Update from UK asbestos and
deafness working parties
Robert Brooks, Brian Gravelsons and Gabriela Macra
02 May 2013
Agenda
• Update from the UK asbestos working party
Background and Introduction
– Background and Introduction
– Recap on 2009 UK Asbestos Working Party Projections
– Legal and Other Developments
• Update from the UK deafness working party
UK Asbestos
Background and Introduction
Background and Introduction
Mesothelioma experience
4,000 4,500
500 1,000 1,500 2,000 2,500 3,000 3,500
Deaths /
Claims
0 500
HSE (non-clearance) Gross-up claims (AWP 2004)
Gross-up claims (AWP 2007) Observed deaths
Background and Introduction
What has the Working Party done?
• Since 2009 market estimate - entered working party passive
phase p
• Continued to collected survey and government data
• Comparing data against estimates
• Maintained contact with HSE and Prof. Peto
• Consultation responses such as Pleural Plaques & ELIB
5
UK Asbestos
2009 UK Asbestos Working Party Estimates
Approach
• Data
– Market survey
• Number of claims
– Adapted models developed by
Market survey
– Sample of claimant settlement
costs of mesothelioma claims
– CRU and IIDB
• Expert judgement based on
discussions with
Adapted models developed by other
– Developed own models
– Judgement
• Average costs (including
inflation)
– Claims handlers
– NHS / Doctors
– Legal profession
– Special interest bodies
– Developed own model for
mesothelioma
– Judgement
7
2009 UK Asbestos Working Party Estimates
Total Insurance Market Estimates
16,000 18,000
Insurance Market cost estimate of £5 3bn and a highest of £33 9bn
6,000 8,000 10,000 12,000 14,000 C
ost of all
ty
pes
(£m)
Inflation scenario 1 Inflation scenario 2 Inflation scenario 3 £5.3bn and a highest of £33.9bn
-2,000 4,000
Number scenario 1 Number scenario 2 Number scenario 3
C
2009 UK Asbestos Working Party Estimates
Mesothelioma Deaths and Claimants
2,000 2,250
n
ts
Ob d l d th (
750 1,000 1,250 1,500 1,750
e
lio
ma
male d
eath
s
/ claima
n Observed male deaths (ages
20-89)
HSE / HSL (2009)
AWP1 - 2009
Observed Insurance Claimants (inc Government)
0 250 500
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048
M
esoth
e
Scenario 23 - Insurance Claimants (inc Government)
9
UK Asbestos
Actual vs. Projected Experience
Mesothelioma deaths
3,000
AWP (2009) Adjusted HSL
1,000 1,500 2,000
2,500 model( ) j
AWP (2009) Latency model AWP (2009) Alternative birth cohort model
HSL Non-clearance (2009) HSL (2010) - Revised risk model R1
11
0 500
model R1
HSL (2010) TSCE T2 Observed deaths (ages 20-89)
Actual vs. Projected Experience
Mesothelioma: Number of claims
3,000
s
1,000 1,500 2,000 2,500
r of mesothelioma
claim
s
(excluding nils)
2012 Survey Scenario 23
12
0 500
2009 2010 2011
Numbe
r
Actual vs. Projected Experience
Mesothelioma: Average cost of claims
£120,000 ims £40,000 £60,000 £80,000 £100,000 o st of mesothelioma cla (excluding nils) Actual Incurred Actual Settled Scenario 23 13 £-£20,000
2009 2010 2011
A
v
erage c
o
2012 survey data assuming a nil rate of 23%
Actual vs. Projected Experience
Lung Cancer: Number of claims
600 200 300 400 500 e
r of lung cancer claims (including nils)
2012 Survey Number 2 / Cost 2
14
0 100
2009 2010 2011
Numb
e
Actual vs. Projected Experience
Lung Cancer: Average cost of claims
£60 000 £70,000 m s £20 000 £30,000 £40,000 £50,000 £60,000 c ost
of lung cancer clai
m
(including nils)
Actual Incurred Actual Settled Number 2 / Cost 2
15
£-£10,000 £20,000
2009 2010 2011
A
v
erage
c
2012 survey data assuming a nil rate of 33%
Actual vs. Projected Experience
Total costs 2009 to 2011
£1 000m £1,200m £200m £400m £600m £800m £1,000m £0m
Mesothelioma Lung cancer Asbsetosis Plueral Thickening
Projected (Scenario 23 & Cost 2 / Number 2) Incurred (Grossed up in 1Q 2012 Survey)
Notified in year * Settled in year (Grossed up 1Q 2012 Survey)
16
UK Asbestos
Legal and Other Developments
Legal and Other Developments
• ELTO
T i Liti ti
• Trigger Litigation
• Jackson
• International Energy Group Ltd v Zurich Insurance plc [2013]
Legal and Other Developments
Employers’ Liability Tracing Office (ELTO)
• Set up to provide access to a database of EL policies (EL
Database or ELD))
• ELTO has contract with Tracing Services Ltd, a subsidiary of
the Motor Insurers’ Bureau (MIB)
• February 2011, new regulations that change the way that
insurers and intermediaries record EL policy data
– From January 2011, all members required to upload new and renewed y , q p
policies, and old policies with new claims made against them
– From April 2012, all members required to upload new and renewed
policies and also supply subsidiary company information
19
Legal and Other Developments
Employers’ Liability Tracing Office (ELTO)
• 60 members, with around 8 million records
Split evenly between new policies and historical policies (post 1990)
– Split evenly between new policies and historical policies (post 1990)
• Two searches:
– Simple - one search function to all users; and
– Extended - completed once a month where the members are asked to
trace records not on the database.
