Mesothelioma (Insurance Premiums)

Andy McDonald Excerpts

Wednesday 29th January 2014 Westminster Hall

[Andy McDonald (Middlesbrough) (Lab)]

It is an honour to open this important debate and to serve under your chairmanship, Mr Hollobone. I draw Members’ attention to my entry in the Register of Members’ Financial Interests.

It would be remiss of me to start my speech without paying tribute to my right hon. Friend the late Paul Goggins, who was such an assiduous advocate for mesothelioma sufferers and their families. I attended his funeral the week before last at Salford cathedral with many other colleagues, and had a conversation with the hon. Member for Foyle (Mark Durkan), in which he reflected on Paul’s innate decency and many wonderful qualities. He summed up Paul’s parliamentary contributions by saying that his arguments were well marshalled and his responses well mannered. I will strive for those high standards today, but I fear I will never be able to emulate such a brilliant parliamentarian.

In essence, this is a mercifully simple matter, but perhaps a few moments spent establishing the background are warranted. We are here to address provisions in the Legal Aid, Sentencing and Punishment of Offenders Act 2012—LASPO—that relate to mesothelioma cases. The relevant background is that changes were made by LASPO to the way in which the generality of legal cases were funded.

I practised for many years as a solicitor with Thompsons, and before arriving in this place in December 2012, headed up a specialist unit looking after those who suffered catastrophic injuries, including brain and spinal chord injuries, and sadly, on too many occasions, cases resulting in fatalities. I also had the privilege of representing members of the armed forces who sustained serious injuries in the service of their country. I never did represent those suffering from asbestosis or mesothelioma, but I had the privilege of working alongside some wonderful colleagues who devoted their professional, and often significant parts of their personal, life to the service and representation of those suffering from this most dreadful of diseases and their families. I pay tribute to the tireless work of my former colleague, Ian McFall, who is not only an international authority in the field of mesothelioma litigation, but has been, and continues to be, a wholly committed advocate of the cause.

With the move away from legal aid support for personal injury cases, and with such state support being removed altogether, the era of the conditional fee agreement came into being. I cannot count the number of conversations I had while in practice over many years, in which I tried to explain that the description of so-called “no win, no fee” agreements was wholly inadequate. The basis of conditional fee agreements, as they are properly termed, was that if a claimant was unsuccessful, he or she would not face a bill for either their costs and disbursements or those of their opponent. Any risk was principally borne by the claimant’s lawyers. Their reward was that when they succeeded for their clients, they benefited from an uplift on their costs—a success fee paid for by the unsuccessful defendant. All that was designed to take account of other cases that were unsuccessful.

The structure was underpinned by insurance: in the event of the claimant not succeeding, wholly or in part, that insurance would provide cover for the unrecoverable disbursements and the defendant’s costs. In the absence of suitable pre-existing, before-the-event legal expenses cover, that policy would be arranged on an after-the-event basis, known as ATE. The insurance premium was borne by the unsuccessful defendants in cases where the claimant won. In successful cases, the defendant bore a success fee and the ATE premium.

All that changed with LASPO. In short, from 1 April 2013, in return for a 10% uplift on the damages paid, the principle of recovering success fees and ATE premiums was extinguished, and those cost items would now be paid by the claimant; that represented a significant erosion of a claimant’s damages. It was argued in this place that mesothelioma cases should not fall foul of those provisions, and that those cases should be exempt. It was entirely right to have those exemptions in that Act in section 44, which concerns success fees, and section 46, which relates to after-the-event insurance premiums, and the reason for that was eloquently summed up in recent times by Paul Goggins:

“An amendment was passed in the House of Lords that exempted mesothelioma sufferers. Hon. Members from both sides will recall our vigorous debates in the House of Commons over the issue and the strong sense that it was repulsive that people who are given a diagnosis of mesothelioma and know that they might have only months to live might have to give up 25% of their damages to pay a success fee to their lawyers and would therefore have to shop around to get the best deal from those who might represent them. The idea was repulsive.”––[Official Report, Mesothelioma Public Bill Committee, 12 December 2013; c. 93.]

