New diseases and risks are putting added pressure on employers' liability insurers. Alison Boyle reports on the court cases that will affect the sector in the future.
There has been much debate recently about the need for price hikes in the employers' liability (EL) sector to reflect the increasing compensation culture. This need will become all the more apparent as insurers are faced with new and emerging claims and diseases that are expected to push up the level of damages and costs awarded.
Speaking at a recent Aon seminar on the spiralling cost of employers' liability, Anne Davies, from law firm Vizards Staples & Bannisters, spoke of the legal minefield ahead.
Among the emerging diseases ex-pected to create a flux of liability cases are lead poisoning, electromagnetic fields, passive smoking and mobile phones.
The most common new cause of occupational disease, however, is occupational asthma, which mostly affects health professionals such as radiographers and theatre nurses.
Health and safety experts predict that agents responsible for causing or exacerbating asthma are on the increase, especially in industries where new high-performance adhesives and resin monomers are being developed.
An example of the new claims is Fashade v North Middlesex Hospital NHS Trust, where a total settlement of £225,000 was awarded to the claimant and £30,000 paid in general damages.
Asbestos litigation continues to impact on liability insurers and, last month, Lloyd's reinsurance vehicle Equitas announced that the exposure in asbestos claims could not be underestimated. It further announced that claims were running four times the rate predicted two years ago.
A report from AM Best, "Asbestos claims surge set to dampen earnings for commercial insurers", has also highlighted the increasing costs. It lists the following as contributing factors:
In addition, the previous boundaries in asbestos cases are being challenged. For example, a retired docker secured an out of court settlement for stress caused by the fear of contracting asbestosis. He had worked at Southampton Dock in close connection with asbestos dust. He had witnessed many colleagues die and the 68-year-old feared for his own health, although there was no evidence of him having contracted the disease. He received £10,000 by way of out of court settlement.
Case law associated with asbestos disease litigation is presently in a state of flux. In November, the Court of Appeal will hear appeals in five matters:
The decision on the Fairchild case is the most eagerly awaited. It is important for insurers, as the claimant was exposed to asbestos dust by both defendants. The claimant could not prove which company's fibre caused his condition and hence his claim failed. In particular, both defendant employers admitted equal exposure of Fairchild to substantial quantities of asbestos dust.
Stress is another problem for insurers, with cases increasing 50% per year. One of the most important decisions in this field is that of Walker v Northumberland County Council, where the High Court held an employer liable for a nervous breakdown due to work pressure. Walker had suffered a nervous breakdown in 1986 and returned to work, where he was promised an assistant. This was not supplied and he had another breakdown in 1987. The employer was liable for the second breakdown only and it was agreed the second breakdown was caused by stress at work.
Following this, there have a spate of high-profile out of court settlements. These include:
All these diseases are expected to have a major impact on EL insurance.
As a result, EL insurers are looking to contain the spiralling costs by adopting rehabilitation and a back-to-basics assessment of risk, as well as staff training and supervision.