1 Reforming mesothelioma claims Kennedys response to a consultation on proposals to speed up the settlement of mesothelioma claims in England and Wales 2 October
2 Table of contents TABLE OF CONTENTS...1 LEGAL ADVICE IN BLACK AND WHITE...1 PREAMBLE...2 KENNEDYS OCCUPATIONAL DISEASE UNIT...4 EXECUTIVE SUMMARY...6 RESOLVING MESOTHELIOMA CLAIMS QUICKLY...8 QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION QUESTION
3 Legal advice in black and white The firm is one of the largest and strongest dispute resolution practices in the country' and 'has a deep understanding of the pressures of the client's bottom-line and has developed a reputation for providing straightforward, pragmatic advice cost effectively. Chambers and Partners Kennedys is a top 30 specialist national and international legal firm with unrivalled expertise in litigation and dispute resolution. We have over 1,200 people globally across nine UK and ten international locations. This includes 177 partners, of whom 37 (plus their teams) specialise in personal injury cases. Our fee income in was approximately 117million. Our lawyers provide a range of specialist legal services across many areas such as: insurance/reinsurance, general liability, including motor, personal injury, employers and public liability and product liability, as well as property, construction and engineering, professional indemnity, healthcare, life and health, occupational disease, employment and health and safety, environment, marine and aviation. We handle a wide range of insurance disputes and litigation with a client base that includes general insurers, global composites, Lloyd's syndicates, underwriters, selfinsured PLCs and self-insuring government bodies. The firm has expanded considerably over the last eight years, largely as a result of organic growth but also by selected lateral hires made to strengthen key areas of expertise. Today, Kennedys is well equipped with a regional network that can provide our specialist services throughout the UK. Kennedys' global and national network enables us to meet the current and future needs of our clients, the insurance market and the aspirations of our people.
4 Preamble Kennedys supports the aim of the Consultation to ensure speedy distribution of payments to those suffering from Mesothelioma. However, it is important to ensure that speed is not achieved to the detriment of a sound and fair claims process. It is also vital that the objective provides a fair balance towards claimants and defendants and that access to justice considerations are appreciated for all parties. The Government refers to there being an urgent case for reform. This suggests the current claim resolution procedure is inadequate, or at worst, gives rise to injustice. We consider it important to provide context at the outset and recognise the special status already afforded to mesothelioma victims (and disease claims generally). Due to a combination of legislation, working party guidelines and common law, disease claims have already been afforded special treatment in practice. The main reason for this is to avoid the practical difficulty for employees of identifying when a disease begins and which employer to sue. 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. Together, these provisions protect mesothelioma victims and ensure that compensation is available, even where the date of first exposure or diagnosis is unknown. We will assert, in particular, that such status afforded by these provisions nullifies the need for an exemption within the LASPO Act 2012 (as specifically proposed within the Consultation). Kennedys recognises that the proposals contained within the Consultation are running in tandem with the steps contained within the DWP Mesothelioma Bill. Kennedys welcomes the efforts made to reach a balanced agreement with the insurance industry to contribute to a levy that will ensure that justice is delivered for sufferers of Mesothelioma and their families who are unable to trace employer liability policies. However, as above, whilst we acknowledge the need to achieve an effective and efficient payment scheme to underpin Mesothelioma compensation claims, it is vital that the correct legislative framework is developed and introduced to avoid later unintended delays in the claims process.
5 Kennedys has briefed the House of Lords with regard to the passage of the Bill. We intend to brief the House of Commons as well when it passes to that House. We also briefed the House of Lords with regard to 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 in April 2012.
