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Asbestos – All change?
Keoghs Disease and Abuse Aware 2018
Two issues dominate current asbestos claims - new treatments for mesothelioma and uncertainty about breach of duty.
The first reflects the most up-to-date research. The second draws on the knowledge of risks many years ago. They add up to the greatest level of uncertainty over the cost of asbestos compensation that the UK insurance industry has ever known – at a time when the legacy market is itself undergoing profound change. The uncertainty does not have to mean greater outlay. In the grand tradition of management jargon, there are opportunities here as well as challenges.
Insurers must find a practical way to deal with these new claims, but they should also engage with more profound issues. What might these new treatments mean in the longer term?
How should reserves be set?
Dealing with claims
The main treatment is an immunotherapy called Keytruda® (pembrolizumab). This seems to provide the greatest benefit to individuals whose tumours express a particular protein marker – PDL 1. Some patients treated with Keytruda have experienced a profound response. Keytruda is not yet available on the NHS.
The claims themselves are legally orthodox. In an earlier case called Najib v John Laing plc the claimant recovered the cost of an entirely ineffectual treatment since it was ‘reasonable’ for him to have sought it out. Claims for private treatment for cancers have previously been unusual as sufferers would normally get optimal treatment within the NHS. The new treatments change that.
These claims are expensive. Each three-week treatment cycle for Keytruda costs around £7,000. There are other costs on top, including regular scanning and attendance expenses. The other main problem in individual cases is how to structure a settlement. There is nothing difficult in principle about how to pay these claims. Mesothelioma practitioners deal with claims for contingent loss such as care and equipment all the time. The claimant provides evidence that the loss will be suffered and we apply the usual contingency discounts to calculate a lump sum.
We can apply this approach to mesothelioma treatment claims just as well. This can make life easier for insurers. They know the figure and they can present their loss to reinsurers.
The disadvantage of the lump sum is that it risks overcompensation. Many claimants who claim for future treatment will never receive it since the course of their disease may not allow it. The other objection is a moral one. A lump sum leaves claimants with the prospect of funding treatment from their damages if they prove to be one of the longer term survivors.
A variety of solutions have been proposed for this problem. These include:
1. The Periodical Payment Order (PPO)
Certain claimant practitioners made much noise about this option in the early days of these claims. The volume has now reduced. That is because they do not work.
PPOs are designed to apply to cases where the disability is known and damages are fixed. Civil Procedure Rule (CPR) 41.8 reflects this. Its provisions cannot be stretched to accommodate speculative claims for drugs which may never be given.
2. The Trust
Here the defendants pay into a trust, which is then disbursed to the treatment provider. This requires a float to be paid in and topped up where necessary. It also has a set-up and an administrative cost, which is cumbersome.
3. The Indemnity
This is the defendants’ preferred option. We simply pay the treatment provider. Claimant representatives do not like it, as they say, that it creates a risk of late payment and cessation of treatment.
With the exception of the impermissible PPO, what these structures have in common is that they have to be agreed. So far practitioners have been able to develop and refine agreements to do the job.
These agreements beg further questions. On whose judgement should therapy be prescribed? Should there be any review by medico-legal experts or is it just a matter for the claimant’s treating clinician? Should insurers themselves be a party? A claimant is understandably likely to insist on this.
In a multi-insurer case, who decides on the agreement structure? Who signs the agreement? Who pays, and how? All parties will be best served by as simple an agreement as possible. This was underlined in a recent case.
In Hague v British Telecommunications plc the meaning of such an agreement and the extent of the treatments it covered. The agreement was construed in the claimant’s favour – against the defendant’s experimental treatment. The claimant’s support his prescription – one patient, his own. The court ruled that anecdote was a kind of evidence, echoing the argument of The Simpsons’ Lionel Hutz, that hearsay and conjecture are kinds of evidence.
Insurers and their representatives should be able to navigate their way around these practical issues for better or worse. Discussions between insurers have been taking place for some time. There are plans for an addendum to the ABI Mesothelioma Handling Guidelines. A round-table discussion has been organised by the Forum of Insurance Lawyers (FOIL) for 7th March 2019.
The Hague case also tells us that Keytruda isn’t the only game in town. Other immunotherapies are being intimated. Different treatments are being proposed, including second-line combination chemotherapy and anti-angiogenetics. This is all part of what has been described as an ‘explosive’ change in cancer therapies predicted to unfold over the next ten years. The National Institute for Health and Care Excellence (NICE) and the NHS will always be slower to respond to these developments than claimants. These heads of loss will be part of mesothelioma (and other cancer) claims for years to come.