The idea remains repulsive, and no case has been made for changing the position. A claimant in these dire circumstances should be focusing on the quality of representation and nothing else. The exemption, securing 100% recovery, allows that to happen.

Section 48 made it clear that there would be a review, in that sections 44 and 46 could not be brought into effect in cases of diffuse mesothelioma until such time as the Lord Chancellor had

“carried out a review of the likely effect of those sections in relation to such proceedings, and…published a report of the conclusions of the review.”

The Government will doubtless point to the consultation launched in July 2013 on mesothelioma claims. The relevant part is chapter 4, which runs to three pages and asks:

“Do you agree that sections 44 and 46 of the LASPO Act 2012 should be brought into force in relation to mesothelioma claims, in the light of the proposed reforms described in this consultation, the increase in general damages and costs protection described above, and the Mesothelioma Bill?”

With respect, that can hardly be properly described as a review, but more importantly, that chapter dealt with one of many matters consulted on, including fixed costs, secure gateways and new protocols, all of which were abandoned. It simply cannot be properly described as a review; equally, what happened subsequently was not by any means a report.

What we have had is an announcement, by way of a written ministerial statement from the Under-Secretary of State for Justice, the hon. Member for North West Cambridgeshire (Mr Vara), who announced that the Government

“have concluded that they intend to apply sections 44 and 46 of the LASPO Act to mesothelioma cases”.—[Official Report, 4 December 2013; Vol. 571, c. 56WS.]

That cannot by any stretch of the imagination amount to a credible review or report as specified by section 48. Statute says that those things simply have to happen before the relevant sections can apply to mesothelioma cases.

To have introduced a new regime in April 2013 with the exceptions, and then to consult on whether the exceptions should still apply, alongside a host of other matters in relation to mesothelioma claims, in July 2013 was simply ludicrous. There were just three months between the introduction of the new regime in April and the July review; that was simply far too soon for any proper assessment to have been made of the likely effects of sections 44 and 46 on mesothelioma claims. No one can tell at this stage how much clients will be charged by solicitors under LASPO. The situation is developing as the market adapts. The same can be said of the cost of ATE insurance. The Government are jumping the gun. They need to pause and commit to a genuine process of review.

[Ian Lavery (Wansbeck) (Lab)]

I congratulate my hon. Friend on bringing this very timely debate to the Chamber. With regard to the section 48 review, it is generally thought that it is pure poppycock and nonsense, although probably not in legal terms. Would it not be better to abandon the section 48 review and instigate a thorough review of the effects of sections 44 and 46 on mesothelioma claims?

[Andy McDonald]

I am grateful to my hon. Friend. His intervention is apposite. There is only one respect in which I would slightly disagree with him: he says that the review is poppycock, although perhaps not in the legal sense, but we may find that there are legal consequences to it. I am of the view that it does not withstand scrutiny as a proper process. No doubt we will return to that.

Making these changes at this pace makes it abundantly clear that the Government had made their mind up way before April 2013 that these exemptions would not last any time at all. Thereafter, to try, in some tortured way, to create a link between the mesothelioma scheme as laid out in the Mesothelioma Bill and the provisions in LASPO is simply to conflate unconnected matters. If there was one American blues artist who epitomised the approach of the Government on this issue, it would be the inimitable Muddy Waters.

[Kate Green (Stretford and Urmston) (Lab)]

I congratulate my hon. Friend on securing this important debate. He will be interested to know that on 13 December, while the Mesothelioma Bill was in Committee—I was a member of that Committee—the Minister wrote to me, saying that

“the Mesothelioma Bill is relevant to the timing of the application of sections 44 and 46 of the LASPO Act to diffuse mesothelioma claims, since we have always intended to implement any such decision in a synchronised manner with other reforms directed to improving the position of mesothelioma sufferers. This was made clear when parliament agreed the relevant provisions in the LASPO Act 2012.”

Has my hon. Friend found any indication of that being made clear to Parliament in 2012? I cannot recall that happening, and I have not been able to find anything that makes it clear to me.

