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|ISSN 1470-8108||Issue 45||Winter 2001-2|
Asbestos claimants and their legal representatives, still reeling from adverse developments earlier in the year, were hit by another body blow on October 1, 2001 when T&N, Ltd. ceased paying asbestos-related disease claims. Federal Mogul (FM), T&N’s parent company, blamed an explosion in US asbestos litigation for the company’s financial problems. Although it had been anticipated, the news that FM was filing for voluntary Chapter 11 reorganization in the US and administration under the UK Insolvency Act of 1986 set off shock waves on both sides of the Atlantic. Affiliates in Canada, Continental Europe, Africa, Latin America and Asia-Pacific appear to be unaffected by the restructuring process. FM’s newly elected Chairman and Executive Officer, Frank Macher, claims that despite the insolvency: "Federal-Mogul will continue to serve its existing customers, fulfill current contracts and secure new business." On October 15, a corporate press release boasted that FM had secured four new contracts valued at $20 million from auto manufacturers and suppliers with Macher reiterating: "Federal-Mogul is continuing business operations without interruption and with the full support of our major customers."
For plaintiffs with asbestos injury claims it is most certainly not business as usual. UK cases against T&N Ltd., a British multinational gobbled up by FM during a $6 billion corporate buying spree in 1998, have been frozen. Solicitor Ian Bailey explained: "The administration order is a legal device by which the companies can continue to trade while ignoring the urgent needs of the many people who suffer the dreadful effects of asbestos exposure." Plaintiffs’ solicitors were informed by letters received in October that as a result of the proceedings, legal actions against T&N and subsidiaries such as Newalls Insulation Company Limited and J.W. Roberts Limited would be stayed. The High Court of Justice, Chancery Division, London approved the appointment of S V Freakley, J J Gleave and G P Squiries of Kroll Buchler Phillips as Joint Administrators. According to Mr. Freakley: "Whilst Federal-Mogul is viable at an operating level, it requires the protection of Administration and Chapter 11 to allow it time to address the financial difficulties caused by asbestos claims in the US." While Freakley et al are hopeful that these matters can be resolved in a few years, experience in the US has proven that the complex negotiations required can result in much longer delays. According to Asbestos Litigation in the U.S: A New Look at an Old Issue published in August, 2001 by the RAND Institute for Civil Justice, the average length of time from petition for bankruptcy to confirmation was six years for eleven major US asbestos defendants; however, three firms took ten years. Johns Manville filed for bankruptcy in 1982. It was approved in 1988, payments commenced but were suspended in 1990 and did not resume until 1995.
There are many claimants in the UK with on-going cases against the T&N Group of companies. The law firm of Irwin Mitchell represents several families pursuing lawsuits for environmental exposure caused by the operations of J. W. Roberts, a wholly-owned subsidiary of T&N, in Armley, Leeds. As a child, Ian Atkinson, who died of mesothelioma in 1999, had attended the local primary school where he played in a schoolyard covered with asbestos dust. His brother Barry is calling for government intervention: "I feel it is an injustice for all the people in Armley, not just my brother. I have known many people from Armley, strong and healthy people, who have died from this dreadful and painful illness and their families have gone through it all with them. It is a betrayal that they should have to fight for anything after all they’ve been through." Solicitor Adrian Budgen is pessimistic: "This is a bitter blow… the claims have been frozen and prospects for settlement are extremely bleak because we do not know when, if ever, we will be able to force asbestos companies to settle them." T&N checks issued for cases settled before October 1 have bounced according to several solicitors. One former employee, seventy-four year old Thomas Harrison, deposited a settlement check for £38,000 which was returned unpaid.
Earlier this year, the insolvency of Chester Street Insurance Holdings Ltd., formerly Iron Trades Holdings Ltd., threw into jeopardy compensation for thousands of UK asbestos victims. On May 10, 2001, a Treasury spokesperson announced that a settlement had been reached between the Government and the insurance industry which would ensure that the majority of claims would be paid (newsletter issue 43). Many people believe that the precedent set by Chester Street is not applicable in this case as T&N was self-insured; research reveals however, that throughout seventy-eight years of existence, the company had purchased various insurance policies. The history of T&N’s insurance coverage is complex involving British insurance companies, re-insurers, co-insurers, excess layer insurers, numerous syndicates at Lloyd’s of London, employers' liability policies, workmens’ compensation policies, umbrella policies, product liability policies and the Asbestosis Fund, a private insurance scheme set up to handle all T&N’s asbestosis claims. T&N’s annual report of 1994 stated that "insurance cover to meet the asbestos claims is virtually exhausted."
