Travelers Claims Bulletin 1110

Document Sample
Travelers Claims Bulletin 1110 Powered By Docstoc
					                                                                  Claims Legal Bulletin

A regular review of legal developments in the world of property and casualty insurance claims October/November 2010

    REDUCED DISCOUNT RATE APPLIED IN GUERNSEY                          The defendant sought a retrial on the grounds that the judge
    Helmot v Simon — 2010                                              had adopted an impermissible approach by deciding that the
    This was a case heard in the Guernsey Court of Appeal and          abuse had occurred before considering the issues appropriate
    concerned a 28 year old who had sustained a catastrophic           to giving discretion under Section 33. The Court of Appeal
    brain injury and required nursing care for 24 hours a day. He      dismissed the appeal on the basis that KR v Bryn Alyn (2003)
    was 39 at the date of the judgement and his life expectancy        and A v Hoare (2009) did not set out a formulaic template for
    had been reduced by 5 years. The Guernsey courts are outside       the construction of a judgement and the Judge had not
    the UK jurisdiction and there is no provision for periodical       decided that the abuse had occurred and, therefore, there
    payments. At first instance the court applied a discount rate of   could be no prejudice. She had correctly considered the
    1% to the multiplier for both future care and future loss of       reasons for the delay in bringing proceedings, the cogency of
    earnings to reflect factors peculiar to Guernsey. This resulted    the evidence and any prejudice to the defendant in
    in a total award of £9.3m. On appeal by both parties the           accordance with A v Hoare.
    Guernsey Court of Appeal imposed a minus 1.5% discount rate        Comment
    for the earnings losses, including those of the carers, and 0.5%   Although it is surprising that a delay of 33 years in bringing
    for the non-earnings related elements of the care claim. These     proceedings did not affect the cogency of the evidence it is clear
    multipliers increased the total award to between £13.75m           that the Court of Appeal were satisfied that the finding that abuse
    and £14m.                                                          had occurred had not influenced the Judge’s assessment of the
    Comment                                                            discretion issues. This is despite the fact that in KR v Bryn Alyn the
    This case provoked much discussion as to whether the Lord          court had specifically stated that to make the findings in that order
    Chancellor might also review the discount rate on the mainland     “would put the cart before the horse”.
    which has stood at 2.5% since June 2001 and caused concern at
    the extent to which such a change would increase compensation      EMPLOYERS’ LIABILITY POLICY TRIGGER LITIGATION
    awards made on a lump sum basis for future losses. It also         Durham v BAI (run off) Ltd and others - 2010 (CA)
    demonstrates that periodical payments are the most accurate way    The appellant insurers appealed against a decision that they
    of assessing future losses.                                        were liable to indemnify the respondent employers in relation
                                                                       to claims brought by the families of employees who had died
    SEXUAL ABUSE - LIMITATION                                          from mesothelioma. The various policies covered the
    Raggett v (1) Society of Jesus Christ and (2) Preston Catholic     employers for “injury sustained” and/or “disease contracted”
    College Governors - 2010 (CA)                                      by “employees during the course of their employment”. The
    The claimant alleged that he had been abused by a teacher          policies were in force when the employees breathed in the
    during the 1970s and argued that his claim was not statute         asbestos dust which caused the disease but were not in force
    barred because he had subconsciously suppressed his                many years later when the disease manifested itself. The
    memories of the abuse which had only been revived by an            insurers relied on the Court of Appeal decision in Bolton MBC v
    incident in April 2005. Alternatively he sought the court’s        MMI and CU (2006) in arguing that injury was only sustained
    discretion to allow his claim to proceed under Section 33 of       and disease only contracted when the disease manifested
    the Limitation Act 1980. The Judge at first instance had held      itself in the form of a tumour. The High Court had held that
    that the abuse had occurred but that the claimant did know         both of these terms were synonymous with “caused” or
    the nature and extent of those acts and the immediate effect       “being” caused and therefore they covered the time when the
    they had upon him so that his claim was statute barred.            asbestos was inhaled.
    However, he did exercise discretion to allow the case to           The three Lord Justices all differed in their judgements of
    proceed despite the 33 year delay between the abuse and the        the correct interpretation of the policy wordings.
    bringing of proceedings on the grounds that the claimant had       Rix L.J. felt bound by the decision in “Bolton” and would
    suppressed his memories, the delay was understandable and,         have preferred to find that injury is sustained when
    since the claimant’s cause of action lay in vicarious liability,   asbestos exposure causes a material increase in the risk of
    the adverse effect of the delay on the cogency of the evidence     the employee sustaining mesothelioma. Instead he felt