[Andy McDonald]

I am grateful to my hon. Friend for her intervention. Her point is absolutely valid: I have seen no evidence of that. We are trying to compare apples and pears, and it simply does not work. There should be no linkage between LASPO and the Mesothelioma Bill. We are dealing with wholly separate and distinct matters. On the one hand, we are talking about the conduct of cases where employers and insurers are known; those cases progress in the ordinary way. On the other, we are talking about a scheme to deal with cases where insurers are not traced. It is simply disingenuous and grossly insulting to sufferers to try somehow to make a link between the two, and to justify changes that will impact on the conduct of civil cases by saying that the “untraced” scheme is being progressed. If someone suffering from mesothelioma can trace an insurer, their case will proceed in the ordinary way. That others who cannot locate an insurer have recourse to a scheme has no bearing whatever on the conduct of ordinary civil cases. It would be refreshing if the Minister could make that abundantly clear when he responds to the debate, as in my view there is no integrity whatever in such an argument.

Without success fees, some cases that should run will not, as they will be too risky. Removal of the exception will result either in those cases not running, or in mesothelioma victims having to pay out of their compensation. That was clearly not the intention of Parliament, and I urge the Government to reconsider.

[Several hon. Members]

rose—

--- Later in debate ---

[Ian Lavery]

My hon. Friend has hit the nail on the head with that important point, which she raised during the progress of the Bill.

The second issue is the fact that the section 48 review did not ask respondents to make the case for the mesothelioma exemption. It asked if respondents agreed with the Government that the exemption should be lifted in the light of the consultation reforms, plus the CFA reforms and the Mesothelioma Bill. Had the Government asked for the case to be made, the recent legal ombudsman’s report on no win, no fee arrangements would have been most pertinent. The report states that the CFA agreements are not simple to understand and contain unclear terms and conditions, and that there is evidence of some lawyers failing to make clear the financial risks of CFA agreements and trying to pass on the risk to customers. That is precisely the situation that the Lords feared and would not tolerate for dying mesothelioma sufferers.

As it stands, the review is not based on the effects of sections 44 and 46 on mesothelioma claims. It is based on a reiteration of the Government’s intention to apply the CFA LASPO reforms to mesothelioma claims. That can hardly be described as a review. Members of Parliament should ask the Government to abandon the so-called review and seek a proper, fuller one.

[Andy McDonald]

Does my hon. Friend agree that the whole premise of the review is fatally flawed? It includes the question:

“Do you, agree that sections 44 and 46…should be brought into force in relation to mesothelioma claims, in the light of the proposed reforms described in this consultation”?

Those did not proceed; they were abandoned. Does not that put the skids under the entire project?

[Ian Lavery]

I fully agree with my hon. Friend about that—it is question 15 of the section 48 review. It is even more reason for us to seek agreement to the abandonment of the review, and to get to grips with the real problems cutting across the Mesothelioma Bill. MPs should ensure that the outcome of a proper section 48 review is brought before Parliament and not introduced via a commencement order, as the Government probably intend. [Interruption.] Someone has turned my telephone on during the debate, Mr Hollobone: I am sure I switched it off before. I apologise for that.

The legal aspect of the matter seems extremely complicated, and I make an appeal to politicians from across the Chamber. The legislation is not really what I or many other Labour Members wanted, but it is progress. It will mean that individuals can get some form of compensation through the scheme. We must put individuals at the heart of things—the sufferers: people who are losing their lives, and families who will lose loved ones within 18 months. Such things should be cleared pretty quickly, so that families will not be bogged down in legal problems, and will fully understand the compensation procedures they want to embark on. Even if there was 100% compensation for mesothelioma it would not be enough; there cannot be enough compensation for the loss of a breadwinner, father and husband, or mother and wife. There cannot be enough compensation for the loss of someone so important in family life.