An examination of an unpublished manuscript by Barrie N. Barker and documents unearthed during the Chase Manhattan case against T&N raises more questions than it answers. When asbestosis became a scheduled disease under the terms of the Workmens’ Compensation Acts, enquiries for insurance coverage were made to the Midland Employers’ Mutual Assurance Ltd., the company which had written insurance policies for T&N since the 1920 merger. The Midland’s premium for asbestosis cover proved to be unacceptable to the T&N Board; at its meeting of June 25, 1931 a decision was taken that the group would carry the risk itself: the Asbestosis Fund was set up. In 1948, when the National Insurance Act came into force, the Board again took the decision to continue the Fund. In 1952 another approach was made to the Midland which had continued to cover the group for other non-asbestosis common law claims. The insurers indicated they would be prepared to cover the excluded asbestosis claims for an annual premium of £1,000. Once again, T&N decided to carry on self-insuring. Soon afterwards, the unit companies agreed to bear the cost of common law asbestosis claims themselves so that the central Asbestosis Fund could be wound up. According to minutes from the Turner and Newall Board Meeting on 10 February 1977:
"When the Employers’ Liability (Compulsory Insurance) Act came into force we found ourselves in some difficulty. The present situation is that our insurers (The Royal Insurance Company Ltd.) provide the certificates required by the Act, but the clause in the policy excluding asbestosis liability still remains. Insurers have now indicated that they are not prepared to continue, and we are now, through Hogg Robinson, seeking another insurer. The Royal were concerned because since 1972 they have been carrying a risk, by reason of having issued the certificates, which is specifically excluded from the policy, and furthermore that it is a continuing risk for claims which may take up to twenty years to arise. They put forward a suggestion that we consider setting up a trust fund so that claims could continue to be paid even if T&N became unable to meet them. This was not regarded by T&N as a practical solution. On the other hand, T&N asked the Royal to quote a premium for full cover within the terms of the Act but they have declined to do so. The obvious solution seemed to be for T&N to continue to settle asbestosis claims, and for insurers to charge a premium for the other risks which reflected their contingent liability to meet asbestosis claims if T&N ever failed to do so, but they have declined to adopt this course."
When Royal indicated that they did not wish to renew the policy, T&N advised Lloyd’s Underwriters that the company would continue to accept the risks from asbestosis claims.
Advice is urgently needed on the implications of this material. Official demands should be made for T&N, the Midland and the Royal to clarify the insurance coverage provided for asbestos-related claims; specifically:
Did the Royal Insurance Company Ltd. (now part of Royal and SunAlliance Insurance Group plc) provide T&N with certificates as stipulated by the Employers’ Liability (Compulsory Insurance) (ECLI) Act even though asbestosis liability was specifically excluded from T&N’s policy? If so, is the Royal liable for current claims?
Did the exclusion of cover for asbestosis claims under T&N’s insurance policies include mesothelioma; if not, could mesothelioma claims against T&N be paid by the insurers, the Policyholder’s Protection Board or the Financial Services Compensation Scheme?
In November, 1996, T&N made a one-off payment of £92 million ($155 million) for an additional £500 million ($725 million) layer of insurance to cover its asbestos liabilities. Under the policy placed with a consortium of European reinsurers, believed to include Zurich Centre Re, Swiss Re and Munich Re, coverage of claims notified post-June 30, 1996 would be accessible when the total value of claims received after June, 1996 exceeded £690 million. According to FM’s Annual Report of 2000, the company "does not expect to reach the trigger point of the insurance or begin to collect on the insurance recoverable for the next several years." Now that the company has ceased paying claims, when, if ever, will these funds be released?
