Mesothelioma Bill [HL] — Second Reading

Part of the debate – in the House of Lords at 6:51 pm on 20th May 2013.

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Photo of Lord Freud Lord Freud The Parliamentary Under-Secretary of State for Work and Pensions 6:51 pm, 20th May 2013

My Lords, every Member of this House can recognise that working people should have proper protection from personal injury or disease arising during their work. When this principle is breached through negligence or breach of statutory duty, it is right that a person should be compensated by their employer or employer's insurer.

We find ourselves presented with a situation that undermines these seemingly simple assumptions. Many sufferers of diffuse mesothelioma, caused by exposure to asbestos, are unable to find an employer or insurer against whom to make a claim. These people were negligently exposed to asbestos and subsequently developed a fatal disease, yet they must go uncompensated for their immeasurable loss because sufficient records do not exist to trace the responsible insurer or employer. The need to address this is apparent and urgent.

Government, media and public interest in asbestos-related diseases is long-standing. In 1965, the Sunday Times brought this issue to the spotlight and reported on research showing the fatality of exposure to asbestos fibres. Since then, this spotlight has rightly not gone away. Asbestos-related diseases have featured in the press and on television repeatedly, with dedicated programmes produced in 1967, 1971, 1975 and 1982. In 1979, the then Government legislated to make payments to those with certain dust-related diseases who had been exposed to asbestos at work but who could not find an employer or insurer to sue, although lump-sum payments under that were lower than civil damages. In 1999, the insurance industry created a code of practice for better tracing of employers' liability insurance policies. Although success rates for inquiries on difficult-to-trace policies increased, more needed to be done. In 2008, the previous Government introduced a scheme to make lump-sum payments to all people with diffuse mesothelioma regardless of whether they were exposed to asbestos at work. I pay tribute to the work of the noble Lord, Lord McKenzie of Luton. In 2010, as Parliamentary Under-Secretary for Work and Pensions, the noble Lord issued the consultation that has led us to where we are now. Without his efforts, this matter would not have had the profile that it so rightly deserves, and due credit must be given for his continued efforts to obtain support for sufferers.

The focus of this Bill is diffuse mesothelioma, a fatal disease caused almost exclusively by exposure to asbestos. Diffuse mesothelioma has a long latency period, often of 40 to 50 years. Once diagnosed, the average life expectancy of a sufferer is short: between nine and 13 months. The long delay between exposure and developing the disease, combined with inconsistent record-keeping in the insurance industry, means that individuals often struggle to trace an employer or insurer against whom to make a claim for civil damages. The insurance industry and this Government recognise that this is unjust and that provision must be made for these people.

Despite the recognition of this market failure, the insurance industry alone has not been able to put this right. Disputes between insurers and the different interests of companies that still offer employers' liability cover, which I shall refer to as "active" insurers, and those that no longer do so-I shall refer to them as "run-off" insurers-have prevented the industry agreeing on a voluntary levy. Industry representatives have therefore asked for legislation to impose a levy to support a payment scheme.

The Mesothelioma Bill will establish a payment scheme to make a lump-sum payment to eligible sufferers of mesothelioma and their eligible dependants. The scheme will be funded through a levy on insurers active in the employers' liability market, meaning that the active employers' liability insurance market as a whole will bear the cost. Timing is key; the number of diffuse mesothelioma cases is expected to peak around 2015. My aim is to launch the scheme as soon as possible-ideally in April 2014.

We expect there to be roughly 28,000 deaths from mesothelioma between July 2012 and March 2024. If the Bill is passed during 2013, first payments could be made around July 2014 to those diagnosed with mesothelioma on or after 25 July 2012. Around 300 people a year could receive an average payment of approximately £100,000.

The Bill is first and foremost a means to create a scheme to provide for those people who would otherwise be unable to bring a civil claim against their employer. In other words, it is a scheme of last resort. The driving principle is that, where adequate records are not available, those who have developed this disease as a result of their employer's negligence, or breach of statutory duty, should still be able to access payment for their injury, and the process of applying for this should be as straightforward as possible.

