Briefing on Amendments 132AA and 132AB to the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Bill

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1 Briefing on Amendments 132AA and 132AB to the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Bill Kennedys advocates the repeal of Amendments 132AA and 132AB added to the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Bill at third Reading in the House of Lords. Key points The special status already afforded to mesothelioma victims and disease claims under existing legislation, working party guidelines and case law nullifies the need for an exemption within the LASPO Bill. Such legislation includes the Compensation Act 2006, The Workers Compensation Acts, The Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2011 and the Pre-Action Protocol for Disease and Illness Claims. Kennedys warns that exempting claims by mesothelioma sufferers and sufferers of other industrial disease from the abolition of recovery of success fees in conditional fee arrangements (CFAs) and the abolition of recovery of after the event (ATE) insurance premiums will weaken the intention of the LASPO Bill. It is vital to keep the Jackson reforms (in Part 2 of the LASPO Bill) intact to avoid a watering down of the proposals and the production of a range of anomalies, which risks satellite litigation (and further cost generation) and unfairness for those claimants in an otherwise similar position to disease claimants where such an exception does not apply. The Jackson proposals aim to tackle excessive costs in our Civil Litigation system. These excessive costs have, in our view, been largely caused by the recoverability of CFA success fees and ATE insurance premiums. Such costs are not restricted to road traffic accident (RTA) claims alone they extend to all types of personal injury claims. Kennedys calls on Members of Parliament to revoke the amendments 132AA and 132AB in the House of Commons and to thereby ensure a fair system for all personal injury claimants.

2 Background Lord Alton tabled amendment 132AA to the LASPO Bill which, through the insertion of a new Clause before Clause 43, sought to exempt cases relating to respiratory (industrial disease or illness) cases from the abolition of CFA success fees and the recoverability of ATE insurance premiums. Lord Bach tabled amendment 132AB to the LASPO Bill which, similarly through the insertion of a new Clause before Clause 43, sought to make an exemption for any claim for damages for a disease, condition or illness (whether or not resulting in death) resulting from any breach of duty owed by an employer to an employee. Both amendments were passed during third Reading in the House of Lords. Kennedys urges a review of these amendments and advocates their repeal in the House of Commons on 17 April 2012 to ensure that an unequal system is not created and claimants are treated fairly. Why the amendment is not needed In short, disease claims have already been afforded special treatment in practice, due to a combination of legislation, working party guidelines and common law. The main reason for this is to avoid the practical difficulty for employees of identifying when a disease begins and which employer to sue. 1) Disease claims There are two types of disease claims long tail disease claims (for example asbestos related diseases) and short tail disease claims (for example dermatitis). The categorisation of both types of disease is based on exposure and manifestation of symptoms. Long-tail disease claims are typically the more complex type of claim and encounter issues of causation (involving a need for medical evidence), identification of interested insurers and the capture of liability evidence. These types of claims will also frequently encompass multiple employers and multiple insurers within single employers, as well as dealing with foreign parent companies on behalf of their UK subsidiaries with disease legacies. Protocol and practice have built up around disease claim management to ensure that even where there are time consuming issues involved, the process of a disease claim is straight forward and compensates the claimant. Case management (particularly in long-tail disease claims), therefore, requires the

3 opportunity for liaison between co-defendants/insurers/co-insurers, particularly in non-divisible disease claims such as mesothelioma. In asbestos claims, especially mesothelioma cases, liability and therefore settlement is unlikely to be an issue between the parties once it has been established that a claimant has been exposed to asbestos fibres by a defendant and, therefore, represents a low cost risk. As for other disease claims e.g. noise induced hearing loss, vibration white finger etc, the issues upon liability are not substantially different to a standard employer s liability (EL) claim and consequently do not represent any greater cost risk to a claimant. 2) Scope of the pre-action protocol The Pre-Action Protocol for Disease and Illness Claims (PAP) recognises the nature of disease claims (as outlined above) and covers disease claims which are likely to be complex and frequently not suitable for fast-track procedures, even though they may fall within fast track limits. This protocol is not limited to diseases occurring in the workplace but will embrace diseases occurring in other situations, for example, through occupation of premises or the use of products. The PAP encourages an open and flexible approach between the parties, which includes with regard to disclosing documents and obtaining expert evidence. In a terminal disease claim with short life expectancy, such as mesothelioma, additional provisions apply which place an onus on the defendant to treat the claim with urgency including any request for an interim payment (Annex C). This includes the provision of an early notification letter to prompt investigation, which does not stipulate the same level of detail as required in a letter of claim. The defendant is required to respond within 14 days of the date of the early notification letter confirming that the matter is receiving urgent attention. This onus on the defendant to facilitate investigation is reflected throughout the PAP and in practice. 3) Scope of legislation There is an abundance of legislation which protects mesothelioma victims and ensures that compensation is available, even where the date of first exposure or diagnosis is unknown. This includes the following: The Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2011

