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Insurers mount legal challenge to halt pleural plaques damages

Published 13/11/2008

Insurers are to take the unprecedented step of seeking a judicial review in Scotland to prevent legislation that would reinstate compensation for pleural plaques. The industry’s fight back has the secondary aim of dissuading governments from stepping in to overturn legal precedents set by the House of Lords.

The legal challenge will be mounted should the Damages (Asbestos-related conditions) (Scotland) Bill become law north of the border next year as expected, and follows legal advice obtained suggesting it breaches European Union law (see box).

The damages bill would overturn last year’s House of Lords decision, which ruled that, as plaques are asymptomatic, there is no actionable personal injury. Scottish MPs announced their intention to legislate to reinstate compensation last November.

The seriousness of this step is underlined by the fact a judicial review could take up to three years to be completed and is led by the four insurers with the lion’s share of exposure to pleural plaques claims – Zurich, Norwich Union, RSA and Axa. Steve Thomas, UK technical claims manager at Zurich, told Post: “We can’t operate in an environment where, as insurers, we identify an issue that requires testing on legal grounds – it goes through the first instance judgment, we win at the Court of Appeal and then have that upheld in the House of Lords, only for the government to turn around and say it is not happy with the result, so will legislate to overturn it.”

Malcolm Tarling, spokesman for the Association of British Insurers, added: “On seeing the Bill was likely to go ahead, these insurers wanted to consider their options and sought legal opinion on potential remedies. They obtained advice that suggests they have reasonable grounds for doing this and, as an industry, we would not push this unless we believed we had a good chance of winning.”

Revelation of this legal challenge has been timed to pre-empt the Westminster government’s own report on its intentions regarding pleural plaques and compensation. The Ministry of Justice’s consultation closed on 1 October and a decision is expected within the next two weeks, according to Mr Thomas.

He added: “The European Convention says you cannot legislate on something that is still live in the courts, until due process is completed. EU law is on our side; the Scottish government shouldn’t be doing what it is doing.” This refers to the fact law lords’ decisions are not strictly binding in Scotland but instead are only deemed ‘highly persuasive’ (see box).

HOW THE LEGAL CHALLENGE WOULD WORK Edinburgh-based law firm Brodies has advised insurers they have two grounds to mount a challenge under the European Convention on Human Rights.

One is Article 6 – the right to a fair trial – which “precludes any interference by a legislative body with the administration of justice with the object of influencing or determining the judicial resolution of a dispute – other than on compelling grounds of general interest”.

The second argument is that the Bill contravenes the first protocol of Article 1, which protects property rights. Malcolm Tarling, spokesman for the ABI, said: “Insurers’ economic rights and interests would be detrimentally affected by the enactment of this Bill.”

According to the ABI, judicial review can be mounted once Royal Assent is given and the Bill becomes law. The challenge would then be heard in the Court of Session in Edinburgh – first in the Lower Court, the equivalent to the High Court in England, with any appeal going to the Upper Court, which is equivalent to the Court of Appeal. Ironically, the challenge could ultimately end up back in the House of Lords.

This article has been reprinted with permission of the Claims Standards Council

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