Asbestos defendants and insurers in the US have been seeking ways to side-step asbestos liabilities for more than two decades; thirty companies have filed for Chapter 11 since 1982. Until recently, it was hoped that UK industry could weather the storm. Equitas, the reinsurance vehicle set up in 1996 by the Lloyd’s of London insurance market to handle pre-1993 long-tail liabilities such as asbestos and pollution, increased reserves for asbestos claims by £1.5 billion last year and £1.7 billion this year. The accounts for the year ending March 31, 2001 record the company’s first ever loss: £84 million; asbestos claims paid out during the year were £406 million. An Equitas spokesman remained buoyant saying that £8.1 billion in asbestos reserves are adequate. Many observers, however, have serious concerns about the viability of insurers with asbestos liabilities. Enquiries reveal that Chester Street wasn’t the first UK insurer brought down by asbestos; three years earlier, Builders Accident Insurance Ltd. had become insolvent largely as a result of £40 million of asbestos-related liabilities. Widespread demands for a public enquiry into the operations of defunct insurers have been ignored by the Government. A spokesperson for the Association of Personal Injury Lawyers stated: "Within a matter of months, we have seen the demise of Drake, Chester Street and Independent, with attendant rumours, recriminations and, in the case of Independent, a Serious Fraud Office investigation… We believe it’s time for the Government to hold a public enquiry into these insolvencies to establish how this situation was able to develop and what can be done to prevent it from happening in the future." During future discussions, the feasibility of bringing actions against solvent FM/T&N subsidiaries in the European Union and/or Canada could be considered.
While Federal-Mogul’s website (http://www.federal-mogul.com/reorganization/en/) has reams of information on administrative motions and pleadings submitted to the US Bankruptcy Court, information publicly available on UK developments is virtually non-existent. During the week commencing November 19, several UK solicitors received a Notice of Commencement of Chapter 11 Bankruptcy Cases, the first substantial communication received about the insolvency proceedings. This document listed one hundred and thirty-three UK-based companies including well-known defendants such as Turner Brothers Asbestos Company Limited, Ferodo Limited and The Washington Chemical Company Limited and previously unknown firms such as T&N Shelf Twenty Limited, Dumplington Services Limited and Greet Limited. For additional information, solicitors were advised to contact a call center at: 0800 389 6881 When this number was called on November 23, the following recorded message was heard: "The Federal-Mogul call center is no longer available." Calls made on the same day to each of the three court-appointed administrators and to the public relations spokesperson for Kroll Buchler Phillips all went unanswered. Attempts to obtain copies of the transcript of the October 1 High Court hearing, the administration petition and witness statements were equally unsuccessful. According to a court spokesperson, an audio recording was made but no written transcript exists of the hearing. Although he said that the case file can be obtained by solicitors representing asbestos victims, the experience of one hapless London clerk does not bear him out. During a visit to the court, the clerk requested sight of the documents supporting the petition; he was shown an empty file.
Following the T&N collapse, MP John Battle submitted parliamentary questions on employers’ liability insurance, the concept of corporate self-insurance, the number of UK companies involved in the insolvency proceedings and the availability of the October 1 transcript. Battle has a fund of knowledge about the operations of T&N gathered during the 14 years he has represented Leeds West. Since 1988, he has been involved in a campaign for Armley constituents who, having lived or played near the J. W. Roberts asbestos textile factory, contracted asbestos-related diseases. He was a personal friend of June Hancock, one of two plaintiffs in the first successful environmental exposure case against T&N. Mr Justice Holland, highly critical of T&N’s behaviour in the Margereson and Hancock case, wrote: "the conduct of the defense… (reflects) a wish to contest these claims by any means possible, legitimate or otherwise, so as to wear them (the plaintiffs) down by attrition." Battle is adamant that T&N be held responsible for the damage: "This evasion is a scandal. Making the polluters pay means not only proving responsibility, not only winning the moral and legal arguments, but taking on high level international corporate gamesmanship that continues to write off the lives of asbestos victims. This is a struggle for a just society that must be won." In an Early Day Motion (EDM 423) lodged on November 14, dozens of MPs deplored "the fact that the company can remain trading and protect the interest of its shareholders but can abnegate its responsibilities towards its former employees who are now suffering from chronic and terminal asbestos-related diseases…(the MPs called) on the Government to intervene and open a broader inquiry into the issue of company liability for the compensation claims of people suffering with asbestos-related diseases."