6 Kennedys Occupational Disease Unit Kennedys Occupational Disease Unit comprises a leading national team with extensive experience in handling all types of occupational disease and illness claims. Kennedys network of offices and the collaboration of knowledge and resources enable us to provide clients with both national and international coverage. In terms of the size and experience of the team we are one of the market leaders in this field. We act on behalf of insurers, large self insured Corporate clients, Claims Handling Organisations, Local Authorities, Healthcare Trusts and Government Departments. Areas of work Our specialist Unit is recognised for its skill and expertise in defending a wide range of occupational disease claims such as: Asbestos related conditions such as Mesothelioma, Asbestosis and Pleural Thickening Other Respiratory diseases to include Asthma, Silicosis, COPD, and Carbon Monoxide Poisoning Hand Arm Vibration Syndrome Industrial deafness Work Related Upper Limb Disorders Dermatitis Work related Cancers Legionnaire s disease Stress
7 Examples of our work Our team have been involved in some of the leading Disease cases over recent years. This includes: Winning in the Court of Appeal upon a limitation defence in a noise induced hearing loss claim, which is the current leading authority upon such an issue. Johnson v MOD . A successful ruling in the Supreme Court on the correct trigger of exposure to asbestos for employers liability policies in the EL Policy Trigger Litigation. A further victory in the Supreme Court in respect of an employer s date of knowledge where an employee was exposed to noise levels above 85dBA before 1 January 1990 in Baker v Quantum Clothing Group and others . Providing policy advice to a coal mining company, UK Coal, on the administration of the largest personal injury scheme in the world, with over 600,000 claimants. Griffiths and others v DTI (The British Coal Respiratory Disease Litigation). Court of Appeal negligence claim where the risk of harm to local children from asbestos dust, which was allowed to escape from the factory decades earlier, was foreseeable since dust levels outside the factory door effectively replicated the poor conditions inside the factory. Margereson and Hancock v J.W. Roberts Limited.
8 Executive summary We welcome in principle any proposal which aims to make a claims procedure effective in delivering compensation to the injured individual and at the same time, seeks to ensure that the litigation costs incurred in doing so are reasonable and proportionate. Mesothelioma is a tragic disease and given the nature of the disease, it is right that compensation should be paid to the victim as soon as possible after diagnosis. It is important to remember, however, that the empathy rightly deserved by such individuals does not necessarily translate to a complex category of personal injury claims. Overall, we will assert that: Managing mesothelioma claims can be a straightforward process. Living claimants claims should be expedited but claims from the Estate should be treated no differently from any other fatal accidents claim and should be required to comply with the Pre-Action Protocol. A Fixed Recoverable Costs regime shall encourage insurers and claimants to settle pre-issue.
9 FURTHER INFORMATION Any enquiries about the response or requests for further information should be addressed, in the first instance, to: Philippa Craven Partner for Kennedys LLP Kennedys 35 Newhall Street Birmingham B3 3PU Telephone: +44 (0)
10 Resolving mesothelioma claims quickly QUESTION 1 What in your view are the benefits and disadvantages of the current DPAP for resolving mesothelioma claims quickly and fairly? The stated aims of the current Pre-Action Protocol for Disease and Illness Claims (DPAP) are as follows: more contact between the parties better and earlier exchange of information better investigation by both sides to put the parties in a position where they may be able to settle cases fairly and early without litigation to enable proceedings to run to the court's timetable and efficiently, if litigation does become necessary These aims are of course valuable in promoting best practice in the settlement of disease claims. However, in practice with regard to mesothelioma claims - where the claimant has a short life expectancy - the time scales contained within the DPAP typically do not allow living claimants to fall within it. The standard time scales in the DPAP include (i) acknowledgment of letter of claim within 21 days (ii) notification of the identity of all relevant insurers within 30 days of the date of acknowledgement (where possible) and (iii) provision of response within 90 days of the date of acknowledgement. Indeed, the DPAP itself recognises that its time scale is likely to be too long for mesothelioma claims - para 2.7 and Annex C para 11 DPAP. Annex C provides for additional provisions which place an onus on the defendant to treat a mesothelioma claim with urgency, including any request for an interim payment. 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. Notwithstanding the provisions of Annex C, the DPAP is only really beneficial in mesothelioma claims if the defendant is in a position to make an early admission of
11 liability and make a voluntary interim payment of 50,000, which is otherwise available by a specially designed fast-track court procedure. 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. In practice, whilst being alive to the desire to avoid litigation, the savings to the defendant by using the DPAP are relatively small (including, for example, the court issue fee). For the claimant, the incentive is to turn to the security of a specially designed court procedure and a substantial interim payment to assist him in the final stages of his life. At best, therefore, we submit that parties refer to the DPAP as a guide of best practice only. QUESTION 2 How far do you think that a new dedicated MPAP would address the problems and meet the objectives set out above? Please see our answer to Question 1 above. A dedicated MPAP is unlikely to make a substantial difference to the practice of managing mesothelioma claims. QUESTION 3 What are your detailed views on the ABI s proposed MPAP at Annex B? What further issues might it address? Do you think the criteria for entering the MPAP are the appropriate ones? If not, what criteria would you suggest and why? In what circumstances, if any, should a case fall out of the MPAP? The main issue which a dedicated PAP (or otherwise) should address is where the claimant is already deceased and the claim is brought by his Estate. In such situations, the onus should be on following the PAP as there is no longer the need for an expedited court process and the associated trial costs. We estimate that in the majority of claims, whether living or deceased, the existing DPAP is not followed and claims are litigated, be it in the Senior Master Whitaker s fast track list or one of the regional courts where the same procedure is followed.