The wonderful news for sufferers is that these developments will be life-changing for some individuals. There will be long-term healthy mesothelioma survivors within the next few years. True to the current theme, the speed and extent of that change remains uncertain.
Keoghs has played its part to help with the question of reserving. On 10th October we hosted a seminar for the Asbestos Working Party (AWP) where we engaged with leading figures in the insurance industry. This informed the AWP’s 2018 Report and included projections of the cost of Keytruda claims. Even so, until more claims data has been collated the reserving position remains – you guessed it – uncertain.
What is more certain is that insurers have more to welcome than to fear. Insurers often distrust change. The current immediate cost of these claims seems to support this attitude – but long-term healthy survival is transformative of lives and transformative of damages. Insureres can work with the NHS and with researchers. They can support trials as a better approach for everyone than individual funding agreements. Insurers could financially support the research itself. Insurers kick-started mesothelioma research a few years ago with multimillion pound donations. Many of the same insurers funded travel bursaries for researchers at this year’s International Mesothelioma Interest Group (iMiG) Conference in Canada. These are the first steps.
Breach of duty
This year’s Court of Appeal decision in Bussey is one of those curious cases whose importance derives from a change of attitude, rather than a change of law. The claimant’s immediate target in Bussey was a line of cases following the 2011 Court of Appeal decision of Williams v University of Birmingham  EWCA Civ 1242. This decided that as the claimant’s asbestos exposure was below Technical Data Note (TDN) 13, the defendant was not negligent. TDN 13 was guidance for the Factories Inspectorate to assess when prosecutions should be brought under the 1969 Asbestos Regulations.
After Williams, a string of first instance cases decided liability solely on the basis of TDN 13. If exposure was above TDN 13 standards, the claimant won. If it was below them, the defendant won. The Court of Appeal in Bussey rightly rejected that simplistic analysis. TDN 13 is now what it should have been all the time – a factor in breach of duty but not the factor.
The claimant’s other argument in Bussey was more fundamental. If you ‘know’ that asbestos dust is dangerous you must take steps to reduce it. That compulsion is even greater once you ‘know’ that very low levels can cause fatal cancer. That point was reached, they said, by the 1965 article in The Times. This reported on research showing a link between non-occupational asbestos exposure and mesothelioma. This is a seductive argument. The Court of Appeal sniffed at it appreciatively but said that they had insufficient evidence to decide it. The case was remitted back to the first instance judge for that reason. The claim then settled.
So, on a formal basis, all we have from Bussey is a minor recalibration in the importance of a single standard. This does not reflect what is happening at first instance. Courts now seem far less inclined to accept defendants’ breach of duty arguments. In two recent Scottish cases, namely Thacker and Gibson, the Outer House said that defendants would have known immediately in 1965 that any exposure to asbestos dust was dangerous and that positive steps should be taken to reduce exposure.
In this jurisdiction, the judge in Hawkes v Warmex decided that relatively light exposure pre 1965 would be in breach unless positive steps were taken to reduce dust. This takes the logic of the claimant’s approach in Bussey even further. It appears that this change in mood includes the Asbestos List at the Royal Courts of Justice – the most important working forum for asbestos cases in the UK. Practitioners report a marked decrease in defendant success in ‘show cause’ hearings. This shift has a particular significance in mesothelioma claims.
It is very important for claimant solicitors to be able to accurately assess their chances of success at an early stage. In mesothelioma cases they still have to arrange full After The Event (ATE) cover, costing up to £4,500. The issue fees are normally around £10,000. Combined with the loss of profit on unsuccessful claims, these are significant investments.
Greater certainty of claimant success will encourage more claims. This means that in contrast to immunotherapy, uncertainty is the insurers’ friend here. This should reflect the legal position. Far too much weight has been ascribed to a single Times article.
In response to the 1965 research, the Government eventually introduced the Asbestos Regulations 1969. Regulation 2 (3) reads as follows:
"References in these Regulations to asbestos dust shall be taken to be references to dust consisting of or containing asbestos to such an extent as is liable to cause danger to the health of employed persons."
This is a full four years after the supposed revelation about the full risks of asbestos. Following an extensive consultation, Parliament tells the world at large that there is a level of asbestos dust which does not cause a danger to health. This means that current cases are holding ordinary employers to account for doing a worse job at assessing risk than the UK Government.
The 1969 Regulations are not an anomaly. The information given to employers by Government, asbestos producers and the media was patchy, inconsistent and contradictory. The 1965 Times article has been elevated out of all proportion to its modern importance. Dealing with this issue is not easy. It requires a detailed assessment of the information reasonably available to employers of all sizes over an extended period of time. Insurers are well placed to carry out this exercise. Until they do, the courts will continue to find for claimants on a demonstrably false basis.