible harm. The consensus of medical opinion has been made even clearer since the Rothwell judgement, with two reports published on behalf of the Chief Medical Officer for England and Wales, by Professor Robert Maynard, and by the Industrial Injuries Advisory Council. Professor Maynard ends his report:
‘I conclude that the occurrence of pleural plaques does not provide a satisfactory basis for providing compensation to some of those exposed to asbestos. I would thus advise against a change in the law to allow pleural plaques to be considered as grounds for compensation.'
4.4 The Bill as it stands therefore dismisses the advice of the Chief Medical Officer for England and Wales on pleural plaques and the consensus of medical opinion used in the Johnston decision and since. This includes important medical evidence that has been submitted to DFP consultations on pleural plaques in advance of this Bill. We are concerned that in proceeding with the Bill, due regard is not being given to this clear and uncontested medical evidence.
Association of British Insurers
13 January 2011
1 Johnston v NEI International Combustion Limited  UKHL 39 http://www.publications.parliament.uk/pa/ld200607/ldjudgmt/jd071017/johns-1.htm.
2 Professor Anthony Seaton, ‘Close scrutiny needed on asbestos-related disease’ in The Scotsman, 30 October 2007.
3 Royal College of Physicians written evidence to the Scottish Justice Committee http://www.scottish.parliament.uk/s3/committees/justice/inquiries/damages/D3.RoyalCollegeofPhysicians.pdf.
4 ABI estimates, 2010.
5 Department for Finance and Personnel, Analysis of responses to consultation paper on pleural plaques, May 2010, p13.
6 To DFP’s Consultation on the draft Damages (Asbestos-Related Conditions) (Northern Ireland) Bill 2010 and DFP’s consultation CP 02/08 on Pleural Plaques.
7 NI Assembly Research and Library Service, Pleural Plaques: numbers, costs and international approaches, NIAR 478-10, October 2010 http://archive.niassembly.gov.uk/finance/2007mandate/research/pleural_plaques.pdf
8 Ministry of Justice, Pleural Plaques, CP 14/08, July 2008 p44 http://www.justice.gov.uk/docs/cp1408.pdf
9 Dr John Moore-Gillon, 10 November 2004, cited in MoJ consultation paper.
10 Cugell, DW and DW Kamp, "Asbestos and the Pleura: A Review", Chest 2004:125, 1103-1117
11 Chapman, SJ et al, "Benign Asbestos Pleural Disease", Curr Opin Pulm Med 2003:9(4), 266-271
12 3 Dec 2007 House of Commons debate, Michael Clapham (Lab): reading an email from Professor Tony Newman Taylor: "You may be interested to know that about a third to one half of those occupationally exposed to asbestos will have calcified pleural plaques thirty years after first exposure. After twenty years, 5 to 15 percent will have uncalcified pleural plaques".
13 Ministry of Justice, Pleural Plaques, CP 14/08, July 2008 p33 http://www.justice.gov.uk/docs/cp1408.pdf