12 An Estate claim should be no different from the normal litigation process and any other fatal accidents claim. Arguably mesothelioma should not be distinguished from other such claims. Allowing Estate claims to proceed on the same basis as with a living claimant raises access to justice considerations on behalf of defendants. It also runs counter-intuitive to the Jackson proposals which specifically aim to tackle excessive costs in our civil litigation system. Based on our experience, one of the main reasons why the Estate proceeds to litigation is so that the Estate of a mesothelioma victim will receive the 50,000 interim payment which the fast-track procedure provides for and which was originally intended to be a payment to the living Claimant. We would advocate an obligation on claimant solicitors who are acting on behalf of the Estate to manage the claim in accordance with the relevant protocol. A failure to do so should trigger a court imposed sanction including with regard to costs sanctions against the Estate, unless it can show good reason for commencing proceedings. Therefore, were the MPAP to be introduced, we suggest that sanctions are imposed for claimants bringing claims on behalf of Estates who litigate without adhering to the Protocol, whilst still allowing claimants to issue proceedings where they wish to try and resolve their claims within their life times. Encouraging this distinction would allow considerable court time to be freed up and there would be a corresponding costs savings in respect of claimant litigation costs, court fees and defence costs. QUESTION 4 To what extent do you think the proposed MPAP will result in reduced legal costs in mesothelioma claims? The proposed MPAP would only result in reduced legal costs if underpinned by a meaningful fixed costs regime. Please see our answers to questions 8 and 9 below.
13 Secure Mesothelioma Claims Gateway QUESTION 5 To what extent do you think a SMCG will help achieve the Government s objective of ensuring that claims are settled quickly and fairly? As outlined above, there is already in place an effective and efficient claims management procedure for dealing with mesothelioma cases. 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 such as mesothelioma), therefore, requires the opportunity for liaison between co-defendants/insurers/co-insurers, particularly in nondivisible disease claims such as mesothelioma. The onus on the defendant is to facilitate investigation and is reflected throughout the DPAP and in practice. We acknowledge the good intention of a secure method to register information. However, in practice, this already occurs. At best, we would suggest that a gateway as proposed is unlikely to reduce the time scale of exchanging information by any significant amount of time. QUESTION 6 How should the SMCG work (if at all) with the MPAP and procedure in traced mesothelioma cases generally, and what features should the SMCG have in order to complement those procedures effectively and efficiently? Please see our answer to question 5 above. QUESTION 7 What do you see as the risks of a SMCG and what safeguards might be required?
14 We are not convinced that a SMCG would in fact compliment the management of mesothelioma cases. The main factor to be borne in mind is the highly confidential nature of the information being disclosed. Parties would, therefore, need the reassurance that any form of a SMCG was equipped to provide more security around document handling than is already achieved.
15 3. A more efficient costs system QUESTION 8 Do you agree that a fixed recoverable costs regime should be introduced to support a dedicated MPAP? If so should this apply primarily to claimant costs? Should any measures also apply to defendant costs? If so what form might they take? The correct question to be asking is whether, on the assumption that the fast-track procedure continues as it is, there should be the introduction of a fixed recoverable costs (FRC) regime to support mesothelioma cases which are litigated. Our answer to that question is yes. For the avoidance of doubt, we believe that there should also be a FRC regime for non-litigated (i.e. pre-action) cases in order to compliment the litigated FRC structure. As outlined above at question 1, few claims stay within the DPAP most proceed to the fast-track court procedure and it is here that the benefits of a FRC regime should be targeted. A system of FRC (as originally intended by the Lord Woolf s Reforms) has now been implemented under the Jackson Reforms. We believe a FRC regime should also apply to mesothelioma cases, therefore bringing these claims in line with the wider civil justice reforms aimed at tackling litigation costs. In principle, to not do so, risks watering down the objective of those wider reforms and is against the background that mesothelioma cases are (quite rightly) already afforded special treatment to ensure prompt settlement and, therefore, carry lower costs risks than other types of personal injury claims. We believe (as does Sir Rupert) that the saving will be significant. Not only will there be savings made from the removal of the recovery of costs ( costs of costs ) but also in relation to the claimant s solicitor not being required to time record or to retain records in the form of attendance notes to justify time spent on any given task. The main reason why a FRC regime is suitable to mesothelioma cases is because by their very nature, they represent a low adverse cost risk. Whilst mesothelioma is indeed a terrible disease, we urge the importance of recognising that emotive reasons should not be confused with assuming that the nature of the disease translates to complex litigation.
