CESR/06-669: THE PASSPORT UNDER MiFID – ABI RESPONSE …



Pleural Plaques

The ABI’s Response to the Department of Finance and Personnel Consultation Paper CP 02/08

The ABI is the voice of the insurance and investment industry. Its members constitute over 90 per cent of the insurance market in the UK and 20 per cent across the EU. They control assets equivalent to a quarter of the UK’s capital. They are the risk managers of the UK’s economy and society. Through the ABI their voice is heard in Government and in public debate on insurance, savings, and investment matters. And through the ABI they come together to improve customers' experience of the industry, to raise standards of corporate governance in British business and to protect the public against crime. The ABI prides itself on thinking for tomorrow, providing solutions to policy challenges based on the industry’s analysis and understanding of the risks we all face.

Introduction

Pleural plaques are small fibrous discs on the surface of the lungs. They are symptomless in all but a handful of exceptional cases, and neither lead to, nor increase susceptibility to, any other conditions. They are benign and do not impair quality of life. Despite this clear prognosis, there continues to be much confusion and concern among sufferers and the wider public about what a diagnosis of pleural plaques really means for a person’s health.

The Department of Finance and Personnel has produced a consultation paper on pleural plaques in response to the House of Lords’ decision in Johnston v NEI International Combustion Ltd. The paper discusses a number of ways to assist people with pleural plaques, including increasing support, help and information available for people with pleural plaques; overturning the House of Lords’ decision by changing the law of negligence; and a no-fault payment scheme, either applying to those exposed prior to the House of Lords’ judgment or to all diagnosed, both before and after.

The ABI strongly supports increasing support, help and information for those with pleural plaques and the wider public, but does not support either overturning the House of Lords’ decision in Johnston, or a no-fault payment scheme because:

• Compensation is not the best way to help people with pleural plaques – paying compensation either through overturning the House of Lords’ decision or through a no-fault payment scheme sends the wrong message to people that the condition is more serious than it is, perpetuating confusion. Raising awareness of the benign nature of pleural plaques and improving the information available will provide reassurance and reduce anxiety. Further, making pleural plaques compensatable is likely to lead to a rise in ‘claims farmers’, with a vested interest in generating referral fees, who encourage people to have unnecessary and possibly harmful x-rays.

• Overturning a House of Lords decision will undermine business confidence – overturning the House of Lords’ decision proposes a fundamental change to the law of negligence, undermining stability of the legal environment. Parties should be able to rely on certainty of House of Lords’ decisions, to shape business practices accordingly. Legal instability would make Northern Ireland a less attractive place for investment. It will also increase costs for businesses, government, local authorities and insurers.

• It will fundamentally change the law of negligence – interference with the fundamental principles of law in this way may be used as a precedent to argue for compensation for other currently non-compensatable conditions, further increasing costs. It will also detrimentally affect the economic rights and interests of insurers, in breach of the European Convention on Human Rights.

ANNEX A

Questions for Consultation

QUESTION 1: DO YOU THINK INFORMATION LEAFLETS ON PLEURAL PLAQUES WOULD BE USEFUL? IF NOT, WHY NOT?

We believe that awareness raising measures such as information leaflets would be useful, and strongly support such measures.

Raising awareness about the benign nature of pleural plaques should help allay concerns of those diagnosed, and the wider public. At the moment, pleural plaques are not well understood; many people wrongly think that they will develop into lung cancer or mesothelioma.

How best to raise awareness

The best way to raise awareness and understanding is to increase the amount of accurate information about pleural plaques available for medical professionals, those diagnosed with pleural plaques and the wider community. This information could be tailored to different audiences.

The information for medical professionals could include technical literature on the nature of pleural plaques, disseminated via professional publications and medical professional bodies. There could be specific guidance targeting those who regularly make pleural plaques diagnoses, and those who make units that test for asbestos-related conditions. For those diagnosed with pleural plaques, and for the wider public, there should be information leaflets in general practice surgeries, community health centres, and x-ray departments, in addition to those places suggested in the UK government consultation paper. A website, hosted by an appropriate source such as the government or the medical profession, may be helpful in reducing confusion around the nature of pleural plaques.

QUESTION 2: WOULD YOU SUPPORT THE CREATION OF A REGISTER? PLEASE GIVE REASONS FOR YOUR ANSWER.

We would not support the creation of a register for the following reasons:

• Medical evidence shows that only a tiny fraction of people with pleural plaques develop symptoms as a result of their exposure to asbestos. The vast majority of people on such a database would not therefore develop any disease.

• We believe a database would cause unnecessary distress to people with pleural plaques. Doctors would be providing reassurance while at the same time be advising them to register on a database in case they go on to develop terminal cancer. This is counter-productive.

• The cost of setting up and maintaining the database also needs to be taken into account. The expenditure would provide no benefit to almost everyone on the database, and therefore cannot be justified.

