Can You Believe It?
By Kendra M. Felisky

The U.K. has had several rulings on asbestos claims recently that you in the U.S. will just not believe. Generally, we expect imports from the U.S. to transform the U.K., e.g., the compensation culture, rap music, Desperate Housewives, and the like. It now looks like the U.K. is fighting back, at least on the compensation culture front!

There has been much concern over the last few years that the U.K. judiciary is starting to rewrite liability policies as compensation policies, but the court of appeal recently went against this trend by reversing an earlier damages award. Former boilermaker James Maguire worked during the early 1960s for shipbuilders Harland and Wolff. While there his wife Teresa dutifully and regularly washed his work clothes, but in later life contracted lung disease, allegedly from exposure to the asbestos dust absorbed in her husband's clothes. Harland and Wolff were found liable at a High Court hearing in Manchester last year for the illness contracted by Mrs. Maguire. She died shortly after she was awarded £82,000 in damages. However, the Court of Appeal reversed the earlier decision and cancelled the award. As part of the judgement Lord Justice Longmore said: "It was not reasonably foreseeable between 1960 and 1965 that a wife washing the clothes of a husband who was exposed to asbestos to a negligent degree would herself be likely to suffer risk of personal injury." This could affect many other cases of indirect exposure to the deadly dust.

Another recent case relates to pleural plaques. Pleural plaques are scars within the lungs, commonly a result of exposure to asbestos dust. However, they do not necessarily cause debilitating symptoms and very often are not precursors of other, more serious, asbestos-associated conditions or diseases, such as mesothelioma. Despite this, court cases have been brought against U.K. employers by people with pleural plaques and some have won, with provisional damage awards of between £5,000 and £7,000, rising to £12,500 to £20,000 for final damages. In the face of this, Norwich Union and Zurich FS, alongside British Shipbuilders, brought a counter case, claiming that pleural plaques should not be categorized as an illness or disease. The implication of this would have been that pleural plaques claims would be automatically dismissed. The case concluded in mid-February with the court appearing to steer a middle path. The judgement accepted that pleural plaques are not an illness or disease but then ruled that the anxiety caused by having pleural plaques diagnosed (diagnosis would make the patient aware that he or she had been exposed to asbestos and therefore stood a chance of contracting an asbestos-related disease at some point) was itself worthy of compensation. Therefore, the judge upheld the claims made by those with pleural plaques but reduced the compensation payments to between £3,500 and £4,000 for provisional payments for people with pleural plaques, rising to around £7,000 for final damages.

Ireland has been experiencing its own battles over tort reform. The Personal Injury Assessment Board (PIAB) was established last year to set the level of compensation awards in personal injury cases. Two of the stated intentions behind its establishment were to speed up the settlement rate and to reduce the cost of establishing compensation awards. To those ends the PIAB originally refused to deal with lawyers but changed its mind and subsequently indicated it would. It later decided that it would only deal directly with claimants, but conceded that it would copy correspondence to solicitors if so requested by the claimants. Enter into this confusing picture an Offaly butcher by the name of Declan O'Brien. He claimed that his constitutional right to be legally represented was breached by the PIAB's refusal to deal directly with his solicitor. And in a key ruling in the high court in January 2005, the judge agreed, telling the PIAB that if a claimant wished the PIAB to deal directly with his or her lawyer then that is what the PIAB must do. This is the latest development in an increasingly bitter battle between the PIAB and the legal profession in Ireland. The PIAB does not appear willing to accept the judgement and has already lodged an appeal with the Supreme Court. If that fails, then apparently it plans to lobby the Department of Enterprise, Trade, and Employment to rewrite the legislation in order to keep the PIAB a "lawyer-free zone."

As mentioned before, much has already been achieved regarding the general shape of Solvency II: it will follow the Basel 3-pillar approach, it will be risk based, and the use of internal models will be encouraged, at least to some extent. However, there is still much work to be done to determine the detail of the agreed general shape. CEIOPS (pronounced "See-Ops"-this might sound like a creature from ancient mythology but is really the Committee of European Insurance and Occupational Pensions Supervisors) is due to finalize in October its consultation document regarding the detail of the Solvency II proposals. This speed is necessary if Solvency II is to keep on course for a 2008 implementation (however, see next). As part of this, the European Commission has issued a paper calling on CEIOPS to answer some specific questions. The ones that are of particular interest to general insurance practitioners are as follows:

1. How to establish technical provisions that are sufficient to cover the liabilities with a quantified degree of confidence;
2. How to establish an appropriate solvency capital requirement;
3. How to establish internal models that are appropriate for each insurer;
4. How to deal with outwards reinsurance in the solvency assessments;
5. What safety measures would be appropriate in the new solvency framework?

All this has to be done so that the resulting rules and principles make sense (where relevant) in every member state. CEIOPS is taking its actuarial advice from the Groupe Consultatif, rather than directly from the actuarial bodies in each of the member states. It also occasionally refers to the IAA. As already mentioned, Solvency II is slated for implementation across the E.U. in 2008, but there remain doubts as to the practicality or desirability of this timetable. In the minds of many, Solvency II is inextricably linked to the introduction of the new International Accounting and Financial Reporting Standards, the development of which has experienced delay after delay. It is hard to see Solvency II being launched until those standards have also been introduced.

The benefits of rehabilitation, structured settlements, and other tort reform are only beginning to be introduced in the U.K. So, watch this space…. However, I'd rather be watching Desperate Housewives!