16 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. A victim needs only to identify an employer where there was exposure to asbestos above minimal levels to trigger a compensation payment. The issues in these claims, therefore, relate more to valuing the claims. There are also a number of other existing provisions which ensure that the adverse 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 (DPAP para 4.3). We also make reference again to the specially designed fast-track court procedure designed by Senior Master Whitaker. Given that defendants costs are rarely an issue which would affect the claimant s management of a claim, we agree that a FRC regime should apply only to claimant costs at this stage. It is worth highlighting, however, that defendants have already developed cost-saving methods for dealing with claims and see no reason why claimant firms cannot develop such efficiencies as well. Due to market forces some composite insurers have required Defendant firms to undertake litigated mesothelioma claims upon a fixed fee. This has required these firms to respond by developing claims processes and IT systems to handle such claims and to still retain profitability. It has required the increased use of paralegal resources. We foresee that claimant firms shall be required to adopt similar measures. QUESTION 9 Which proposed design of fixed recoverable costs structure do you support? Please explain your answer. We consider that a system of FRC should be based only on whether liability is admitted or denied as this is where we see that a substantial costs saving can be made. The level of general damages awarded for a mesothelioma claim does not vary significantly. It is the special damage claim which has the scope to fluctuate depending upon the circumstances of a particular claimant, such as his or her age at the date of death, the level of pre-injury earnings and the number of dependants. However the calculation of such losses takes a formulaic approach capable of swift resolution once the necessary evidence is provided. It is the issue of liability which can stall the settlement of a claim and an encouragement to both insurers and claimants to resolve this at the pre-issue stage would represent a substantial saving of costs to both parties.
17 We therefore propose that the system of FRC should be more favourable for those claims which settle pre-issue and increase upon a diminishing scale at both the post-issue and trial stages as an incentive to all parties to achieve an early settlement. With reference to our answer at question 8 above, the majority of defendants will make an admission of liability at an early stage. However, we recognise that certain organisations may wish to defend a claim and, therefore, the structure we have suggested above reflects the level of associated risk i.e. a lower level of costs where liability is admitted and a more favourable regime where a denial is made. In terms of detail, we wish to make the following observations on a proposed FRC regime in order to assist the Government: Whether a system of fixed costs should apply for all aspects of case management. We believe that adopting different approaches has the potential for complicating the overall process. It would also create the danger that poor behaviour may be encouraged within the dispute resolution process in order to generate and enjoy additional/greater fees available within different case management stages. Whether there should be a link between damages recovered and the fixed costs calculation. We do not believe that the calculation of the fixed costs should be tied to the value of the claim. General damages do not necessarily mean that more work is required by the claimant s lawyer. Therefore, the costs calculated under a FRC regime should not involve increased awards for cost purely on the basis of increased damages. QUESTION 10 What are the key drivers of legal costs, both fixed and variable costs, and how strong are these drivers? With respect, we find this question ambiguous and are unsure whether the question is aimed at mesothelioma claims only (which do not currently operate a system of fixed costs) or the wider litigation landscape. Assuming the focus is on mesothelioma cases, one factor which clearly drives up costs is with regard to the quality of expert evidence. Normally, there are two main types of expert discipline in mesothelioma claims medical and engineering.