Two awards by Manchester courts have provided some relief for asbestos plaintiffs in recent months. In the first case (Crompton v The Ministry of Defence and The Home Office), the concept of Crown immunity was breached by former workers from a gas mask factory while in the second (Harrison v Halsen Engineering Ltd.) an employer was held liable for disease contracted by a relative exposed to asbestos taken home on a storeman’s workclothes. Although compensation awarded in the Harrison case was set at £256,000, an insurance anomaly means that this money may never be paid. Both cases were brought on behalf of women plaintiffs.
The December 21, 2000 verdict of Mr Justice Holland awarded four plaintiffs, or their estates, between £37,500-£66,210 ($56,250-$99,315) for mesothelioma and asbestosis contracted after varying periods of employment. The women had worked at factories in Leyland or Blackburn which had, during the Second World War, been requisitioned by the Crown for the production of gas masks; the mask filters contained either chrysotile or crocidolite. Evidence was presented which established that the burden of asbestos in the women’s lungs was similar to that found in workers at asbestos factories. Testimony was given that working conditions had been dusty and the gas mask filters had contained asbestos. Although only chrysotile had been used for the civilian gas masks manufactured at the Blackburn factory, women at this factory developed mesothelioma.
The northern factory owners, J E Baxter and Co., had an agreement with the Government. Although the firm owned the factories and employed the labor, the Government had overall control of production, paid for the use of the factory, the installation of machinery and the purchase of raw materials. While early claims were settled, the firm eventually became bankrupt due to lack of insurance. Lawsuits were then brought against the Government. According to Solicitor James Thompson: "It was argued that the Government should have protected the factory workers with the knowledge they already had in the 1930s of the hazards of asbestos, their position of control of the factories and their own inspectors and managers working in the factories." Initially these claims were settled. Government solicitors then changed tack and mounted a defense based on the doctrine of "Crown immunity," under which the monarchy, and by delegation the Government, can do no wrong. Even though a government employee might have been negligent in allowing the existence of high levels of asbestos contamination in a factory, the Crown could not be at fault and the Government could not be sued. A pragmatic solution was devised whereby the Government would volunteer a senior employee as defendant in personal injury cases; the defense was handled and any compensation awarded was paid by the Government. This practice was stopped by a 1946 ruling of the Court of Appeal. In 1947, The Crown Proceedings Act ended Crown immunity for personal injury claims by civilian government employees but maintained immunity for claims initiated by members of the armed forces.
In the Compton case, the Ministry of Defence (MOD) maintained that because exposure to asbestos occurred prior to the 1947 Act, the Government enjoyed the privilege of immunity. The plaintiffs denied this, saying they could only sue for negligence once their diseases had developed; this happened years after the Crown Proceedings Act had abolished the immunity. Just in case the 1947 Act was unclear, the plaintiffs’ solicitors cited the UK Human Rights Act which sets out claimants’ rights for a judicial hearing as stipulated in Article 6 of the European Convention on Human Rights. A verdict based on the human rights arguments could have been used by servicemen with asbestos-related diseases who are still barred from bringing claims against the MOD. Mr Justice Holland chose not to open this can of worms; he decided that the Crown Proceedings Act did not give the Government immunity in this case. The plaintiffs’ solicitors were pleased with the outcome saying: "The successful result for Mrs Crompton and the other claimants means that civilian claims for asbestos diseases against the Ministry of Defence are unlikely to face this argument again, where the exposure to asbestos happened before 1947. There are still, sadly, former gas mask factory workers and former civilian naval asbestos workers becoming ill from asbestos exposure in that era."
Christina Harrison’s brother worked for Halsen Engineering at the British Steel factory in Corby, Northamptonshire. As a storeman he handled a wide variety of asbestos products; he cut and shaped asbestos sheets into boiler blankets and laid on the material to stitch the layers together. No overalls were provided by his employer; it’s no wonder that he returned home covered in fibers. In 1970, Christina helped her mother do the family washing. In the mid-1990s, Christina was diagnosed with mesothelioma. Throughout the four years of her illness, she was resolute in her refusal to take morphine, believing that it would shorten her life. Consequently, she often suffered excruciating pain. Giving what is believed to be one of the highest awards of damages for mesothelioma, the judge said: "this was a particularly protracted period of suffering for a mesothelioma case." A sum of £256,000 was awarded of which £65,000 was for pain and suffering; the bulk of the compensation was for care, dependency and loss of earnings (Andrew Harrison, Christina’s husband, gave up work to look after her).