QUESTION 3: DO YOU HAVE ANY INFORMATION ON SETTLEMENT FIGURES AND ASSOCIATED LEGAL COSTS OR ANY ESTIMATES REGARDING:

• THE NUMBER OF PEOPLE CURRENTLY DIAGNOSED WITH PLEURAL PLAQUES;

• THE FUTURE NUMBER OF PEOPLE WHO WILL DEVELOP PLEURAL PLAQUES;

• THE FUTURE DISTRIBUTION OF PLEURAL PLAQUES CASES;

• THE PERIOD OF TIME OVER WHICH PEOPLE WILL DEVELOP PLEURAL PLAQUES; OR

• THE NUMBER OF PEOPLE DIAGNOSED WITH PLEURAL PLAQUES PRIOR TO THE HOUSE OF LORDS’ DECISION AND WHO HAVE NOT RECEIVED COMPENSATION.

THE NUMBER OF PEOPLE CURRENTLY DIAGNOSED WITH PLEURAL PLAQUES; AND

THE FUTURE NUMBER OF PEOPLE WHO WILL DEVELOP PLEURAL PLAQUES

We do not know how many people have, or will develop, pleural plaques

The ABI does not have estimates of how many people are currently diagnosed with, or will develop, pleural plaques. However, there are a number of medical studies which give an indication of the prevalence of pleural plaques:

- In his report of 10 November 2004, Dr Moore Gillon suggested that for every person who develops mesothelioma in any given period, there will be 20-50 people developing plaques, i.e. 30,000 to 75,000 per year in the UK[1]

- A study of autopsy results for males over 70 years old near Glasgow showed a 51.2% incidence of pleural plaques[2]

- A study by SJ Chapman concludes pleural plaques “are found in as many as 50% of asbestos-exposed workers”[3]

- Professor Tony Newman Taylor, previously chair of the Industrial Injuries Advisory Council, states that about a third to half of those occupationally exposed to asbestos will have calcified pleural plaques thirty years after first exposure[4].

The Ministry of Justice (MoJ) in their consultation paper, estimate that, based on a combination of the medical estimates, 1-2.5 million people will develop pleural plaques, and 200,000 – 1.25 million people will be diagnosed.

Costs Estimates

The ABI refer to the MoJ’s estimate of legal costs based on an Actuarial Working Party report released by the Institute of Actuaries. This report gave average compensation costs ranges of £11,500-13,400 and average legal costs of £14,000.

We cannot offer more information to assist the current UK Government estimates. These estimates which stand at total compensation and legal costs associated with a range between £3.7 billion – 28.6 billion. The UK Government arrived at these figures by using the medical estimate of the amount of people diagnosed with pleural plaques above, and the average cost of compensation and legal fees. We cannot give a figure for Northern Ireland, but based on the Northern Ireland population of 1.75 million, they could expect to bear at least 2.9% of the total UK cost, being £111 million - £858 million.

THE FUTURE DISTRIBUTION OF PLEURAL PLAQUES CASES

We do not know the future distribution of pleural plaques cases

The ABI does not have estimates regarding the future distribution of pleural plaques. Accordingly, we cannot offer more information to assist the current UK Government estimates, which stand at 200,000 - 1.25 million diagnosed in the UK. The estimated total compensation and legal costs associated with this range between £3.7 billion – 28.6 billion.

We do not know the future number of pleural plaques claims

History shows us that it is very difficult to accurately predict how many claims are likely to arise following changes to legislation: at the outset of the British Coal Chronic Obstructive Pulmonary Disease scheme, 150,000 claims were expected; by the time the scheme closed, 592,000 claims had been registered. This massive underestimation was despite data with a greater degree of statistical certainty than exists for plaques.

THE PERIOD OF TIME OVER WHICH PEOPLE WILL DEVELOP PLEURAL PLAQUES

The ABI does not know the period of time over which people will develop pleural plaques. However, in its policy consultation document, and based on medical evidence, the MoJ estimated that it was approximately 20 years following exposure of asbestos before the first indicators appear.

THE NUMBER OF PEOPLE DIAGNOSED WITH PLEURAL PLAQUES PRIOR TO THE HOUSE OF LORDS’ DECISION AND WHO HAVE NOT RECEIVED COMPENSATION

We do not know the number of people diagnosed with pleural plaques prior to the House of Lords decision, who have not received compensation.

The UK Government has recognised that “there is no reliable way of estimating how many individuals who have pleural plaques as a result of negligent exposure to asbestos will ultimately make a claim”.

The insurance industry is in no better a position than government to give an estimate on those who have not received compensation.

QUESTION 4: DO YOU THINK THE LEGISLATION SHOULD BE INTRODUCED TO OVERTURN THE DECISION IN THE JOHNSTON CASE?

