The Scottish Government

Summary of Responses to Consultation - Partial Regulatory Impact Assessment on a Proposed Bill to Reverse the House of Lords (HoL) Judgment in Johnston v NEI International Combustion Ltd

Background to Consultation

1. The House of Lords (HoL) Judgment in Johnston v NEI International Combustion Ltd published on Wednesday 17 October ruled that asymptomatic pleural plaques do not give rise to a cause of action under the law of damages. This Judgment reversed over twenty years of precedent and practice.

2. The Judgment is not binding in Scotland, but is highly persuasive. There have been calls in Parliament and beyond for the Scottish Government to legislate to ensure those negligently exposed to asbestos who go on to develop pleural plaques can raise an action for damages in Scotland.

3. On 29 November 2007 the Scottish Government announced its decision to introduce a bill to reverse the HoL Judgment and that the provisions of the bill would take effect from the date of the Judgment. Our consultation - Partial Regulatory Impact Assessment (RIA) on a Proposed Bill to Reverse House of Lords Judgement in Johnston v NEI International Combustion Ltd. [1] - issued on 6 February and ended on 4 April 2008.

4. Responses to this consultation (where confidentiality has not been requested) are available in the Scottish Government Library, K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3XD (Tel:0131 244 4565).

Next steps

5. The Scottish Government has fulfilled its commitment to introduce a bill to the Scottish Parliament to overrule the HoL Judgment. The Damages (Asbestos-related conditions) (Scotland) Bill was published on 24 June 2008.

6. Information gained from responses to the partial RIA has been used to prepare the financial memorandum which accompanies the bill as well as the final RIA. The Final RIA is available on the Scottish Government Business and Industry website. [2] The bill, financial memorandum and other accompanying documents are available at [3].

Breakdown of Responses

7. 22 responses to the consultation were received. They can be broken down as follows:

· Insurance Industry 10

· Local Authorities 3

· Business 1

· Asbestos Groups 1

· Legal Interests 4

· Individuals 3

Summary

8. The responses to the partial RIA were helpful in firming up numbers of pleural plaques claims and average settlement costs, based on the historical position. The overall costs included in the final RIA and in the financial memorandum are higher than the costs in the partial RIA. The Scottish Government is grateful to all of those who responded to the consultation.

9. The responses also raised questions about whether the numbers and costs of pleural plaques claims might be higher than the historical position would suggest; and whether the legislation would have wider implications which would lead to higher costs for Scottish business. These aspects are discussed in the final RIA and the financial memorandum.

10. Although the consultation was not in relation to the decision to introduce legislation, the majority of respondents did offer comments on this. Of the 22 responses received, 17 did not welcome the proposal to legislate, with the biggest group within this being insurers. To put these figures into context, it should be borne in mind that, as there was no consultation on the general policy, parties supportive of the Bill would not necessarily have responded to the consultation on the partial RIA. Scottish Ministers have noted the concerns of those opposed to the legislation but they remain convinced of the need to take forward a Bill to ensure that the HoL Judgment does not have effect in Scotland. The policy memorandum provides the Scottish Government's comments on concerns raised by those responding to the consultation.

Annex A summarises the points made by those responding to the consultation.

Scottish Government

Constitution, Law and Courts Directorate

Civil Law Division

June 2008

ANNEX A

Supportive Responses (5)

· To legislate is both justified and reasonable

· The basic premise of the legislation is sound

· Judgment is an infringement on rights of ordinary workers seeking recompense for the harm caused from negligent employers

· Psychological effect of a diagnosis of any asbestos-related condition should not be underestimated

· Employers and insurers will have already budgeted, with appropriate actuarial advice, for these claims

· Insurers should have collected adequate premiums and made long term investments to cover risk of future long-tail claims

· Issue of time bar- if legislation not passed there will be considerable arguments as to when symptoms start where initial diagnosis is symptomless asbestosis or pleural thickening - insurers will want it to be as early as possible to use time bar defence - following legislation time bar would be clear - 3 years from diagnosis of symptomless condition

· Note that there are no specific examples in the partial RIA about increased insurance premiums

Non-Supportive Responses (17)

· Fundamentally disagree with decision to legislate - urge SG to delay taking final decision until implications fully considered, full legal advice taken and responses analysed

· HoL Judgment was based on new consensual medical evidence available that pleural plaques have no effect on health - over 20 years of precedent of settling claims was because cases were settled historically when medical opinion was unclear and it was believed that people suffered ill health

· Making compensation available for pleural plaques in light of new medical evidence would constitute fundamental change to law of negligence

· Legislation would set dangerous precedent and open floodgates to any number of "exposure" claims

· Legislation unfair on those negligently exposed to exactly same risk who have not developed pleural plaques

· Exposure to asbestos leads to between a 1-5% risk of developing mesothelioma

· Legislation will encourage claims farmers' "scan vans" - inevitable there will be increase in individuals seeking scans - public health implications need to be taken into account

· Proposed retrospection brings into question fundamental principles around whether Scotland has stable and principled legal framework which businesses and citizens can rely on

· Not obviously consistent with respect and observance of rule of law - unprecedented interference with private legal relations - insurers will look closely at legality of proposed legislation

· Not to legislate would provide legal certainty, avoid risk of more widespread challenge to clear longstanding legal principle - compensation only paid where people suffer material harm from acts of negligence

· Legal certainty important to businesses - require assurance government committed to stable and certain environment that enables them to understand their risks fully

· Numbers underestimated - believe there would be dramatic increase in number of claims

· Serious cost consequences to insurers, employers, former employers and Government.

· Could make third party insurance (employer's liability, and public liability) more expensive for businesses in Scotland - could affect their competitive position compared to English and Welsh counterparts as cheaper insurance and wider availability of cover - insurers who underwrite long tailed business in Scotland may choose not to do so - first party insurance policies (life, critical illness, income protection) would not be affected by legislation

· Cost of £16,000 per case is wrong - nearer £22- £25,000 per case with annual cost of £5m for 200 cases

· If HoL decision overturned would directly reduce amount of compensation available to future victims of more serious asbestos-related disease

· Education not legislation is the best way of providing peace of mind to people with asbestos-related conditions - legislating would create anxiety in the minds of those exposed to asbestos

· Partial RIA silent on fact that claimant lawyers will benefit significantly from legislation

· The law in relation to pleural plaques in the UK (post - Johnston) is in line with most of the rest of the developed world. Very few European countries award compensation for symptomless asbestos-related conditions

[1]http://www.scotland.gov.uk/consultations

[2]http://www.scotland.gov.uk/Topics/Business-Industry/support/better-regulation/partial-assessments/full

[3]http://www.scottish.parliament.uk/business/bills/billsInProgress/index.htm