Aviva Insurance Ltd v The Secretary of State for Work and Pensions
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 20 November 2020 |
| Neutral Citation | [2020] EWHC 3118 (Admin) |
| Docket Number | Case No: CO/2608/2019 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 20 November 2020 |
[2020] EWHC 3118 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
BEFORE THE HONOURABLE Mr Justice Henshaw
Case No: CO/2608/2019
The Queen on the Application of
Michael Kent QC, Benjamin Tankel and Kate Boakes (instructed by Keoghs LLP) for the Claimants
Edward Brown and Brendan McGurk (instructed by Government Legal Department) for the Defendant
Hearing dates: 8 and 9 July 2020
Further evidence and written submissions filed 17 July 2020
| (A) INTRODUCTION | 2 |
| (B) SUMMARY OF THE CLAIMANTS' CLAIMS | 3 |
| (C) THE DEFENDANT'S POSITION IN OUTLINE | 9 |
| (D) LEGISLATIVE BACKGROUND | 10 |
| (1) Pre 1989 position | 10 |
| (2) The 1989 and 1992 Acts | 11 |
| (3) Background to the 1997 Act | 17 |
| (E) KEY PROVISIONS OF THE 1997 ACT | 22 |
| (F) A1P1 – LEGAL FRAMEWORK | 26 |
| (G) TARGETS OF THE CLAIMANTS' CLAIM | 29 |
| (H) JUSTICIABILITY | 31 |
| (I) LIMITATION | 33 |
| (J) WHETHER THE CLAIMANTS ARE ‘VICTIMS’ FOR HRA PURPOSES | 35 |
| (K) WHETHER THE ACT INFRINGES THE CLAIMANTS' A1P1 RIGHTS | 41 |
| (1) Interference | 41 |
| (2) Legitimate aim | 42 |
| (3) Rational connection to aim | 43 |
| (4) No more than is necessary | 46 |
| (5) Fair balance | 48 |
| (L) FAILURE TO MAKE REGULATIONS UNDER SECTION 22(4) | 59 |
| (M) REMEDIES | 62 |
| (N) CONCLUSION | 62 |
(A) INTRODUCTION
By this claim for judicial review the First Claimant (“ Aviva”), an insurer with a substantial book of long-tail employers' liability (“ EL”) insurance, and the Second Claimant (“ Swiss Re”), a reinsurer with contractual responsibilities in respect of this and other long-tail books, contend that provisions of the Social Security (Recovery of Benefits) Act 1997 (“ the 1997 Act” or “ the Act”), as currently interpreted and applied by the Defendant through its Compensation Recovery Unit (“ CRU”), are incompatible with their rights under Article 1 of the First Protocol (“ A1P1”) to the Convention for the Protection of Human Rights and Fundamental Freedoms (“ the Convention”) as incorporated in the United Kingdom by the Human Rights Act 1998 (“ HRA”).
The 1997 Act and regulations made under it require liability insurers to pay to the CRU amounts equal to certain social security benefits received by claimants in personal injury cases. The Claimants do not complain of the legislative scheme as a whole. They accept that the scheme which, with modifications, Parliament has maintained since 1989, enabling the State to recoup some part of its substantial outlay on social security benefits where the injury or disease (and therefore the need for the benefits) has been caused by wrongdoers, has never as a generality infringed the Convention rights of liability insurers.
The aspects which the Claimants do challenge relate to what they describe as an unintended but increasingly onerous by-product at the margins of the scheme, which involves obligations imposed on a dwindling number of liability insurers holding long-tail disease legacy policies (including Aviva), arising from liabilities for long-tail asbestos-related diseases. The Claimants' complaint is not that they or their insureds have to meet long-tail claims of this kind. It is, rather, that statutory and common law developments since the 1997 Act, designed for the protection of victims of asbestos-related diseases, have led to a situation where those in the position of the Claimants are required to pay to the State amounts equal to State benefits that do not correspond in any real way to any injury caused by their respective insureds.
The Claimants seek declarations as to the correct interpretation of such provisions as required by HRA section 3, alternatively a declaration of incompatibility under section 4(2) of the HRA; a declaration as to a failure to introduce regulations to remove the incompatibility; a quashing order in relation to a specimen CRU certificate; and an inquiry into damages.
Linden J granted permission to proceed, on the papers, on 21 January 2020.
For the reasons set out below, I have concluded that the claim succeeds in part. To the extent that it requires payments to the State which (in summary) do not correspond to the insured's real contribution to the injury, it fails to strike a fair balance between the rights of the State and those of the Claimants and is incompatible with A1P1.