• If simple search is unsuccessful an extended will be undertakenp
• ELTO keeps a list of the individuals using the database and
about 65% are Claimants / Solicitors.
• Around 70% of traces are finding an insurer to pursue
Legal and Other Developments
Pleural plaques
House of Lords ruled pleural plaques were not compensable (Oct 2007)
Scotland
• Scottish Parliament introduced a bill to reverse the House of Lords ruling in Scotland -in force from June 2009 • Insurers’ appeal was
heard in July 2010
England and Wales
• Government announced it will not be legislating to make PP claims compensable
• Extra-statutory Payments of £5,000 for unresolved cases
Northern Ireland
• Consultation paper published by Dept of Finance and Personnel (NI) Oct 2008;
recommended claims made compensable • The Damages (Asbestos-• 12th October 2011, the
Supreme Court rejected the insurers' appeal
related Conditions) Act (Northern Ireland) 2011 came into operation on 14th December 2011
21
Legal and Other Developments
Employers’ Liability ‘Trigger Litigation’
• Seeking to clarify what triggers a policy to pay a claim to victims of mesothelioma
• Bolton Metropolitan Borough Council v MMI and CU
– Public liability policies
– “Injury occurring” wording
• Durham v BAI (run-off) and others (“Trigger Litigation”)
E l li bilit li i
– Employers liability policies
– “Injury ‘sustained’ or disease contracted” wording
Legal and Other Developments
Trigger Litigation: Court of Appeal Judgement
• Court of Appeal judges took divergent approaches
F ll i i i l
• Following principles emerge
– “Sustained” wording – policy responds when tumour starts to develop
– “Contracted” wording – synonymous with caused, policy responds to
exposure
– Policies post 1972 (when EL became compulsory) will meet
mesothelioma claims based on date of inhalation
• Leave to appeal to the Supreme Court was granted
– Recommended that this appeal be expedited
23
Legal and Other Developments
Trigger Litigation: Supreme Court
• On the 28th March 2012 the Supreme Court handed down its
judgment based on a 4-1 majority:
j g j y
– Reflecting the wider commercial purpose of employers' liability cover,
that disease is said to have been "sustained" or "contracted" in an employers' liability policy when it is caused and not when the disease manifests itself many years after the exposure
– Applying the principles established in Fairchild
• Employers' liability policies respond on an exposure basis
• Employers liability policies respond on an exposure basis
regardless of wording (unlike public liability policies)
• Return to the basis used prior to the litigation
Legal and Other Developments
Jackson reforms
• A10 year review looking into the costs in civil litigation completed by Lord Justice Jackson in January 2010 p y y
• After consultation UK Government published its response in
March 2011
• They agreed to implement the majority of reforms within the
Jackson review
• Legislation passed in May 2012 - the Legal Aid Sentencing
• Legislation passed in May 2012 - the Legal Aid, Sentencing
and Punishment of Offenders Act 2012 (LASPO)
• LASPO came into force on 1 April 2013
25
Legal and Other Developments
Jackson reforms
• Success fees payable on CFAs and ATE premiums no longer
recoverable from the losing partyg p y
– The winner must therefore pay its lawyers' success fee
– This could render some claims uneconomic to pursue
• Court of Appeal guidance after Simmons v Castle [2012]
-General damages in all civil claims 10% higher
• Damages-based agreements or DBAs can be entered with
• Damages-based agreements or DBAs can be entered with
claimants
– Agree to accept a share of their clients' winnings
– Maximum cap of 50%
Legal and Other Developments
Jackson reforms
• Additional penalty on unsuccessful defendants under Part 36
payable when claimant’s reasonable offer rejected
– payable when claimant s reasonable offer rejected
– Capped on large awards
• File disclosure reports listing potentially relevant documents
• File budgets for approval by the court and other parties
• Exclusion of mesothelioma claims from the reforms
– After-the-event insurance and success fees still apply
– Lord Chancellor investigating
27
Legal and Other Developments
INE v Zurich Insurance plc [2013]
• Claimant died from mesothelioma
E d t b t i G f 1961 t 1988
• Exposed to asbestos in Guernsey from 1961 to 1988.
