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Monthly update – August 2012
General damages to increase by 10% Third UK Corporate Manslaughter conviction obtained Victims unable to claim from taxi driving rapist’s motor insurers Government announces new compensation scheme for Mesothelioma victims Pyrite panel publishes report for Irish Government 1
Insurance Fraud Enforcement Department secures first conviction: R v John Machin – Leeds Crown Court (2012)
First Jury Loss of Society Awards since reforms: Kelly v UCS – Court of Session (2012)
News General damages to increase by 10%
The Court of Appeal has used the opportunity of giving judgment in the case of Simmons v Castle, to announce that general damages will increase in value in England and Wales by 10% for all cases where judgment is given on or after 1 April 2013. The increase is part of Lord Justice Jackson’s package of reforms intended to reduce the cost of litigation but unlike other measures, which are contained in the Legal Aid Sentencing and Punishment of Offenders Act 2012 (LAPSO), the increase will apply retrospectively to any case provided judgment is not given until after 1 April 2013. The remaining provisions in LASPO will only apply for cases where solicitors are instructed after 1 April 2013. This is likely to lead to demands for increased damages from claimants now who otherwise can seek to delay their claims going to trial until after 1 April 2013. The Association of British Insurers (ABI) has written to the Lord Chancellor to urge him to obtain legal advice on the impact of this judgment and to consider measures to manage its impact, including bringing forward other reforms contained within LAPSO. The ABI has warned the Lord Chancellor that unless he acts to ameliorate the effects of this change, the cost of motor and liability claims could rise by hundreds of millions of pounds with corresponding pressure to increase insurance premiums.
Comment: The Jackson reforms are intended to reduce the costs of litigation by ending the recoverability of success fees and after the event insurance premiums from defendants. The increase in general damages was intended to partly offset these losses to claimants but because of the retrospective nature of the Court of Appeals judgment, insurers and other compensators will see demands for increased damages now without the benefits of costs reform yet taking effect.
1 Technical claims brief, monthly update – August 2012
Third UK Corporate Manslaughter conviction obtained
Lion Steel has become the third UK Company to be convicted under the Corporate Manslaughter and Corporate Homicide Act 2007. The company pleaded guilty to Corporate Manslaughter after individual charges of Gross Negligence Manslaughter and charges under the Health and Safety at Work Act (HSWA) against three directors, and a further HSWA charge against the company, were dropped. The company was fined £480,000 and ordered to pay half the prosecution costs
in the sum of £84,000. The prosecution costs were halved by the Judge due to the unacceptably long delay in prosecuting the case, some four years after the tragic death of employee Steven Berry who fell from a roof. The fine was reduced from £600,000 to £480,000 to reflect the guilty plea. The gross fine at £600,000 was the first to comply with the sentencing guidelines which recommend fines above £500,000 in value. Following submissions about the impact of a large fine on a relatively small company, Lion Steel was given three years to pay the fine and costs.
Comment: Following this third prosecution, questions remain about how the court will define senior management in large companies and whether the prosecuting authorities have the appetite to prosecute a large organisation.
2 Technical claims brief, monthly update – August 2012
Mr Justice Silber expressed his great sympathy for the claimants but said that his duty in deciding the case was to follow the appropriate legal principles. Comment: Interpretation of whether injuries fall within the RTA will always be governed by the particular facts of the case. The essential character of the journey at the time of the incident that led to injury was the key consideration in the judgment here. We are grateful to DAC Beachcroft who acted for the insurers Inceptum in this case, for their very helpful note on the outcome.
Victims unable to claim from taxi driving rapist’s motor insurers
The High Court has ruled as a preliminary issue that ten victims of serial rapist John Worboys are unable to obtain damages from Worboys’ taxi insurers Inceptum under the Road Traffic Act 1988 (RTA). In AXN and Others v John Worboys and Inceptum Insurance Company Ltd (see June 2012 Brief) Mr Justice Silber held that: • The injuries suffered by the claimants were not caused by and did not arise out of the use of the vehicle within the meaning of the RTA • Worboys’ liability for drugging and assaulting his victims was not one that required compulsory insurance under the Act and neither was it covered by his motor policy • Worboys’ use of his vehicle at the material time was not a use insured by his motor policy
• Inceptum as insurers of Worboys’ taxi were not liable under the Act to meet any judgment obtained by the claimant against Worboys. In reaching his decision the Judge found that the term ‘arising out of’ must be applied to the relationship between the injuries suffered and the use of the vehicle at the time they were suffered (not at the outset of the journey). The link between the use of the vehicle and the injuries was broken by Worboys’ acts of drugging and raping his victims. This case was distinguished from the Court of Appeal authority of Dunthorne v Bentley. In Dunthorne a motorist caused an accident by running across a road to find petrol for her car. In that case, the injuries to another driver were held to have arisen from the use of a motor vehicle. The motorist in Dunthorne was seeking fuel so that she could continue her duty whereas Worboys had no wish to continue a journey he planned solely to commit rape.
3 Technical claims brief, monthly update – August 2012
Government announces new compensation scheme for Mesothelioma victims
Following the public consultation, Accessing Compensation-Supporting People who need to trace Employer’s Liability Insurance, details of the Mesothelioma Untraced Scheme (MUTS) were announced by the UK Department of Work and Pensions (DWP) on Wednesday 25 July 2012. The scheme is intended to provide compensation for Mesothelioma victims, diagnosed from the date of the statement, whose employers have no traceable insurance or assets and who would not otherwise be compensated. The consultation had proposed the establishment of an Employer’s Liability Insurance Bureau to act as a fund of last resort for all injured employees who were unable to obtain compensation. The Government do not believe that this is justified but they were persuaded that given the dreadful nature of mesothelioma, victims were a special case warranting assistance.
