Border skirmish

Insurers to take Holyrood to court,” screamed the headline in this magazine two weeks ago. It was the latest salvo in a battle that erupted in June when the Scottish government unveiled a bill to make pleural plaques compensable.

The insurers are talking tough, with AXA, Zurich and Norwich Union among the companies that have signalled their intention to call in the lawyers.

But speaking to Insurance Times in his Holyrood office, Fergus Ewing, the Scottish minister for community safety, insists his government is not for turning.

“We have embarked on this course after consultation, after having discussions, and we intend to proceed,” says the 51-year-old minister, seated at a meeting table and accompanied by his press officer, who records the conversation.

“If somebody comes along and says, ‘Here’s a problem that exists with your legislation’, of course our door is open and we would look at arguments on their merits. But we’re not aware of any new arguments being presented to us.”

The possibility of legal action doesn’t move him either. “I note that concerns remain and again reiterate the Scottish government’s willingness to engage with the insurance sector.”

Insurers might ruefully note that this is pretty much what he wrote in a letter to the ABI on 11 September. The letter claimed the government’s “door is always open” for discussion. At the time, David Williams, managing director of claims at AXA, said it was “more positive than previous communication”.

Ewing’s latest comments, however, suggest that the minister and his Scottish National party (SNP) government are in no mood to compromise over the piece of legislation officially known as the Damages (Asbestos-related Conditions) (Scotland) Bill (SP Bill 12).

According to Williams, the industry isn’t shying away from the fight either. “We’ll still be working away in the background to see what our legal options are,” he says.

“We do think it’s completely and absolutely wrong and therefore will do everything that we feel appropriate to resist it.

“But if we can do this through negotiation rather than legal challenge, then that’s better.”

The industry’s view of the bill – as presented by Nick Starling, the ABI’s director of general insurance and health, to the justice committee of the Scottish parliament on 2 September – is that there are many cases of people who have been exposed to harm. A person could face an increased risk of heart attack from taking prescription drugs, for example. If they develop heart trouble, they are compensated. But if they stay healthy, they are not compensated.

The ABI believes the same logic should apply here: pleural plaques are symptomless so they ‘

‘ should not be compensable. But if a person develops a condition such as asbestosis, they should receive compensation.

“The prospect of developing a condition, or anxiety that is engendered by the prospect of developing a condition, has never been actionable in English or Scottish law. The bill would fundamentally change that and therefore raises a much wider issue than pleural plaques. It raises the whole issue of harm, liability and delict,” said Starling.

Gilbert Anderson, Scottish chairman for the Forum of Insurance Lawyers, also gave evidence to the committee during the bill’s first stage (box, right).

“With the greatest of respect to the committee – I fully understand the bill is well intentioned – I believe we should be focusing on the fundamental issue of whether the various conditions that are detailed in the bill are harmful or harmless,” he said.

“The overwhelming medical evidence appears to be unequivocal that they are harmless. To my mind, culpability, breach of duty and negligence are not relevant considerations in assessing the fundamental purpose of the bill.”

This is where the two sides clash. Ewing agrees that pleural plaques are not usually harmful. But he draws a different conclusion from the medical evidence.

The Scottish government believes that, although pleural plaques are symptomless, the resulting scarring on the lungs is a physical, palpable change – and one that signals exposure to asbestos and, therefore, a greater risk of developing mesothelioma, a deadly form of cancer.

That’s why it says plaques should be treated as a material injury and should be compensable.

People with pleural plaques only lost the right to claim compensation last October, when the House of Lords ruled in a combined appeal (Johnston vs NEI International Combustion Limited and Rothwell vs Chemical and Insulating Company Limited and others) that pleural plaques were not sufficiently harmful to be eligible for damages. Insurers estimate the decision saved the industry £1.4bn across the UK.

Thompsons, a law firm that specialises in trade unions and personal injury, has called for legislation to overturn the House of Lords ruling. If the judgment is not reversed, it wants a no-fault scheme paid for by insurers, running alongside an insurance fund of last resort for workers’ compensation – an employers liability insurance bureau – based on the Motor Insurers’ Bureau.

Such a bureau would guarantee that workers injured or killed by negligent, uninsured employers have the same right to compensation as people injured or killed by uninsured drivers.

Ian McFall, head of asbestos policy at Thompsons, says: “When insurance companies saved billions as a result of the Lords ruling last year, they said they wanted to get compensation more quickly to people who are affected by the deadly effects of asbestos.

“Insurers now have an opportunity to back up their warm words with action. They have the reserves to compensate people with pleural plaques. It would be a scandal for them to now say that they won’t use those reserves and hypocrisy of the highest order for them not to agree to an insurance fund of last resort.”

That’s an issue for England. In Scotland, the House of Lords ruling is not binding but the two jurisdictions do influence each other, which is why insurers fear the Scottish bill could lead to a huge number of compensation claims for pleural plaques – on both sides of the border.

Westminster has not moved as fast as Holyrood on this issue, but a Ministry of Justice consultation on pleural plaques ended on 1 October. The responses are being analysed and are expected to be published by the end of next month. It remains to be seen whether English law-makers take a similar tough line.

Some commentators have argued that this is exactly what the SNP government doesn’t want, as it seeks to distance itself from London as part of the campaign for independence.

Mark Higgins, a Scotland-based partner for solicitor Irwin Mitchell, says: “Because of the SNP’s stated agenda for an independent Scotland, they appear to be keen on any policy which may draw something of a line between the Scottish way of doing things, and the rest of the UK.

“Anything that gives Gordon Brown a headache is seen to be a good thing by the SNP.”

That’s not the case, counters Ewing. “It’s not that we particularly want to set ourselves apart, and I’d personally be happier if England and Wales adopted similar legislation. That would make it the same across the UK and it would give those with pleural plaques the same rights south of the border as they would north of

the border.”

He cannot resist one swipe at the prime minister and his cabinet, though. “I hope

in England that they will follow suit, that they will follow the leap that we have taken in Scotland. But they do seem to be preoccupied with some local difficulties of their own.

“Perhaps they’re not able to devote quite so much time to the small print that we like to focus on up here in Scotland, getting on with running the country and not resigning before lunch.”

The Scottish bill is still in the first of three parliamentary stages, so its fate will not be known for some time. Things could get ugly as the legislative process rumbles on,

says Williams. “I do wonder whether the pro-plaques side has just been more successful in their lobbying. Because when you see some of these comments, they sound like people don’t know the difference between pleural plaques and mesothelioma.

“I find that shocking for anybody in a decision-making position not to be able to differentiate between pleural plaques, where there are no symptoms at all, and mesothelioma, one of the most awful diseases and ways to die you can think of.”

Insurers do admit to one hole in their argument: people with asbestos-related but generally symptomless conditions were eligible for damages for more than 20 years. In Scotland, they technically still are – and the bill would enshrine that status in law for pleural plaques.

But Williams says not much was known about the different types of asbestos-related disease until recently – hence the Lords ruling last year. Despite the Scottish government’s attempts to make a link with mesothelioma, he says it is now clear that pleural plaques don’t lead to further ailments.

Individual insurers plan to use a number of different solicitors in the case, but Williams declines to name any firms. Insurers are unlikely to make their next move until the legislation completes its first stage on 6 November.

According to Williams, a law suit – if it comes – would be launched in the first quarter of 2009. The clock is ticking ..