--- Later in debate ---

[Mr Vara]

I hope the hon. Lady will agree that, given the sensitivity and importance of the matter, it is right and proper that we should make known to the public our broad thrust of thought, rather than people having to wait a further few months before the report comes out. The hon. Member for Sefton Central (Bill Esterson) secured a debate when there was much agitation about the timing of the review, what it would say and so on. I am sorry if trying to be helpful is now being held against the Government.

Let me say at the outset that the Government recognise that mesothelioma is a terrible disease and has a devastating impact on the families of its sufferers. We take very seriously the plight of sufferers and their right to be able to claim compensation for negligently caused personal injury. The subject is, understandably, emotive, and that has been demonstrated in our heartfelt and thorough debate today, as well as during the passage through both Houses of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Debates on LASPO included consideration of the Government’s reforms to no win, no fee conditional fee agreements, or CFAs, and led to the limited exception of mesothelioma cases, to which I will return shortly.

This debate has highlighted the importance of the issue, and the Government wholeheartedly agree that, given the short life expectancy after the disease has been diagnosed, it is imperative that there is early payment of compensation when necessary. That is why we announced on 4 December 2013 that we will explore whether more can be done to improve the compensation claims process.

I appreciate that today’s debate has been about the Government’s decision to remove the limited exception from no win, no fee reforms in relation to mesothelioma cases. I want to deal with three main issues. The first is why our reforms to CFAs are the right way forward, and the second is the limited exception to these rules in respect of mesothelioma claims and the circumstances in which that exception will end; thirdly, I want to clarify the position relating to the section 48 review and how it was carried out.

I will start by setting out briefly the rationale for our changes to CFAs. Many mesothelioma claims are funded under such agreements. Legal aid has not been available for some time. The previous Government’s Access to Justice Act 1999 removed legal aid for the majority of personal injury cases, including mesothelioma cases, when alternative forms of funding, such as CFAs, were available. As hon. Members will know, the Government have introduced reforms in England and Wales relating to the way that civil cases are funded, and the costs involved in bringing those cases. Those reforms are set out in part 2 of LASPO and took forward recommendations by Lord Justice Jackson, a distinguished Court of Appeal judge.

Hon. Members will be aware that Lord Justice Jackson had been asked to investigate the high costs of civil litigation, and to make recommendations for reform. He found that the arrangements for CFAs were

“the major contributor to disproportionate costs in civil litigation in England and Wales.”

He recommended that the recovery of success fees and after-the-event insurance from defendants be abolished, saying that that would lead to

“significant costs savings, whilst still enabling those who need access to justice to obtain it.”

The Government accepted the recommendations, and they were implemented in sections 44 and 46 of LASPO, with the reforms coming into effect in April 2013.

These important reforms will generally ensure that meritorious claims can still be pursued, but at a more proportionate cost. As part of our reforms, earlier settlement will be encouraged, and damages for non-pecuniary loss, such as pain, suffering and loss of amenity, will be increased by 10%. The Government agreed with Lord Justice Jackson that the level of such damages in England and Wales was generally low, and that a 10% increase could assist claimants in meeting the costs of the success fee and other funding changes. Lord Justice Jackson argued that in the majority of cases his proposals

“should leave successful claimants no worse off than they are under the current regime”.

Those words are relevant.

During LASPO’s passage through Parliament, the Government accepted that the reforms should not be brought into effect for mesothelioma claims until a review had been carried out of the likely effect of those reforms on such cases. That review provision is in section 48 of the Act. If Parliament had intended the LASPO provisions not to apply to such claims at all, it could have legislated to that effect. In the event, mesothelioma claims were exempted, and Parliament legislated to the effect that the provisions could be commenced for claims following the conduct of a review, as set out in section 48. Of course, we must recognise that a review could lead to a number of possible outcomes—to claims continuing to be exempted from the reforms, or alternatively to the exemption not continuing.

The Government carried out the section 48 review as part of the consultation on reforming mesothelioma cases, which concluded on 2 October 2013. That was a 10-week public consultation, and all interested parties had the opportunity to participate. Some 105 responses were received from interested parties and expert stakeholders on both sides of the debate; that is the specific advantage of a public consultation. The respondents included Thompsons, the personal injury solicitors firm to which the hon. Member for Middlesbrough referred when declaring an interest at the outset of the debate.