We do not think legislation should be introduced to overturn the decision in the Johnston case for the following reasons:

It is not the best way to help people with pleural plaques

Paying compensation through overturning the House of Lords’ decision sends the wrong message to people that the condition is more serious than it is, perpetuating confusion. Professor Anthony Seaton, Emeritus Professor at the University of Aberdeen, recently said:

‘“It is understandable that individuals with plaques can be worried about their prognosis if they are given misinformation on their significance. The change in case law that led to individuals with pleural plaques receiving money for a non-disease caused problems in their management. While giving appropriate reassurance and explaining the risks of other asbestos-related diseases in relation to the risks of much more likely diseases, we were obliged to advise them to consult a lawyer – a mixed message with the obvious consequence of causing anxiety. The main beneficiaries have been lawyers and expert witnesses such as me. I believe we have better things to do, to prevent real diseases.

There is a risk that the desirability of raising awareness of the nature of pleural plaques and allaying unnecessary concerns could be undermined by the provision of compensation, as this could send mixed messages about the nature of the condition and increase concerns.[5]”

This has been echoed by other medical experts, such as the Royal College of Physicians, who noted in their submission to the Justice Committee on the Scottish Government’s Damages (Asbestos-related Conditions) (Scotland) Bill that:

“The fatal consequences of asbestos exposure through mesothelioma and lung cancer do not apply to the development of pleural plaques, but there is little doubt that patients can be confused and anxious about “asbestosis” in general and categorise pleural plaques within this group. The College understands this but the medical evidence is clear and competent, and knowledgeable physicians should be in a position to allay these fears. Lawyers seeking to support patients in compensation claims must not be allowed to undermine the medical evidence.”

Likewise, if compensation were made available for pleural plaques, it is likely that more people would be tested for it. Again, because of the common misconceptions about the condition, many people who would probably never have known they had it would be unnecessarily distressed. It could also lead to a rise in ‘claims farmers’ who, with a vested interest in generating referral fees, encourage people to have unnecessary and possibly harmful x-rays, and put extra pressure on the national health system.

Overturning a House of Lords decision will undermine business confidence

Overturning the House of Lords’ decision proposes a fundamental change to the law of negligence, undermining stability of the legal environment. Parties should be able to rely on certainty of House of Lords’ decisions, to shape business practices accordingly. Legal instability would make Northern Ireland a less attractive place for investment.

Further, overturning the decision will increase costs and divert resources for businesses, government, local authorities and insurers. There would be added pressure on the health system, with increased demand for x-ray and CT scans, including costs for medical staff time, training and operation of equipment. For insurers, the departure from established principles alters the nature of liability insurance and would likely destabilise the insurance market.

The position of run-off companies, and solvent defendants with insolvent insurers, needs to be considered. Such companies are likely to have limited assets with which to meet asbestos liabilities and any diversion of such resources to pay plaques claims will reduce the funds available to pay claims for mesothelioma and other symptomatic asbestos related conditions.

The MoJ consultation paper estimates the total potential cost of changing the law on pleural plaques in this way at between £3.7bn - £28.6 billion, reflecting the uncertainty regarding the potential number of claims.

It will fundamentally change the law of negligence

Making pleural plaques compensatable fundamentally changes the law of negligence, eroding the integrity of a large area of common law. As the Government consultation paper points out, the determination, as to whether a particular disease or condition constitutes an injury which is compensatabl, has traditionally been a matter for the courts under common law.

Changing the law in this way for asymptomatic asbestos-related conditions is likely to be used as a precedent to argue for compensation in other situations which are not currently compensatable. This could open up a potential ‘floodgate’ of claims based on circumstances where no actionable damage has occurred and, even more widely, claims for risk of an illness occurring or for worry that something might happen. This potentially increases the level of litigation and possibility of spurious claims, and also exposes defendants to potentially significant costs, which could be damaging to business and the economy.

As the Government consultation paper points out, the legislation would need to apply to the cases included in the decision itself, and all cases where there was no judgement or settlement prior to the House of Lords’ decision. Retrospective legislation of this nature is contrary to the European Convention of Human Rights, on the basis that the legislation interferes with settled arrangements and could only be justified on the grounds of compelling public interest. In this instance, the public interest is better served by allowing the courts to rule on a fundamental interpretation of the common law.

The legality of any such legislation will be closely examined by insurers, some of whom intend to launch a challenge to the Damages (Asbestos Related Conditions) (Scotland) Bill introduced by the Scottish Government, should it become law.

QUESTION 5: IF YOU DO THINK LEGISLATION SHOULD BE INTRODUCED, WOULD YOU FAVOUR LEGISLATION WHICH-

A) RESTRICTS CLAIMS TO THOSE WHO HAD BEEN DIAGNOSED WITH PLEURAL PLAQUES BEFORE THE JOHNSTON CASE?;

B) ALLOWS ANYONE WHO HAS BEEN DIAGNOSED WITH PLEURAL PLAQUES TO CLAIM?