    was not sufficient to prevent a fair trial.
constrained to hold that injury was “sustained” when it               the conduct was sufficient to amount to harassment under the
occurred so that wording looked towards the occurrence                Act and also whether they related to operational decisions.
rather than to the exposure. Although that interpretation was         The Judge dismissed each allegation against the senior officer.
in conflict with the commercial purpose of an employers’              Although there were occasions when he was insensitive,
liability policy it was not an absurd or irrational interpretation.   belittling and overbearing, his conduct did not amount to
“Disease contracted” was capable of referring to disease either       harassment. Although his conduct was unacceptable it was
in its origin or in its onset but when used in combination with       not oppressive or intimidating or calculated to cause distress.
the words “injury sustained” suggested that it was concerned          The evidence was that some of the complaints related to
with the onset of disease. However, the commercial purpose            disagreements on operational issues but none amounted to
of the policy pulled more towards the causal origins of the           harassment. If there had been strong expressions of
disease and therefore “disease contracted” referred to the            disagreement over operational or managerial decisions in the
exposure to asbestos. All EL policies that were issued after the      course of routine work it is difficult to see how that can
Employers’ Liability Compulsory Insurance Act 1969 came into          amount to an act of harassment. Had there been repeated
force in January 1972 covered the period of exposure because          capricious disagreements with a subordinate amounting to
those policies were deemed to comply with the 1969 Act.               oppression and accompanied by abuse then there was no
Brunton L.J. held that the cover was defined by the terms of          reason why that would not give rise to a claim provided that
the policy and little assistance was to be gained by looking at       all the other requirements of the cause of action were
the commercial purpose. Mesothelioma was “caused” by any              satisfied. The removal of the officers from their unit during the
significant exposure to asbestos in the year when cover was in        investigation of their complaints was taken for sound
force. However, employees did not suffer or sustain injury            operational reasons and could not amount to harassment.
within the meaning of the policy when they were exposed to
asbestos but rather upon the onset of malignancy.                     SUITABILITY OF PERSONAL PROTECTIVE EQUIPMENT
Mesothelioma would be “contracted” when the employee was              Steven Threlfall v Hull City Council - 2010 (CA)
exposed to asbestos.                                                  The claimant sustained a severe laceration to his finger whilst
                                                                      working with a team maintaining unoccupied council houses
Smith L.J. held that the policy had to be interpreted according
                                                                      and removing rubbish and debris left there by residents. He
to the factual matrix that existed at the time the contract was
                                                                      was handling a bin bag full of rubbish and was wearing the
entered into and, consequently, the Judge was correct that
                                                                      standard issue cloth and suede gloves provided by his
both of the wordings in the policies covered the period when
                                                                      employer when he suffered the injury but it was not known
employees were exposed to asbestos and Bolton could be
                                                                      what the sharp object in the bag was that had caused the cut.
distinguished as it was only binding in respect of public
                                                                      The claimant argued that he should have been provided with
liability policies. Consequently the Insurers’ appeal was             highly protective gloves rather than the standard issue ones.
successful in part.                                                   The Court found that the risk of injury was very low and the
Comment                                                               risk assessment had not identified that the gloves were
This Judgement is unsatisfactory in many ways but particularly in     unsuitable so the defendant had satisfied the requirements of
that it increases the gaps in cover held by employers for             Regulation 4 of the Personal Protective Equipment at Work
mesothelioma claims from their employees. Employers would             Regulations 1992. The claimant appealed on the grounds that
have no cover if they held an “injury sustained” policy at the time   the court had applied a common law test of reasonableness
of exposure and an “injury caused” or “contracted” wording when       instead of properly applying the words of the Regulations and
the disease occurred, despite having purchased EL cover               the duty on the employer was very high and the risk
                                                                      assessment had been inadequate.
throughout. Doubt was also expressed as to whether “injury
sustained” wordings would cover ex-employees, that is people          The Court of Appeal held that the risk assessment had been
who were employed at the time of exposure but were not                manifestly defective when compared to the requirements of
employed when the tumour eventuated. This is neither fair to the      Regulation 6 which should be read together with Regulation 4