To fund the scheme the Government is to introduce a tax on current Employer’s Liability (EL) Gross Written Premium (GWP) with effect from 2014 (a contribution based on historic market share was considered to be too difficult to administer). The rate will not be announced until the 2013 budget and will be implemented by the Finance Bill 2013. To cover set up costs and the initial backlog of old cases, insurers will have to have to pay a levy of around 3% (possibly more) of 2013 GWP based on Employer’s Liability Tracing Office (ELTO) disclosure figures with the DWP contributing a £50 million loan to the MUTS administration body. No commencement date has yet been set but the second quarter of 2014 is likely. The compensation tariff will run at 75% of 2008 awards plus an adjustment for inflation.
Comment: The scheme will provide much needed compensation for Mesothelioma victims and their families, who would otherwise be unable to claim damages. It stops short of a universal scheme (like the Motor Insurers Bureau untraced and uninsured schemes) as was originally proposed but this could be extended in the future.
4 Technical claims brief, monthly update – August 2012
Pyrite panel publishes report for Irish Government
The panel commissioned by the Irish Government to investigate the problem of reactive pyrite heave in Irish housing, has published its report. The three-member panel looked at how the problem arose and made twenty-four recommendations focused on addressing the immediate problems of affected homeowners and preventing a reoccurrence in the future. The problems caused by reactive pyrite used in hard core for house foundations was first brought to the attention of the Irish Government in 2007 after two years of abnormal cracking claims alerted the press and politicians to the issue. The Irish Government was prompted to set up the panel in 2011 following the decision by Homebond, one of the two main companies providing structural defect guarantees, to declare that their warranty scheme did not cover pyrite heave damage. This left many affected homeowners with no access to funds to carry out repairs. It is now widely accepted that expanding reactive pyrite has caused hard core to crack. An estimated 12,250 ground floor privately owned dwellings have hardcore containing pyrite. Of these 1,110 have undergone or are undergoing remedial work and a further 850 have made claims for damage. This leaves 10,300 dwellings, which may have problems in the future. In addition, some 850 social dwellings have suspected or confirmed pyrite heave. Rectification work is both time consuming and expensive requiring the occupants of the property to move out whilst the ground floor slab and underlying hardcore are removed and replaced.
The immediate problem identified by the panel is to find funds for the many uninsured homeowners, to affect repairs. The panel believe that funds should be made available by the construction/ quarrying industry and their insurers. The former could be subject to a Government imposed levy. Homebond are urged to reconsider their position and “re-engage” with homeowners as soon as possible. In addition, there should be a review of the standard limits of Contractor’s All-Risk and Public Liability policies, a review of the Statute of Limitations in respect of latent
defects and the removal of restrictions of cover in relation to pyrite-affected dwellings. Comment: the Pyrite Panel has no powers to amend Irish legislation but has called on the Irish Government to act quickly to assist homeowners. The extent of any impact on the construction industry and their insurers will depend on what if any panel recommendations the Irish Government adopt. Many insurers currently exclude cover for pyrite damage.
5 Technical claims brief, monthly update – August 2012
Fraud Insurance Fraud Enforcement Department secures first conviction: R v John Machin – Leeds Crown Court (2012)
Would be insurance fraudster John Machin has become the first person to be convicted following an Insurance Fraud Enforcement Department (IFED) investigation. Mr Machin inadvertently incriminated himself when he failed to hang up his telephone properly after ringing his insurers to report a fictitious accident and was recorded boasting to an accomplice about how easy it was to make a fraudulent claim. The insurers reported him to IFED, the specialist police unit funded by insurers to tackle insurance fraud. Mr Machin was subsequently prosecuted and sentenced to a suspended prison sentence of one
year. He was also ordered to complete 200 hours of community service. Machin has had to suffer the embarrassment of having his recorded comments played on BBC Radio 4’s “You and Yours’” programme, aired on the BBC’s web site and later reported by international news agencies as far afield as Atlanta. Comment: It is always pleasing to see a fraudster get his just desserts, especially in such a public way.
6 Technical claims brief, monthly update – August 2012
Quantum First Jury Loss of Society Awards since reforms: Kelly v UCS – Court of Session (2012)
The first jury trial for Loss of Society claims, following the reform of the system by the Inner House of the Court of Session in the combined appeal cases of Hamilton and Anr v Ferguson Transport and Thomson v Dennis Thomson Ltd (see July 2012 Brief) has seen the jury awarding damages within the range given them by the judge. In the case of Kelly v UCS the judge gave the following guideline figures for loss of society suffered by the family of a deceased mesothelioma victim: Widow Adult Child Grandchild Sibling £40,000 to £80,000 £15,000 to £35,000 £5,000 to £25,000 £5,000 to £20,000 Comment: In the first case where a jury was allowed to have guidance, they kept to the recommended brackets and made awards at the lower end. If this is repeated in subsequent cases, the spiralling increases in the level of awards will end (although damages will remain far higher than in England and Wales). Once again, we are grateful to HBM Sayers who acted for the Defenders in the Inner House appeal cases, for their helpful note on this case.
The jury having considered this advice made the following awards: Widow Adult Child Adult Grandchild Brother £40,000 £25,000 £8,000 £8,000
7 Technical claims brief, monthly update – August 2012
Completed 30 July 2012 – written by and copy judgments and/or source material for the above available from John Tutton (contact no: 01245 272 756, e-mail: firstname.lastname@example.org).
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8 Technical claims brief, monthly update – August 2012
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