Some respondents to the consultation questioned the timing of the review and how it was carried out. However, the Government are satisfied that it meets our obligations under section 48. The Act makes it clear that in conducting the review under section 48, the Government are required to consider the likely effect of sections 44 and 46 on proceedings on a claim for damages in respect of diffuse mesothelioma. That is what we have done.

Comments have been made about the Mesothelioma Bill and the timing of the review. As Members will know, the Government introduced the Bill in May 2013. It creates a compulsory payment scheme for victims who are unable to trace a liable employer, or liable employer liability insurer, from which to claim the damages that are rightly due. The Bill has completed all stages in both Houses and is awaiting Royal Assent. It is an important milestone in ensuring that those who were previously unable to claim can do so when the scheme is up and running.

[Andy McDonald]

Will the Minister give way?

[Mr Vara]

I am about to come to the point to which I think the hon. Gentleman wants to refer, but I am happy to take a question.

[Andy McDonald]

The Minister is concentrating on the Mesothelioma Bill, but we are talking about LASPO. Does he accept that there is no connection between the two?

[Mr Vara]

I am coming immediately to the point that I anticipated the hon. Gentleman would refer to. In conducting the review, the Government focused their consideration on matters relevant to claims for mesothelioma that are subject to litigation—in other words, where a solvent defendant is identified. The provisions of the Mesothelioma Bill, however, apply to sufferers who cannot trace a defendant to sue for compensation. If claimants are able to identify a defendant, the Mesothelioma Bill is not directly relevant to their claim, and the Government have carefully borne this in mind.

The Government have not therefore taken the Bill into account in relation to litigated cases in respect of the review. However, the Bill is relevant to the timing of the application of sections 44 and 46 of LASPO, since we have always intended to synchronise the implementation of any decision on this matter with other reforms directed at improving the position of mesothelioma sufferers. This was made clear when Parliament agreed the relevant provisions in LASPO. Much was made of that in earlier speeches, so I refer hon. Members to a debate on LASPO on 24 April 2012. The late Paul Goggins asked the then Justice Minister, my hon. Friend the Member for Huntingdon (Mr Djanogly):

“Crucially, how will the commencement of the relevant provisions of the Bill be aligned with the proposals that the Department for Work and Pensions hopes to publish before the summer recess? I would be happy to take an intervention from the Minister if he wishes to make a clear commitment this afternoon that he will not seek to implement the relevant provisions in the Bill unless and until an improved system of compensation is in place.”

My hon. Friend the Justice Minister replied:

“I do not want to give any binding commitments about the process today, because things have not been finalised. However, I can tell the right hon. Gentleman that if the process is to be improved by the Department for Work and Pensions, which we hope it will be—he will have some insight into our proposals from the discussions he has had—that could well require DWP legislation, in which case”—

the relevant words—

“we would look to roll the ending of the provisions into the commencement of the DWP provisions. That is how I foresee the process now, but again, I am not making that a commitment.”—[Official Report, 24 April 2012; Vol. 543, c. 838-39.]

The following day, the noble Lord Alton questioned the Justice Minister in the upper House, the noble Lord McNally. Lord Alton asked:

“First, is the Minister able to assure us that there will be absolute synchronisation between the Ministry of Justice and the Department for Work and Pensions to ensure that the mesothelioma provisions in the Bill will not be implemented in advance of the new regime coming into force?”

Later in the debate, Lord McNally responded:

“I can absolutely guarantee that we will work in a synchronised way with the DWP.”—[Official Report, House of Lords, 25 April 2012; Vol. 736, c. 1818 and 1824.]

The hon. Member for Stretford and Urmston (Kate Green) was present at the House of Commons debate. She made a contribution at Hansard column 834—

[Mr Vara]

I hope that I am clear when I say that it is important that we synchronise the timing, so that everyone affected by this terrible illness knows what the position is, whether or not they have a traceable employer or liable insurer. It is the timing that is at issue. That is what was referred to in the debates in both the upper and lower Houses.