Secondly, the Bill is part of the ongoing commitment of this Government, previous Governments and the insurance industry to correct a market failure. The Bill includes measures which will improve the tracing of employers' liability insurance policies through the creation of a technical committee that makes binding decisions on insurance cover.

It is at this point worth reflecting on the work that the Ministry of Justice, too, is doing to support sufferers of mesothelioma. In December, a Written Ministerial Statement was issued confirming the Government's intention to consult on a range of measures, including a specific pre-action protocol for mesothelioma cases, a portal and fixed legal costs for such cases. None of these elements is beholden on our Bill and, similarly, our Bill is not beholden on them, but together they demonstrate the desire across government to help people with this terrible illness.

I turn to the question of payments. The scheme will make payments on a tariff basis to eligible people with mesothelioma, or to an eligible dependant if that person has died, where they cannot trace either an employer who exposed them to asbestos or that employer's insurer and where they have not received civil damages or some other compensation payment in respect of mesothelioma. The scheme is not intended to be an alternative to civil damages, nor is it a compensation scheme. The scheme will be set up by the Secretary of State, who will make arrangements for another body to be the scheme administrator.

The Bill allows for the payment amount to be determined in regulations that will set out a simple tariff, basing payments at roughly 70% of the amount of average civil damages. Payment amounts in the tariff will be linked to an individual's age. Calculating the amount of civil damages that a person is to receive is complex. However, published research shows that awards in civil cases decrease with the age of the victim. Regarding the amount of the payment, I ask your Lordships' support in understanding that the scheme strikes a careful balance and does so in a way that is fair and lawful. It ensures a substantial payment to people who have mesothelioma and cannot trace the liable employer or insurer, while ensuring that the contribution made by insurers is fair and not excessive, since not all of them were in business at the relevant time. It will ensure that the scheme can get on with helping sufferers and not get bogged down in legal challenges from insurers.

There are four main criteria for eligibility. The first is that an individual was diagnosed with diffuse mesothelioma on or after 25 July 2012. The second is that they were employed at the time of exposure to asbestos and that this was due to negligence or breach of statutory duty on the part of an employer. The third is that they have not brought a claim for civil damages against an employer or the employer's insurer and they are unable to do so. The fourth is that they have not already received damages or other compensation payment in respect of their disease, nor are they eligible to. I should point out that individuals who have received a payment under existing state schemes will be eligible to apply, but any such benefits and lump sum payments will be recovered when a payment is made under the new scheme. Eligible dependants of sufferers of diffuse mesothelioma may apply to the scheme where the sufferer has died before making an application. Calculating awards of compensation for dependants in civil cases can be complex, but under the scheme it will be simple and quick. The scheme will pay eligible dependants exactly the same amount as the sufferer would have received. We will set out details of the application process in the scheme rules. The scheme will give a right to an applicant to request a review of decisions taken and confer a right of appeal to the First-tier Tribunal against a decision taken on a review.

A sufferer must have been diagnosed on or after 25 July 2012 to be eligible under the scheme. A cut-off date will always be unfortunate for those whom it excludes. However, we must be pragmatic. The costs to the active insurers funding the scheme would be prohibitive if we were to make the scheme open-ended. It was on 25 July 2012 that the Government announced that they would set up a payment scheme and so created a reasonable expectation that eligible people diagnosed with mesothelioma on or after that date would receive a payment.

The Bill does not-and cannot-look to respond to all asbestos-related disease. The issue of individuals who have developed other asbestos-related diseases through negligence or breach of statutory duty and are unable to bring a civil claim for damages of course needs to be addressed. However, this Bill is not the appropriate instrument to do that. Mesothelioma is distinctive, and its link to asbestos exposure is undeniable. This allows for the fast processing of cases because there is no doubt that asbestos exposure caused the disease. The Bill supports the administration of a simple and streamlined scheme. It could not cover other diseases, where there could ever be a question as to the cause, because the lengthy investigations required in order to prove these cases would choke the scheme, preventing the comparatively simpler mesothelioma cases being administered with the necessary speed. Again, I ask noble Lords to look at this emotive issue from a pragmatic perspective and focus not on what is impossible but on what can be achieved. This legislation is a huge step forward and should be recognised as such.