employer who has no cover nor to the claimant who cannot              which applied wherever a residual risk of harm existed that
recover compensation. It is clear that this matter will now have to   wasn’t de minimis or so trivial that it could be ignored. There
be decided by the Supreme Court.                                      had been a risk of encountering sharp objects so that risk had
                                                                      to be adequately controlled by the provision of a suitable,
HARASSMENT CLAIMS                                                     which means an effective, form of protection which should
Bruce Dowson (and 6 others) v Chief Constable of                      prevent a significant injury. The gloves provided were not
Northumbria Police - 2010 (EWHC)                                      capable of withstanding pressure from a sharp object and
Six police officers brought claims for harassment against the         were, therefore, unsuitable and in breach of Regulation 4.
Chief Constable in respect of his vicarious liability arising out
of the actions of a Detective Chief Inspector. All of the officers    RESCUER — CONTRIBUTORY NEGLIGENCE
were involved in a team investigating serious and organised           Tolley v (1) Carr, (2) Johnson, (3) O’Callaghan
crime which itself was likely to be stressful. The allegations        - 2010 (EWHC)
were that the claimants had been required to act contrary to          The claimant stopped to help the first defendant who had
the law, they had been blamed for the DCI’s own failings,             collided with the central barrier on a motorway. After
subjected to vulgar abuse, often in front of subordinates and         helping her from the vehicle to a place of safety and
had been undermined by unjustified and demeaning criticism.           realising that her car was facing the barrier so that the rear
Furthermore, they had been removed from their units and               was partially blocking the fast lane he went back to the car
their formal complaints had been rejected as a result of his          with the intention of moving it entirely onto the area
untruthful denials of misconduct. The question was whether            between the fast lane and the central barrier. After
checking for approaching traffic he got into the car but had        PRE-ACTION DISCLOSURE APPLICATIONS - COSTS
been unable to move it in time before it was hit by two cars        Sattar v Kirklees Council (and 5 other applications)
driven by the second and third defendants. His injuries were        - 2010 (CC)
serious and, whilst liability was admitted by the defendants,       The same firm of solicitors brought six applications for pre-
they alleged contributory negligence for putting himself in         action disclosure against the defendant in potential personal
obvious danger by going back to the car after he had rescued        injury claim cases. In each case they sought an order for pre-
the driver.                                                         action disclosure and costs. The Council concede that it was in
The court considered that although there was no duty on a           technical breach of the pre-action protocol and disclosure had
private individual to perform a rescue the fact that a danger       been arranged so that the applications were effectively
had been created was something that could invite rescue. At         unopposed. Costs schedules were filed by the claimants
the time of the accident the claimant had in mind the safety of     totalling almost £9000 for the six cases. The Council offered to
other motorists who were likely to collide with the car if it was   agree no order as to costs in line with CPR 48.1(2) but this
left in the fast lane of the motorway with the morning rush         offer was rejected. The Council relied on the cases of Bermuda
hour traffic starting to build up. The fact of the collision was    International Securities v KPMG (2001) CA and SES
proof of the danger that he had been attempting to avert. The       Contracting v UK Coal (2007) CA as authority for the principle
law should be slow to blame individuals who imperil                 that if costs are to be awarded against the respondent there
themselves in order to avert a danger to others and the             needs to be both a breach of the protocol and unreasonable
greater the danger the greater the risk of imperilment to his       opposition to the application. The claimants argued that the
safety the law would accept as reasonable. Whilst it was            failure to comply with the protocol took the cases outside the
unattractive for an allegation of contributory negligence to be     ambit of CPR 48 such that a costs order against the Council
made by the very person who had created the risk it was more        was appropriate.
important to consider the reasonableness of the actions of the
                                                                    The Judge ruled in favour of the Council as there was no
person who had put themselves at risk and that assessment
                                                                    reason to depart from CPR 48. Since there had been a breach
should not be carried out by the scrutiny of a courtroom when
                                                                    of the protocol the Council was not entitled to its costs of the
a person under the pressures of the moment might feel
                                                                    applications. The appropriate order was no order as to costs in
impelled to act in circumstances where prompt action might
                                                                    the six applications but the Council was awarded its costs of
be considered vital to the safety of those in danger. In the