4 The Compensation Act 2006 The Workers Compensation Acts 4) Scope of handling guidelines The industrial disease claims working party has produced guidelines intended to establish a claims handling and resolution convention between EL insurers managing long-tail and short-tail disease claims. The focus of the guidelines is to determine how the level of risk for the period of culpable exposure should be managed. All asbestos exposure is considered to be culpable for the purposes of apportionment. Such guidelines, therefore, further ensure that a disease claimant is protected from arguments about apportionment which can delay proceedings and therefore payment of compensation particularly in cases of mesothelioma where the mean latency period is between 30 and 40 years after first exposure. 5) Costs in disease claims: a low risk We do not agree with the suggestion that the main source of CFA exploitation is RTA claims. Disease claims also fuel disproportionate profits for claimant lawyers. Notwithstanding the position with regard to liability in disease claims (as explained above), there are a number of other existing provisions which ensure that the cost risk to a disease claimant is low. This includes, for example, the provision of occupational and health records by the potential defendant to the potential claimant at no cost (PAP para 4.3). For mesothelioma and other asbestos related diseases, Senior Master Whitaker (at the Royal Courts of Justice) deals with such cases using a specially designed fasttrack court procedure. This includes a presumption and requirement that the defendant will make an interim payment of 50,000 at the allocation stage of the proceedings if it cannot show cause (effectively summary judgment) that it has a defence to the claim. Despite this fast track system for asbestos claims the uplift is 27.5% for a normal CFA and 30% for a trade union funded claim but increasing to 100% if the matter proceeds to trial. However for stress, psychological and upper limb disease claims the uplift is 100% throughout and for other disease claims it is 62.5% for a normal

5 CFA and 70% if union backed and 100% at trial. This compares to 12.5% for a RTC and 25% (27.5% if union backed) for an EL claim if settled prior to trial. Amendments 132AA and particularly 132AB would therefore appear contrary to the principal objective of the LASPO to reduce litigation costs. 6) Scope of common law Further protection for mesothelioma victims is afforded by case law, and notably by the recent decision of the Supreme Court judgment in the EL policy triggers test litigation - Durham v BAI and others (28 March 2012). The overall effect of the judgment is to restore calm to the market and reinstate the relatively straightforward claims handling protocols that have served insurers and claimants well for many years. The judgment overturns the Court of Appeal s majority decision regarding the meaning of a sustained policy wording in EL cases and reinstates the longstanding market practice that policy cover for mesothelioma claims is triggered by the date of exposure to asbestos and not by the deemed date of injury many years later. The practical implications for the functioning of the long-tail EL market include: Asbestos victims will be compensated, and the affected policyholders will no longer be forced to self-fund costly mesothelioma liabilities from other budgets. The judgment aligns the meaning and effect of caused, sustained and contracted and avoids different treatment of similar EL policies. The exposure date is a relatively straightforward benchmark for establishing which EL insurer was on risk. The judgment closes the previous loophole for ex-employees who did not sustain injury during the course of their employment. The blockage of stayed claims can now at last be cleared. The exposure trigger applies equally to other asbestos and occupational diseases where there is a latency period between exposure and injury, and therefore averts significant market disruption from prospective challenges along similar lines in relation to other diseases.

6 Kennedys partners Mark Burton and Kieron West represented two of the successful local authorities in the test litigation. 7) Victim categorisation Kennedys advocates the repeal of amendments 132AA and 132AB to the LASPO Bill. Notwithstanding the above observations, Kennedys believes that their inclusion in the Bill will be the first of more exemptions to the progress being made with the proposals made by Lord Justice Jackson to control litigation costs, which includes ensuring the equal treatment of claimants. Kennedys supports the government position that a situation should not be established whereby different classes of claimants would be created. If such an unequal system be created, Kennedys is concerned that an element of unfairness would be created for individuals where exemptions do not apply. Kennedys is concerned that this is the situation that would occur should amendments 132AA and 132AB remain within the LASPO Bill and as such advocates their repeal. About Kennedys Kennedys is a top 50 specialist national and international legal firm with unrivalled expertise in litigation and dispute resolution. Kennedys lawyers are experts in the area of occupational disease. Our Occupational Disease Unit comprises a team with extensive experience in handling all types of occupational disease and illness claims. We act on behalf of insurers, brokers, corporate and other uninsured defendants, local authorities, healthcare trusts and government departments. We are also frequently instructed by foreign parent companies on behalf of their UK subsidiaries with disease legacies, including UK subsidiaries of US Corporations in asbestos litigation. We deal with claims arising from traditional diseases as well as ground breaking and unusual illnesses such as Q-fever. Our lawyers also provide a range of specialist legal services across many other areas such as: insurance/reinsurance, general liability, including motor, personal injury, employers and public liability and product liability, as well as property and construction, professional indemnity, healthcare, life and health, employment and health, safety and environment.

7 We handle a wide range of insurance disputes and litigation with a client base that includes general insurers, global composites, Lloyd's syndicates, underwriters, self-insured PLCs and self-insuring government bodies. For further information please contact:

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