18 Typically, experts that are instructed from either discipline on behalf of both the claimant and the defendant produce lengthy and costly reports. Their reports tend to repeat background information that is already available in other documentation and frequently run to in excess of 80 pages. Of that content, the salient detail which is needed to quantify the claim is typically contained within, say, three to five pages, including with regard to life expectancy. One solution for the Government to consider is the creation and adoption of an industry-approved model expert report template in order to control costs. This is not a unique concept but one which was adopted to process hundreds of thousands of claims under both the British Coal Vibration White Finger and Respiratory Disease schemes. Such an approach could eliminate the non-essential information from these reports thus reducing the cost of the report itself and the costs of the claim in considering these reports. QUESTION 11 Do you have any views on what the level of fixed recoverable costs should be, in relation to your favoured design? Please explain your answer. Please see our answer to question 8 above. QUESTION 12 Do you agree that the fixed recoverable costs regime should apply only to cases which fall under the MPAP? Please see our answer to question 8 above. QUESTION 13 To what extent do you think the reforms apply to small and micro businesses? Please see question 14 below.
19 QUESTION 14 To what extent do you think the reforms might generate differential impacts (both benefits and costs) for small and micro businesses? How might any differential costs be mitigated? Considering Questions 13 and 14 together, the tighter the time scales become under the proposed reforms, the greater the potential impact on resources needed to be able to deal with those cases. This is likely to be felt more acutely by smaller organisations compared to larger organisations, which will typically have less people and less sophisticated claims handling procedures in place. As well as being able to respond to time scales with regard to investigation, there are also administrative requirements to be met, such as document handling, ensuring cleared funds for payment etc. These too should be appreciated as potential challenges for organisations, and again, in particular for smaller businesses.
20 4. Review under section 48 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 QUESTION 15 Do you agree that sections 44 and 46 of the LASPO Act 2012 should be brought into force in relation to mesothelioma claims, in the light of the proposed reforms described in this consultation, the increase in general damages and costs protection described above, and the Mesothelioma Bill? We do. It is vital to keep the Jackson reforms intact to avoid a watering down of the proposals and the production of a range of anomalies. Should that occur, it would risk 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 extend to all types of personal injury claims, including mesothelioma cases, which fuel disproportionate profits for claimant lawyers. We have outlined above the special status already afforded to mesothelioma victims which, in our view, further nullifies the need for an exemption within the LASPO Act In short, disease claims have been afforded such 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. Long-tail disease claims, including mesothelioma cases, are typically the more complex type of disease claim when compared with short tail disease claims (for example dermatitis). The categorisation of both types of disease is based on exposure and manifestation of symptoms. As referenced to above, long-tail disease claims 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 such as these, the process of a disease claim is straight forward and compensates the claimant quickly. Case
21 management (particularly in long-tail disease claims), therefore, requires the opportunity for liaison between co-defendants/insurers/co-insurers, particularly in non-divisible disease claims such as mesothelioma. As explained above, 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. Specific cost saving measures are already in place for mesothelioma cases, such as the provision of occupational and health records by the potential defendant to the potential claimant at no cost (PAP para 4.3) and the specially designed fast-track court procedure. 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. This compares to 12.5% for a RTA and 25% (27.5% if union backed) for an EL claim if settled prior to trial. The uplifts being applied to mesothelioma cases in practice do not, therefore, reflect either the level of risk which these cases carry or other types of personal injury cases where no exclusion has been applied and where liability will frequently be in dispute. Excluding mesothelioma claims from the LASPO Act 2012 would therefore appear contrary to the principal objective of LASPO and the related reforms to reduce litigation costs.
22 claim is straight forward and compensates the claimant quickly. Case management (particularly in long-tail disease claims), therefore, requires the opportunity for liaison between co-defendants/insurers/co-insurers, particularly in non-divisible disease claims such as mesothelioma. As explained above, 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. Specific cost saving measures are already in place for mesothelioma cases, such as the provision of occupational and health records by the potential defendant to the potential claimant at no cost (PAP para 4.3) and the specially designed fast-track court procedure. 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. This compares to 12.5% for a RTA and 25% (27.5% if union backed) for an EL claim if settled prior to trial. The uplifts being applied to mesothelioma cases in practice do not, therefore, reflect either the level of risk which these cases carry or other types of personal injury cases where no exclusion has been applied and where liability will frequently be in dispute. Excluding mesothelioma claims from the LASPO Act 2012 would therefore appear contrary to the principal objective of LASPO and the related reforms to reduce litigation costs. Kennedys is a trading name of Kennedys Law LLP. Kennedys Law LLP is a limited liability partnership registered in England and Wales with registered number OC and registered office at 25 Fenchurch Avenue, London, EC3M 5AD.