[Andy McDonald]

rose—

[Mr Vara]

I am happy to give way, because it is the hon. Gentleman’s debate, but I hope that hon. Members accept that I have limited time, and I want to get through things.

[Andy McDonald]

I am grateful to the Minister for giving way. Will he explain something? We have a group of people way over in the distance with one group of problems—in Weymouth, for example—and another group of people in Wolverhampton with another set of problems. If he addresses one situation, how would that benefit the people in the other place? They are not connected; it is just that he is trying to do things at the same time. Does he not agree with that analysis?

[Mr Vara]

It was agreed by Parliament in the debate that there would be a synchronisation of what the Department for Work and Pensions did and what we did. That is what has happened. I trust that Members will now allow me to proceed, because a number of issues were raised, and I want to put the Government response on the record.

The Government have carefully considered the likely effect of implementing the LASPO reforms on mesothelioma claims, including the evidence put before us by respondents to the consultation. The issues raised, however, were generally similar to those in other very serious personal injury cases to which the reforms already apply. There was little explanation of any particular feature of the mesothelioma claims process that would lead to a different or disproportionate effect on claimants’ access to justice, should the reforms apply. Ultimately, in our view, there needs to be a specific justification for the continued difference in treatment between mesothelioma cases and other personal injury cases—most particularly, other serious personal injury cases that have their own tragic features involving, as some do, catastrophic injury and the need for substantial care arrangements for the remainder of a claimant’s life, sometimes when the claimant is very young.

Let me emphasis that we entirely understand that mesothelioma victims face an appalling and fatal disease with which they and their families have to come to terms, while also having to engage with the claims process. Without in any way seeking to minimise the distress that this entails, however, there are many other serious personal injury and fatal claims, to which the LASPO reforms already apply, that produce difficult challenges for victims and families.

On 4 December, we announced that we intended to apply sections 44 and 46 of LASPO to diffuse mesothelioma cases from July this year, when the Mesothelioma Bill is expected to be implemented. When the reforms take effect, claimants will be entitled to a 10% increase in general damages. The average general damages for such cases, as set out in the Judicial College guidelines, is £70,000, so that would be an average additional £7,000 in damages.

Claimants will be liable for any success fee claimed by their lawyer, as in any other personal injury case, but there is no requirement for a success fee to be charged. The amount of any success fee is a matter for negotiation between claimants and their lawyer. Claimants will also benefit from costs protection in the form of qualified one-way cost shifting, to protect them from having to pay the other side’s costs if the claim fails. Additionally, the costs of any after-the-event insurance that claimants feel they need in order to deal with defendants’ part 36 offers—a process of negotiation between parties on a reasonable offer for resettlement—are expected to reduce. If a part 36 offer is unreasonable, a claimant is not at risk for rejecting it. Claimant lawyers tend to know what is and is not a reasonable offer. Claimants are of course liable for disbursements in relation to their case, but the general rule in all civil litigation is that reasonable costs will be paid by a losing defendant.

We announced in December that we anticipate publishing the Government’s response some time in the next few weeks. Colleagues will appreciate that we could have waited until we announced the outcome of the consultation, but we were keen to let stakeholders know the outcome as soon as possible, especially on those issues that we are not currently taking forward.

I want to emphasise that the Government firmly support the right of those who suffer from this terrible disease to be able to claim compensation. Over the past 10 years, significant progress has been made in streamlining the process, including in relation to those matters headed by Senior Master Whitaker. We wish to explore further ways of streamlining the process, and we seek the co-operation of the appropriate stakeholders.

The LASPO reforms are about tackling the high cost of civil litigation, rather than questioning the validity of claims. The Government believe that the reforms should apply to all personal injury cases, including those of the utmost severity. We have conducted the review as required, and as soon as we are able to do so, we will publish our report. In the meantime, my thanks again to the hon. Member for Middlesbrough for securing this debate. It is fair to say that we are united on at least one matter: the great importance of this issue.