• Guernsey law applied: UK Compensation Act 2006 did not
apply
• INE settled claim for damages and then sought recovery from
the insurer
E l ' li bilit li i id d 1982 t 1988
– Employers' liability policies provided 1982 to 1988
• Commercial Court ruled insurer's liability under an EL policy limited to period under which the claimant had been insured
• Insured appealed this verdict
Legal and Other Developments
INE v Zurich Insurance plc [2013]
• Court of Appeal ruled in February 2013
I t id l t i d it
• Insurer to provide a complete indemnity
– On risk for 6 out of the total of 27 years of exposure
– Basically an “All Sums” verdict
• Followed the approach of the Supreme Court in the Trigger
litigation - mesothelioma was "caused" by his exposure
• No contribution by solvent insured to insurer - contrary to the ABI guidelines
• Supreme Court?
29
UK Deafness
Introduction
• Why are UK Deafness claims a current issue?
• What are noise induced hearing loss claims?
• A claims history lesson
• What is driving the recent claims experience?
• UK Deafness Working Party GIRO Paper
31
100,000 120,000
Why is it a Current Issue?
20,000 40,000 60,000 80,000
Data source: Deafness Working Party Data Survey Sept 2012, with 2012 updated from March 2013 survey. Survey covers 12 market participants in last 10 years, fewer in earlier years, history has been rescaled to be consistent across all years.
-Total Number of Insurance Claims Notified
What are Noise Induced Hearing Loss (NIHL)
Claims?
• Hearing loss arising from prolonged exposure to high noise levels almost always in the work place and therefore impact Employers’ Liability policies
D t l d d t b b i d t k d t f k l d i 1963
• Dates employers deemed to be aware vary by industry – key date of knowledge is 1963
• Successive regulations in 1989 and 2005 reduced actionable noise levels and stipulated employer actions (noise surveys, reduction, protection etc.)
• Serious cases involve tinnitus alongside hearing loss
• ‘Latency’ arises because NIHL becomes apparent around age 60-65 when hearing typically starts to deteriorate through age
• Current claims predominantly from 1970s to 1980s exposures
• UK Insurance industry is currently paying around £50m per year based on working party data
• Major component of claim cost is claimant solicitor fees with damages only representing around one quarter of total spend
• Similar mix of insurer compensators as asbestos
33
100,000 120,000
Impact of 1989 regulations and recession
T t Liti ti
UK Deafness Claims – History Lesson
20,000 40,000 60,000 80,000
Economy recovers, trade union influence
reduces CFAs introduced April 2000 Test Litigation, Textile Industry targeted
Rise of CMCs and further recession
Rising unemployment in
early 1980s
Data source: Deafness Working Party Data Survey Sept 2012, with 2012 updated from March 2013 survey. Survey covers 12 market participants in last 10 years, fewer in earlier years, history has been rescaled to be consistent across all years.
-Total Number of Insurance Claims Notified
What is Driving Recent Experience?
Legislation
• The impact of LASPO (April 2013) is likely to have fuelled an increase in claimant solicitor ti it
activity
Claims Management Companies (CMCs)
• Claims Management Companies have increased rapidly from a couple of hundred to a couple of thousand* over the last five years
• Significant increase in advertising raising awareness in the general population of the potential to make a claim
• After the Event (ATE) insurance allowed solicitors to run a case ‘risk-free’ if the ATE insurer accepted the case
*Source: Motor Third Party Working Party
insurer accepted the case
Recession
• Impact of recent recession has increased unemployment, albeit mainly at younger ages
• Redundancy has historically been a trigger to make a claim against an employer
35
UK Deafness Working Party Paper for GIRO
2013
Includes
Background to help interested party understand the emerging
•Background to help interested party understand the emerging
deafness claims experience
•Market data collection and survey results
•Analysis of influencing factors
•Key items for the reserving actuary to consider
Does Not Include
•Insurance Market Projections
Questions
Comments
The views expressed in this presentation are those of the presenter