C) FOLLOWS THE BILL IN SCOTLAND BY COVERING ASYMPTOMATIC PLEURAL PLAQUES, PLEURAL THICKENING AND ASBESTOSIS?

We do not think legislation should be introduced to overturn Johnston, for the reasons given when answering Question 4 above.

QUESTION 6: DO YOU THINK THERE IS A DANGER THAT LEGISLATION WILL CREATE A PRIVILEGED CLASS OF CLAIMANT OR SET AN UNHELPFUL PRECEDENT?

We think that there is a very real danger that legislation will create a privileged class of claimant and set an unhelpful precedent. In particular, legislation to reverse the decision in Johnston takes one class of persons in the population and says that they have been injured, even though, according to the ordinary principles of what constitutes damage under UK common law, they have not been injured, are not unwell and have not suffered any damage.

As mentioned in the response to question 4 above, reversing the legislation will set a precedent to argue for compensation in similar situations, and could considerably increase the level of litigation and the possibility of weak or spurious claims, which would have a damaging effect on business and the economy.

QUESTION 7: DO YOU SUPPORT THE OPTION OF A PAYMENT SCHEME FOR PLEURAL PLAQUES? IF SO, HOW WOULD YOU SEE THE SCHEME WORKING? IN PARTICULAR, WHAT LEVEL OF PAYMENT WOULD BE APPROPRIATE AND SHOULD A LIMITATION PERIOD BE APPLIED?

We do not support the option of a payment scheme for pleural plaques:

It is not the best way to help people with pleural plaques

Having a no-fault payment scheme for pleural plaques reinforces the position that plaques are a condition for which compensation is required. It sends confusing messages to those diagnosed with plaques and to the wider public, which may readily associate compensation with damage.

QUESTION 8: WOULD ANY OF THE IDENTIFIED OPTIONS LEAD TO A HIGHER OR LOWER LEVEL OF PARTICIPATION OR UPTAKE BY THE SECTION 75 GROUPS OR HAVE A DIFFERENTIAL IMPACT ON THE GROUPS? PLEASE GIVE REASONS FOR YOUR ANSWER

We are not aware of any impact the options might have on participation or uptake by the Section 75 groups.

QUESTION 9: DO YOU HAVE ANY INFORMATION ABOUT HOW A CHANGE TO THE LAW WOULD IMPACT ON THE BUSINESS SECTOR?

For the insurance industry, a change to the law would mean a significant financial impact. Employers’ liability premiums will almost certainly have to rise to fund the additional cost, resulting in extra cost to all policyholders at a time when many are suffering as a consequence of the economic downturn. In the longer term, it could lead to higher cost and less choice as some insurers decide not to write certain types of risk or insurance. This will affect the wider business community.

Overturning the decision will increase costs and divert resources for businesses, government, local authorities and insurers. There would be added pressure on the health system, with increased demand for x-ray and CT scans, including costs for medical staff time, training and operation of equipment.

The position of run-off companies, and solvent defendants with insolvent insurers, needs to be considered. Such companies are likely to have limited assets with which to meet asbestos liabilities and any diversion of such resources to pay plaques claims will reduce the funds available to pay claims for mesothelioma and other symptomatic asbestos related conditions.

The MoJ consultation paper estimates the total potential cost of changing the law on pleural plaques in this way at between £3.7bn - £28.6 billion, reflecting the uncertainty regarding the potential number of claims.

CONCLUSION

Compensation, either through overturning the House of Lords’ decision in Johnston or through a no-fault payment scheme, is not the best way to help people with pleural plaques; it sends the wrong message to people that the condition is more serious than it is, perpetuating confusion and contributing to anxiety about pleural plaques. Additionally, the impact of government intervention will have a significant impact on business confidence and legal stability. Increasing awareness about what the condition really means for a person’s health will provide reassurance and reduce anxiety for those who have been diagnosed with pleural plaques and correct any misconceptions amongst the wider public.

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[1] Dr John Moore-Gillon, 10 November 2004

[2] Cugell, DW and DW Kamp, "Asbestos and the Pleura: A Review", Chest 2004:125, 1103-1117

[3] Chapman, SJ et al, "Benign Asbestos Pleural Disease", Curr Opin Pulm Med 2003:9(4), 266-271

[4] 3 Dec 2007 House of Commons debate, Michael Clapham (Lab): reading an email from Professor Tony Newman Taylor: "You may be interested to know that about a third to one half of those occupationally exposed to asbestos will have calcified pleural plaques thirty years after first exposure. After twenty years, 5 to 15 per cent. will have uncalcified pleural plaques".

[5] Professor Anthony Seaton, ‘Close scrutiny needed on asbestos-related disease’ in The Scotsman, 30 October 2007

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