Friday, September 14, 2007.

The government has invited responses to a Consultation document proposing changes to the law about Regulations concerning employer liability insurance.  To see the full Consultation paper click here.

Employer liability insurance has been compulsory by law since 1972 and Regulations were introduced in 1998 that require employers to retain insurance documents for 40 years and to display insurance certificates at their place of business.

However, the Department for Work and Pensions (DWP) now proposes to relax these Regulations to reduce the “administrative burden” on businesses.  The Consultation document puts the cost to businesses arising out of the requirement to store and display employer liability insurance policies at £71m.

The government favours replacement of the Regulations with a form of “strongly worded guidance” which advises businesses to keep records for their own benefit.

The Consultation also recommends that the current Regulation which requires employers to physically display insurance certificates at their place of business should be replaced with further guidance.  The DWP propose that employers should be able to deal with this issue in a “bespoke” manner.  It seems that what is envisaged is that employers can display the documents electronically, such as via a company intranet, but that the policies are also available for inspection.

We are concerned that these proposals may further undermine the rights of victims of industrial diseases and accidents and have sent a detailed response to the DWP.

Specifically, we are concerned that society does not repeat its historical failure to protect victims of occupational diseases, including asbestos related diseases like mesothelioma, lung cancer, asbestosis and diffuse pleural thickening.  Some victims of industrial diseases with long latent periods find that by the time that they have developed the illness, some of their employers may have stopped trading and become defunct.  If the past employer liability insurer cannot be traced then these individuals may go uncompensated.

Therefore, the DWP’s proposals to relax current Regulations about retention of insurance documents could mean that victims of diseases in the future encounter the problems of today’s victims, an inability to trace their employers’ past insurers and recover compensation for their injuries or the loss of loved ones.

Although the apparent cost of these Regulations to business may seem substantial, it must be remembered that the cost of £71m will be borne across the entire industry.  We also believe that any potential savings to business should be balanced against the cost of individuals potentially going uncompensated and being reliant upon state benefits, rather than getting proper compensation from the employer who caused their illness.

We have also argued that a database of insurance records should be set up to help injured individuals trace their employers’ past insurers.  Insurance companies have historical records about insurance coverage and we believe that this information should be shared and made accessible to the public and have called for legislation to introduce this database and make compliance by insurance companies mandatory.

The DWP have cited the presence of an existing ABI scheme for tracing employer liability insurance as a justification for relaxing the Regulations that govern this area.  However, the ABI scheme has been much criticised because of its voluntary nature and concerns have been aired as to whether all insurers are devoting enough resources to make the system work.  For example, the success rate of the scheme fell from 42% in 2002 to only 23% in 2005.  Although the ABI have introduced changes to try to improve the scheme, we believe it is too early to measure how successful these improvements are, and it would be wrong for the government to allow the laws in this area to be relaxed.

Given the uncertainty of so-called “long tail” diseases like mesothelioma, which can develop decades after exposure to asbestos took place, the government should provide the maximum protection to potential future sufferers and should not be seeking to erode existing safeguards.

For further information about our response to the government consultation, please contact-

Kevin Johnson
John Pickering and Partners LLP
19 Castle Street
Liverpool
L2 4SX
Tel: 0151 227 1214
kj@johnpickering.co.uk

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