(B) SUMMARY OF THE CLAIMANTS' CLAIMS
As part of the social security system in the UK, the Defendant Secretary of State pays a range of benefits to individuals. Some of these benefits relate to the effects of disabling diseases and injuries; others are for different purposes entirely. Where the victim of an injury or disease also brings a successful claim against an employer (including one which results in a settlement), the 1997 Act requires that employer, or its liability insurer (together, the “ compensators”), to make a payment to the Defendant equal to a prescribed portion of specified types of benefits.
The list of benefits which are required to be thus paid by compensators to the CRU is set out in Schedule 2 to the 1997 Act, which currently lists 20 benefits including Universal Credit and several of its predecessor benefits, statutory sick pay, and the two components of Personal Independence Payment (PIP) and of its predecessor Disability Living Allowance (DLA). In any claim by an injured person against his/her former employer, the care and mobility components of PIP (and, where still available, DLA) are offset against any compensation for the costs of care and mobility respectively during the relevant period. All other listed benefits are set off only against compensation for earnings lost during the relevant period. Due to the long-tail nature of asbestos-related diseases, many claimants are above retirement age and therefore do not have a claim for loss of earnings. Compensators are therefore often required to make a payment to the Defendant in respect of benefits that cannot be offset against any part of the compensation paid to the injured person. The Claimants say this results in insurers being required to repay benefits that do not compensate for a type of damage that their policyholders have caused.
Since the 1997 Act came into force, there have been far-reaching changes in the common law and statutory provisions in relation to asbestos-related diseases. These changes have been driven by the express objective of readjusting the balance between tortfeasors and victims in asbestos cases in favour of the victim, as Males LJ noted in Equitas Insurance Limited v Municipal Mutual Insurance Limited [2019] EWCA Civ 718 §§ 90–91. However, they have also had the consequence of increasing the amount the Defendant considers she is entitled under the 1997 Act to recoup from insurers on account of the benefits the State has, as a matter of public policy, decided to provide to such victims.
These changes in the legal framework are summarised in McGregor on Damages (20 th ed.) §§ 8-006 to 8–029, and include the following developments:
i) Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32: the usual “ but for” test for causation in fact was exceptionally relaxed, on policy grounds, to enable mesothelioma victims to prove causation in circumstances where due to the aetiology of the disease, medical science did not permit identification, even on the balance of probabilities, of the source of asbestos fibres which caused it in a given case. The mesothelioma might have started from a single fibre inhaled when working for a particular employer, and the court concluded that a modified approach to proof of causation was justified, under which it would be sufficient to prove that the defendant employer had materially increased the risk of contracting the disease.
ii) Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572: held that the Fairchild principle makes a tortfeasor liable only for a share of damages, in proportion to his contribution to the overall exposure.
iii) Section 3 of the Compensation Act 2006: reversed Barker v Corus and thus imposed full liability upon a tortfeasor who was only responsible for part of the asbestos exposure.
iv) Durham v BAI (Run off) Ltd (in scheme of arrangement) & conjoined appeals [2012] UKSC 14; [2012] 1 W.L.R. 867 (the “ Employers' Liability Trigger Litigation”): held that on the correct construction of EL insurance policies, in a mesothelioma case injury is “ sustained” or “ contracted” at the moment when the employee is wrongfully exposed to asbestos, rather than the moment when the disease is later established in the employee's body.
v) International Energy Group Ltd v Zurich Insurance Plc UK [2015] UKSC 33; [2016] AC 509: concluded that the common law rule in Barker v Corus of aliquot share liability continues to apply in cases not covered by the Compensation Act 2006.
vi) Heneghan v Manchester Dry Docks [2016] EWCA Civ 86: held that the Fairchild exception applies to asbestos-related lung cancer cases because, in aetiological terms, mesothelioma and lung cancer are legally indistinguishable. It is convenient to refer to diseases of this type as being “ indivisible”, the term used in Carder (below).
vii) By contrast, Carder v University of Exeter [2016] EWCA Civ 790 concerned asbestosis, which is regarded as a “ divisible” disease in the sense that periods of exposure can be linked on a causal basis to the onset or severity of the disease. It is a dose-related disease, whose extent and severity is related to the quantity of fibres ingested (judgment § 2). The Court of Appeal held the claimant to be entitled to damages from a former employer who had been responsible for...
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Aviva Insurance Ltd v The Secretary of State for Work and Pensions
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Aviva Insurance Ltd v The Secretary of State for Work and Pensions
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