Cutting out the legal men

Insurers are in secret talks with the government in a bid to settle the long running dispute over whether victims of pleural plaques should be compensated. While the deal on the table could cost the industry up to £500m, insurers are keen to reach a quick resolution with an upper limit on payouts. And the industry is keen to keep its old enemies, the lawyers, from cashing in.

As revealed in Insurance Times, government officials have been seeking a deal that would see insurers pay up to £5,000 to each pleural plaques victim – despite a recent House of Lords ruling which said the conditions was not compensable.

Stephen Haddrill, the ABI’s director general, as well as representatives from AXA and RSA are understood to be involved. The ABI denies that discussions are underway, and AXA and RSA refuse to comment on the talks.

The discussions came against a backdrop of growing pressure on the government to address the question of compensation for plaques victims. Pleural plaques are fibrosis areas on the lungs of victims, caused by exposure to asbestos fibres. They are not malignant.

The Ministry of Justice has said that a consultation paper on pleural plaques will be published shortly. Prime Minister Gordon Brown, under pressure from MPs and lobby groups, has weighed into the debate and pledged to take action.

Meanwhile the talks with the insurance industry have progressed. A senior source says insurers had been focusing on how lawyers could be removed from the process for handling any pay-outs to pleural plaques victims. This would keep the costs down for any compensation system.

That the discussions have moved to this level of detail indicates a deal could be struck.

With a £500m bill in the offing insurers are keen to keep the costs of administering any compensation system to a minimum. The removal of claimant lawyers from any compensation system would save huge sums, but is likely to be controversial.

Hugh Price, a partner with law firm Hugh James, said: “If there is a government scheme and a protocol is established for the claimant, then in that instance there may well be justification for saying, ‘do we need lawyers?’ Well, probably not.

“But asbestos claims are not straight forward, especially if the claimant suffers from mesothelioma, which is the cancerous development of asbestos exposure. It is a fatal disease so I can’t imagine a situation where a family would not want lawyers involved.”

AXA’s Williams says asbestos-related claims are relatively straightforward and there is no need for lawyers to be involved.

“Asbestos exposure is a fatal disease so I cannot imagine a situation where a family would not want lawyers involved.

Hugh Price, Hugh James

“If you look at some work the ABI did last year, it suggested if you go to an insurance company direct with your claim for bodily injury, you get your claim paid quicker and on average you get more.

“We end up having to pay them a huge amount of money for a lot of what we consider to be unnecessary.”

Meanwhile, the MPs who are pushing for the government to take action to ensure plaques victims are compensated are prepared for a fight.

Labour MP David Anderson said: “I spoke to Stephen Hepburn [another MP campaigning for compensation for plaques victims] and he has agreed with the Prime Minister’s office to meet as soon as possible after the recess. The Prime Minister might have other things on his mind, but we will keep at him.”

Anderson argues that pleural plaques can lead to more serious asbestos-related conditions, and therefore victims should receive compensation.

He says “If you have scars on your lungs, then that can be a precursor to one of the most horrible cancers in the world. Even if it doesn’t develop, you do have massive stress problems.”

In the past, insurers have paid average claims for pleural plaques of £5,000 in provisional damages. A spokesman for Norwich Union says the reason insurers decided to challenge the pay-outs was because better medical evidence now makes it clear that pleural plaques are symptomless and not life threatening.

Insurers have for some time been trying to resist paying compensation to victims of pleural plaques.

In 2004 insurers including Norwich Union and Zurich took test cases to the High Court and were told they would have to pay. This decision was overturned on appeal in January 2006. But the appeal court judges were not unanimous in their decision and the case went to the House of Lords, which, on 17 October, ruled pleural plaques were not compensable.

With northern MPs in particular having constituents affected by asbestos exposure, as well as the Prime Minister’s promise to investigate pleural plaques, insurers face an uphill battle despite the House of Lords’ ruling, which they fear the government will overturn. A deal with the government looks increasingly likely.

Given how long the argument has dragged on for, even a £500m resolution is beginning to look like a good option.