The establishment of a technical committee to handle disputes relating to cover is key. The technical committee will be distinct from the scheme and will deal solely with disputes related to insurance cover. If a question arises between an insurer and an individual about whether an employer maintained employers' liability insurance with the insurer at a particular time, the technical committee will be able to make a binding decision on this issue. In practical terms, this means that if a person with diffuse mesothelioma has some evidence that an insurer was providing cover at the time they were negligently exposed but this evidence is contested by the insurer, they can ask the technical committee to make a decision. This will also benefit other mesothelioma sufferers exposed to asbestos by the same employer at the same time, who may wish to bring a claim against that employer in the future. The technical committee will ensure consistency in decision-making and allow more people to take a case to court, having had the issue of cover already decided. Where the technical committee decides that an insurer is not on cover in a particular case, and no other employer or insurer has been traced, the person with diffuse mesothelioma may then be able to apply for a payment under the scheme.

The Bill envisages a review process for any decision taken by the technical committee. Following a review, a person may refer a decision to arbitration, after which very limited recourse to the courts is possible under the arbitration legislation. Again, timing is key; undue delays in the decision-making process would prevent an eligible applicant taking further action while they are still alive, be it seeking damages in the civil courts or applying for a scheme payment. It is expected that the decisions and reviews will be undertaken by the technical committee with the utmost speed.

I now turn to the levy on insurers. The levy will be imposed on active employers' liability insurers at large, not on the individual insurers who took the premiums and who were on cover in the cases that will come to the scheme. The levy will be fair and not excessive, and set at a rate that does not require the insurers to pass on increased costs to business. The scheme could be jeopardised if the levy were set disproportionately high, which might invite legal challenges from the insurance industry. This would delay the introduction of the scheme, preventing a payment mechanism being in place at the time of the peak of mesothelioma deaths around 2015. Once more, we must be pragmatic and recognise what can be achieved.

The cost of the scheme in the first year will be considerably higher than in subsequent years because of the number of cases dating back to 25 July 2012. To avoid the first period's levy being unaffordable and risking costs being passed on to current employers through higher premiums, the costs will be spread over four years.

Existing government provision is available for those who are unable to claim damages or receive payments from elsewhere. Where a person has received government benefits or lump-sum payments for diffuse mesothelioma and subsequently becomes eligible for a payment under the new scheme, the benefits recovery legislation will apply. This is because people should not be compensated twice for the same condition or compensated in excess of their loss. This means that an eligible applicant will receive a scheme payment after the deduction of relevant social security benefits and lump-sum payments, which the scheme administrator will repay to my department through its compensation recovery unit. Similarly, the Bill includes amendments to the existing lump-sum payments legislation to prevent an individual receiving such payments after they have received a payment under this new scheme.

I hope that noble Lords can agree today that the principles driving the Bill are right and just; that it is right that we legislate to provide for people with diffuse mesothelioma who are unable to claim civil damages from an employer for negligence or breach of statutory duty; that it is right that the insurance industry bear the cost; and that it is right that we establish the scheme with the greatest possible speed.

The measures contained within this Bill will mean that people with diffuse mesothelioma or their eligible dependants will be supported financially at this most stressful time. Quick access to payments will allow victims to afford care and treatment costs so that they can die at home with dignity.

The Bill marks great progress and strikes a careful balance in a fair and lawful way between the rights of victims and the active insurers funding the scheme. Several active insurers funding the scheme will not have even existed at the time when the exposure to asbestos occurred. Several of these insurers will have also maintained good records for the periods when they were providing insurance services. The Bill demonstrates the commitment of the insurance industry to correcting a terribly damaging market failure, and I thank the Association of British Insurers for this commitment. I am encouraged by the support of the industry, and look to the Financial Conduct Authority to support this work further through vigorously pursuing any insurer that fails to comply with requirements relating to EL record tracing.

The Bill is timely and necessary. It is something that I believe we should all welcome, and I commend the Bill to the House. I beg to move.