Convincing the judge that negligence had caused the fatal illness was the easy part. As the company was defunct it did not appear in court to defend the action; neither did any of its insurers. Once the judgment was issued, the question arose: who will pay? Workers, entitled to bring a case against a former employer can, if the company is defunct, sue the insurer which provided employers’ liability cover. If neither the company nor the insurer is viable, compensation for occupational injuries can be claimed under some government schemes. Such recourse is not open to people in Christina’s position; the only claims they can bring are against the company, if it still exists, (Halsen Engineering closed in 1988), or the company’s public liability insurer. Although Halsen had public liability cover, the insurers refuse to pay compensation on the grounds that they are not obliged to pay for damages claimed outside the policy period. Solicitor Pauline Chandler explained: "In Christina’s case, there was no public liability insurance in effect at all when the claim was made in 1998 because the company had ceased to trade some 10 years earlier. We do not accept what the insurers say and are seeking sight of all the insurance policies. We will then consider whether to sue any of the insurers under the Third Parties Rights Against Insurers Act but if the insurers are right it would be a terrible travesty of justice."
According to new government data (Health and Safety Statistics 2000/01 http://www.hse.gov.uk/statistics/hss0001.pdf), the incidence of mesothelioma exploded in the UK during the 1990s. Although the occurrence of asbestosis remained more or less constant, the number of mesothelioma cases increased by 78% from 895 in 1990 to 1595 in 1999. Information sheets, Mesothelioma Occupation Statistics and Mesothelioma Area Statistics, produced by the Epidemiology and Medical Statistics Unit of the Health and Safety Executive (HSE) break the figures down by occupation and region. With rates six times the national average, men experiencing the highest risk were metal plate workers (including shipyard workers) and vehicle body builders (including rail vehicles). Plumbers and gas fitters were at four times and carpenters three times the risk of contracting mesothelioma. Other occupations which generated high levels of the disease were: electricians, construction workers, production fitters, electrical plant operators, boiler operators, sheet metal workers, welders and electrical engineers. High proportional mortality ratios were found for eight categories of construction and related trade workers such as carpenters (3.93), construction workers (2.81) plasterers (2.52) and managers in construction (2.54). Regionally, male mesotheliomas were grouped around ports and dockyards: "The county district with the highest SMR (Standardised Mortality Ratio) is the shipbuilding area of Clydebank which had an SMR ten times higher than the average for Great Britain. Other Scottish port and dockyard areas with high SMRs include Dumbarton, Bearsden and Milngavie, Inverclyde, Renfrew, Glasgow City, Kirkcaldy and Dunfermline." Disease levels were also elevated in areas with large railway engineering works, dockyards handling asbestos imports and industries processing raw asbestos. Calculations based on a formula proposed by the HSE, "a reasonable rule of thumb would be to allow for one or two extra lung cancers for each mesothelioma," suggest that the expected incidence of asbestos-related lung cancer should be between 1776-3552 in 1999. The actual figure recorded is 38. Unable to explain this discrepancy, the report simply noted: "There is evidence to suggest that these figures substantially underestimate the true extent of the disease."
More mesothelioma victims are applying for compensation under the Industrial Injuries Scheme, a government-run, non-contributory, no-fault method of providing disablement benefit for injured workers (http://www.dss.gov.uk/asd/iidb.pdf). A 41% increase in applications by patients with diffuse mesothelioma contributed to an overall 20% rise in cases of newly diagnosed prescribed diseases. Table 2.3 on page 9 of the report analyses prescribed asbestos diseases claims which include: 190 diffuse mesothelioma (179 male/ 11 female), 8 (all male) primary carcinoma of the lung with accompanying evidence of asbestosis or unilateral/bilateral diffuse pleural thickening and 69 (68 male/1 female) unilateral or bilateral diffuse pleural thickening. As cases of asbestosis are subsumed within the category of pneumoconiosis, there is no way to know how many of the 261 assessments recorded in this category are for asbestosis claims. However, the HSE Statistics cited in paragraph one noted a 10% increase in asbestosis claims for disablement benefits last year.
Compiled by Laurie Kazan-Allen