Industrial disease - historic claims, sometimes going back to subsidiaries that no longer even exist, can be a nightmare for risk managers.

Historic disease claims, sometimes going back to subsidiaries that no longer even exist, can be a nightmare for risk managers. They can come out of the blue, take a lot of time and cost a lot of money to defend. But risk managers can take a number of actions to be prepared. Peter Wilson of Davies Group looks at the implications.

Disease claims are different. Different in their complexity. And different in the long-term consequences for your company if the right strategies and actions are not taken.

Much of the difference derives from the historic nature of these claims. Most commonly they gradually manifest themselves years after the event. A business may find itself defending a claim for deafness based on allegations of conditions which may or may not have existed 20 or more years ago in a factory which has long since been demolished.

The need to peer back in time and dredge corporate and individual memories presents a daunting array of problems. These range from difficulties in tracing the relevant EL insurers – and there may be several of them on risk throughout the period of the claim – to looking back through the company structure to ascertain where the liability lay. Mergers and acquisitions have laid a minefield for some businesses on this front. With sketchy records it is often a job for Inspector Morse to find out whether liabilities were passed on or retained when a subsidiary was sold. In some cases where businesses are no longer trading it is possible to locate the insurer for some or all of the claims period. But there are myriad claims made against defunct companies with no EL histories.

Documentation is vital in establishing evidence, although it is rarely complete or decisive for the sorts of reasons cited above. The data that can change an outcome might range from air quality records for an asbestos claim to measured noise levels or records of tools used. The aim is to build a picture of the claimant’s working conditions at the time in question. So contemporary witnesses may have a part to play too, particularly when, as is often the case, there is no-one still within the organisation who can provide first hand testimony.

Any evidence throughout the term of the claim may prove useful. For instance, a claimant who alleges hearing loss a result of working for 25 years in a high-decibel environment may be able to claim for only ten of those years if the company can prove that it had an effective ear protection policy for the remaining 15 years.

Sometimes, however, it may not be in a company’s interest to reveal all the evidence. In a recent claim, documentation existed in the form of a site map indicating areas of asbestos pipes. However, in order to establish whether the claimant worked in these locations, it would have been necessary to publish the map as evidence, and this would have potentially opened the floodgates for future claimants.

Disease claims can be very expensive. At one end of the scale - claims arising from asbestos exposure including mesothelioma, a type of cancer which is invariably fatal - damages can exceed £300,000 plus costs. But in other types of disease claim the legal costs regularly outstrip the settlement. Some improvement has come with the new MOJ rules to limit solicitors’ costs, but these have only limited relevance to disease claims and there is a growing call for more specific measures. The existing process excludes certain types of disease claim altogether, and otherwise requires a full admission of legal liability to be made within 30 working days in order to qualify for a restricted costs liability.  But in practice this is almost impossible to achieve in disease claims – obtaining proof of employment from HMRC can typically take several months, for example – so the vast majority of disease claims continue to be subject to variable costs, calculated on a standard basis, which in turn makes them more attractive for claimant solicitor firms to pursue.

However, the good news is that with proper expertise in this complex area of claims it is usually possible to mitigate expenditure on both damages and costs. Critical decisions can make all the difference to the outcome: for instance a realistic appreciation of which cases to defend and which ones to negotiate; reducing legal costs through prompt action; assembling evidence and developing a strategy for using it. It cannot be over stressed that the right decisions and careful planning will enable you to considerably limit the burden of occupational disease claims.

Useful tips

• Prepare yourself: create a library of historical information and documentation, outlining the control measures taken to reduce particular risks (air quality, noise, hand vibration from tools etc.) at particular times.
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• Create an historical EL insurance register for all companies and subsidiaries, including companies that have been sold or closed down.
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• Identify current or former members of staff who can assist and ensure their contact details are retained.
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• Preserve old records – disease claims can relate to events as much as 50 years ago.

Peter Wilson is a Director at Davies Garwyn Liability, part of the Davies Group

Peter Wilson - Davies Group