The decision may cost the industry £8bn. Andy Cook says it's not the best solution
The Fairchild decision last week was as much of a blow to the industry as the Cave decision earlier in the month was a boon.
Conservative (that is, the Association of British Insurers) estimates put the cost of the decision at £200m per year. Construction union estimates put the total bill at up to £8bn.
Whatever the out-turn cost, it will be expensive for an industry already struggling to balance reserves with opportunities to write at good rates. For some, the expense will be inhibiting. It's not that we will see syndicates or insurance companies fail because of Fairchild, it is more that reserves made to cover the liability cannot be released. What's more, cautious insurers will be looking at their long-tail liabilities with greater trepidation this week than last and will be planning cover accordingly.
It seems the Law Lords are punishing the industry as a whole rather than looking for where the true liability lies. Their argument goes,: if the claimant can't identify who was the insurer at the exact time of lethal exposure, let's spread the costs over any of the insurers that could be liable over the claimant's working life. It's a solution. The claimant and dependants rightly receive compensation for some grisly years of living. Whether it is a fair way of paying for it is a completely different argument.
The bottom line is that some companies will be penalised without being responsible. And that's sad. Is there a fairer solution to the problems of employers' liability and industrial diseases in particular? Some have put forward the idea of a no fault compensation scheme, where a central levy is raised - as is common in many European countries. The money is put in a pot and when something like Fairchild comes up there is a way of settling. The only losers are the lawyers. Shame.
Another idea that could put an end to the employers' liability headache is a revision of the law that allows industrial diseases to be excluded from cover. It's a drastic measure and one that, in reality, the government cannot back for reasons of popularity. But until something is done, insurers are being held over a barrel.