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Keoghs secures commitment for crucial change to the Companies Act for legacy insurers
Keoghs has successfully secured a commitment from Government for a key amendment to the Companies Act 2006. This will preserve insurers’ rights to pursue contributions in legacy claims – especially mesothelioma.
The Companies Act 2006 allows insurers to restore their former policyholders to the register. The problem is that it only allows this if the company was dissolved in the last six years. This is far too short for legacy claims, especially those involving asbestos. The gap between breach of duty and disease is usually many decades, with around half of mesothelioma claims made against defunct employers. If an insurer can’t restore their policyholder they can’t pursue contributions from other parties. They need to stand in their policyholders’ shoes to exercise rights of subrogation.
This is a particular problem in mesothelioma cases as the Compensation Act imposes full liability on any one wrongdoer.
This issue has not caused any problems to date because a claimant can restore a company at any time. If an insurer wants to seek a contribution they can insist that the claimant takes this step. However, it won’t be long before this solution becomes unavailable. The Third Party Rights Against Insurers Act 2010, which will come into effect shortly for asbestos cases, allows claimants to pursue insurers directly where their employer is moribund. Insurers could still ask claimants to restore companies, but could not insist on it. Individuals suffering from terminal cancer have other more pressing priorities.
This problem has been raised with various Government departments over many years without result.
Due to increasing concern about the lack of Government response on this issue, Keoghs were instructed by Zurich, Pro Global and RSA to secure an amendment to the Companies Act. A letter of claim was sent to the Business Department pointing out that this situation amounted to a breach of Article 6 (right to a fair trial) and Article 1 of Protocol 1 (right to free enjoyment of possessions) of the European Convention on Human Rights. We stated that, unless the anomaly was resolved, judicial review proceedings would be issued.
The Business Department have now replied and committed themselves to amending the Companies Act to resolve the problem. The amendment will provide an open-ended timetable for insurers to restore their policyholder in personal injury claims – the same right now enjoyed by claimants. It is hoped that the amendment should be in place before the summer recess.