                                                                    the contested hearing.
circumstances of the claimant’s meritorious behaviour there
were no grounds for a finding of contributory negligence.           Comment
                                                                    It has long been the case that the party making a pre-action
CONSEQUENTIAL LOSSES IN CONTRACT                                    disclosure application is responsible for payment of the
Network Rail Infrastructure v Conarken Group Ltd and Farrell        respondent’s costs. Whilst the position is slightly different where
Transport Ltd - 2010 (EWHC)                                         there has been a breach of the pre-action protocol this does not
Network Rail (N) brought claims for consequential losses            mean that the applicant is entitled to its costs unless the
against the defendants following two separate collisions            application has been unreasonably opposed. The potential
between their heavy goods vehicles and a railway bridge in          defendant can strengthen its position by making an offer to accept
the first accident and a level crossing and electrical equipment    no order for costs.
in the second accident. On both occasions the railway line had
to be closed in order for the physical repairs to be effected and   ADVICE GIVEN BY IN-HOUSE LAWYERS
this triggered payments under contract to the train operating       Akzo Nobel Chemicals Ltd & anor v European Commission
companies (TOCs). The defendants accepted their liability to        The European Court of Justice has ruled, in a competition law
pay the cost of the physical repairs but the issue was whether      investigation, that advice given by an in-house lawyer was not
N was also entitled to recover damages in relation to the sums      independent and, therefore, is not protected by legal
which it had paid to various TOCs in relation to the periods for    professional privilege. The fact that the lawyer was directly
which the train tracks upon which they operated were                employed by the company seems to mean that he cannot be
unavailable as a result of the damage and subsequent repairs.       considered independent of it. This may have implications in
The sums totalling £1.3m were paid pursuant to Track Access         other areas such as the investigation of accidents which would
Agreements (TAAs) between N and the TOCs, and were                  not normally be privileged unless it was prepared in
calculated by reference to the delays to the rail services caused   contemplation of proceedings. Companies should consider
by each incident.                                                   whether such an investigation by or on behalf of an in-house
The sums payable were best assessments of the cost of the           lawyer where legal privilege is claimed might be challenged as
line closures and were certainly not penalties and were not         a result of this decision.
unreasonable. It was foreseeable that if damage was caused to
the property in question that the railway lines would have to       LORD YOUNG’S REPORT — COMMON SENSE, COMMON
be closed whilst necessary repair work was carried out within       SAFETY
a reasonable period of time and that the cost of that closure       This report follows a wide ranging review of the operation of
flowed from the negligence of the defendant. The fact that          health and safety laws and the compensation culture and
the losses were assessed in contract made no difference as          makes many recommendations under a number of headings,
such consequential losses would be limited to those flowing         the most notable being —
from the physical damage itself and it would only be where
there was a contractual relationship between the claimant and       Introduce a simplified claims procedure for personal injury
the party suffering those losses that they would be                 claims similar to that for motor claims under £10,000 with
recoverable.                                                        attendant fixed costs.
Introduce the recommendations of the Jackson report on
Restrict the operation of referral agencies and PI lawyers and
control their advertising.
Ensure people won’t be held liable for the consequences of
well-intentioned voluntary acts.
Local authority decisions and refusals on health and safety
grounds to be open to challenge by citizens.
Reduce health and safety requirements for low hazard
Combining food safety with health and safety inspections.

Other recommendations relate to Insurance, working with
large companies, police and fire services, adventure training,
education and health and safety legislation.

List of abbreviations used:
CA         Court of Appeal
CC         County Court
Ch D       Chancery Division of the High Court
ECHR       European Court of Human Rights
ECJ        European Court of Justice
HL         House of Lords
MOJ        Ministry of Justice
QBD        Queen’s Bench Division of the High Court
SC         Supreme Court
SCCO       Supreme Court Costs Office
TCC        Technology and Construction Court

The information contained in this bulletin does not represent a
complete analysis of the topics presented and is provided for
information purposes only. It is not intended as legal advice and no
responsibility can be accepted by Travelers Insurance Company for
any reliance placed upon it. Legal advice should always be obtained
before applying any information to the particular circumstances.

Travelers Insurance Company Limited
61-63 London Road, Redhill, Surrey RH1 1NA
Travelers Insurance Company Limited is authorised and regulated by the Financial Services Authority
Registered office: Exchequer Court, 33 St. Mary Axe, London EC3A 8AG
Registered in England 1034343                                                                                       TRV0254 11/10

Shared By: