Department for Work and Pensions - A Review of Certain Provisions within the Employers’ Liability (Compulsory Insurance) Regulations 1998
Response by Thompsons Solicitors – September 2007
Thompsons are the most experienced trade union and personal injury firm in the UK. It has a network of offices across the UK, including the separate legal jurisdictions of Scotland and Northern Ireland.
Thompsons only acts for trade union members and the victims of injury, never for employers or insurance companies. At any one time, the firm will be running 70,000 claims.
The firm participates regularly in government consultations on legislative issues.
Thompsons is concerned by any proposal to reform the ELCI regulations which may damage the ability of people, injured by the negligence of their employer, to obtain compensation. Any review of the regulations should be guided by the principle of making it easier for claimants to trace insurers and not principally by a desire to reduce burdens on business.
We want to see the ABI tracing scheme scrapped in favour of an independent scheme. Our reasons for this and proposed alternative system are set out below.
Appendix 1 sets out the efforts made by Thompsons to trace the ELCI insurers of the former employer of the late John Sherwood. It illustrates the failures of the ABI tracing system.
This review presents an opportunity to require insurers to provide pre-1999 policy details and to create an independent and efficient system for tracing insurer details. We urge the DWP to use it.
Thompsons’ experience is that it is not usually necessary to trace insurers in accident cases and that in circumstances where it is necessary, because the employer is no longer trading or is insolvent, it is usually possible to do so. We also accept that the current certificate retention requirements do not assist in tracing insurance policies prior to 1999.
The real difficulty in practice however is tracing insurers in long-tail disease cases. Even in claims where the relevant exposure is post 1972, and therefore occurred during a period when insurance was compulsory, it is not uncommon to be unable to trace an insurer.
The government has taken an admirable approach to preserve the right of victims of the asbestos-related disease mesothelioma to claim compensation. Specifically the Barker amendment to the Compensation Act confirmed the government’s commitment to doing so.
It would be perverse now to repeal regulations that are intended to assist claimants to trace the insurers for the purpose of obtaining compensation (albeit a flawed system that may not be helpful in many long tail disease cases), without ensuring an effective alternative (and one that gathers pre-1999 insurance information) is put in place.
The motive behind this consultation is clearly driven by a perceived need to reduce burdens on business. This is evident from the comment in Option iii) under Regulation 4 that retaining the current regulation “does not provide any administrative reductions for business”. “Strongly worded guidance” to businesses (contained in Option ii) that they should keep records for their own benefit is not enough.
Thompsons is concerned by the repeated references to options such as introducing a penalty for failing to keep certificates (Option i)), as having major adverse cost implications for business without considering the detriment that not keeping certificates may cause to claimants.
Thompsons would support Option iv) under Regulation 4, the setting up of an effective central database to enable claimants to identify an insurer.
The ABI tracing scheme is supine and ineffective in tracing insurers in long tail disease claims where it matters most. People with terminal industrial diseases are vulnerable and have limited time to see out a claim in their lifetime. But it is inevitable that insurers industry will try to avoid being identified for the purpose of claims against them. We refer again to the example given in Appendix 1. The ABI scheme, which is inherently conflicted in interest, should be scrapped and replaced by an independent scheme under the auspices of the Compensation Act regulator or the Compensation Recovery Unit (CRU).
There is no evidence to support the view that setting up such a database would be cost prohibitive. It would cost the government nothing since resources from the savings to employers made elsewhere, if proposals in this consultation paper are enacted and if the ABI scheme is closed, should be made available to establish and run it. The scheme would also create its own income stream as the number of claims would inevitably increase as a result of insurer identity being easier to establish. Claims under the Pneumoconiosis Act 1979 would be reduced.
Thompsons would also be prepared to support a requirement for solicitors to pay for successful searches.
In order to ensure that a tracing mechanism provides reliable, comprehensive access to EL policy information it will need to be properly resourced and populated with all available EL policy details held by still existing employers and the insurance industry. The tracing scheme would have to be put on a statutory footing and have real power to require insurers to provide accurate information.
If primary legislation is required to achieve this, Thompsons suggests that, given this move will boost CRU recovery, the Child Maintenance and Other Payments Bill would be the appropriate vehicle for doing so.
Immediate access to information could be achieved by the requirement to have the records stored on line.
There are two issues arising from the requirement to display insurance certificates in the workplace.
1. The requirement to display is visible assurance to employees that the employer is insured and militates against the employer’s non-compliance.
2. It may enable an employee who saw the certificate to remember many years later who the insurer was. One recent mesothelioma case against an EL insurer which denied being on cover turned on the evidence of a lay witness’s recollection [John Aidan Ferguson (Executor of the Estate of John Tolmie deceased) –v- Zurich Insurance Company Limited – Manchester High Court case number 5MA24034]
Whatever method is used to make employees aware of the insurer’s identity, it is vital that they are. Repeal of the duty to inform the workforce about the firm’s current ELCI cover would be a retrograde step. Businesses could use a variety of means to do so, including the contract of employment, the staff handbook, company intranet, via a yearly statement or in payslips.
The £1,000 fine for failure to appropriately inform employees (and / or failure to display) should be retained.
John Sherwood deceased
Thompsons’ efforts to trace the EL insurers in this single employer fatal mesothelioma case illustrate the failures of the ABI tracing system.
In 2005 the family of the late John Sherwood approached a local firm of solicitors in Preston for advice about claiming compensation. The solicitors made an ABI search for the insurers of the employer, Isaac Jackson & Sons Limited, for the period 1963 to 1968.
The ABI replied on 4 April 2005 confirming that "no EL insurance policy has been found" and "nothing further can be done by ABI to assist" and "ABI's involvement is now concluded". The solicitors advised the Sherwood family that as the employer was a dissolved company and no insurer could be traced they could not pursue the claim further.
Mrs Sherwood turned to Thompsons for assistance. We obtained a full set of documents from the Companies House archive which identified the precise title of the employer as Isaac Jackson & Sons (Welding Engineers) Limited. We wrote to the company directors, the directors' adult children, the company accountants and their auditors, all to no avail.
We also made another ABI tracing enquiry online on 7 December 2006 requesting details of the insurers for the period 1965 to 1970. The ABI replied on 1 February 2007 with a second negative response in the same standard terms as before.
After discussion with the client we instructed an insurance archaeologist to carry out further investigations. He established from Capita Insurance Services that the employer's insurers throughout the period 26 August 1943 to 5 August 1968 were Iron Trades / Chester Street.
A copy of the negative ABI search and the letter from Capita dated 17 April 2007 confirming insurance cover are attached as separate documents.
Thompsons are proceeding with Mrs Sherwood's claim.
How many other families would be deprived of compensation in mesothelioma claims because they are deterred by the same obstacles and systemic failures which this case clearly demonstrates?