Question 1: What in your view are the benefits and disadvantages of the current DPAP for resolving mesothelioma claims quickly and fairly?

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1 Ministry of Justice consultation Reforming mesothelioma claims: A consultation on proposals to speed up the settlement of mesothelioma claims in England and Wales About the LMA The Lloyd s insurance market underwrites insurance business from over 200 countries and territories worldwide. In 2012, premium capacity was in excess of 24 billion. The Lloyd s Market Association (LMA) represents the 57 managing agents at Lloyd s which manage the 90 syndicates underwriting in the market, and also the 3 members agents which act for third party capital. Managing agents will be dual regulated firms by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) and members agents will be regulated by the FCA. We appreciate the opportunity to contribute to this paper. Whilst this response is distilled from the views of our members, the views of individual members may differ. Summary of Key Points There is a strong case for introducing a new Pre-Action Protocol for mesothelioma claims. A new MPAP would: - Speed up settlement of mesothelioma claims - Enable rapid payment of interim damages - Require early exchange of witness statements - reduce litigation - Focus the parties on actual points at issue, leading to speedier and cheaper resolution of disputes - reduce legal costs Question 1: What in your view are the benefits and disadvantages of the current DPAP for resolving mesothelioma claims quickly and fairly? Disadvantages: Of all personal injury claims, only mesothelioma has no fixed pre-action timetable. The Claimant s witness evidence is a key piece of information for defendants in mesothelioma claims but it is not required by the Disease and Illness PAP. This is often the only evidence of where and in what circumstances exposure to asbestos took place, and without it a defendant cannot properly assess their liability. In some cases the claimant solicitor refused to provide the claimant s witness statement. As a result of the lack of pre-litigation structure, the time taken to settle mesothelioma claims is far too long. A study found that the average time taken in England and Wales from the claimant signing their witness statement to this being disclosed to defendants is 7 months. 1 In Scotland the average is 21 months. The study also found the average time taken in England and Wales from the letter of claim being sent to the defendant, to settlement is 16 months. In Scotland the average is over 22 months. The lack of an effective pre-litigation system also results in many mesothelioma claims going into litigation unnecessarily. While the expedited litigation process 1 ABI Mesothelioma Study 2 P a g e 1

2 allows for complicated claims to be prioritised, there is little justification for the majority of cases to be put through any form of court process. Putting the evidence and timeline requirements into a pre-action protocol would bring forward the benefits of the Practice Direction with less delay and without the need for a claimant to issue court proceedings. Litigation in itself can add additional delay and stress to the process for sufferers and their families. Cases where proceedings are issued take an average of 5 months longer than those that are settled pre-action, according to ABI Mesothelioma Study 1. Question 2: How far do you think that a new dedicated MPAP would address the problems and meet the objectives set out above? A dedicated MPAP would address the issues outlined in our response to Q1 by: Setting achievable timescales for both sides the main change that the MPAP would bring about is speeding up and standardising the information required to be exchanged by the claimant solicitor and the defendant. The deployment of this structured approach coupled with defined timeframes for defendants to respond should ensure the vast majority of mesothelioma claims are settled within 3-6 months. Under the MPAP, the full response must be within two months of the letter of claim. This means that the time for the insurer's claim response is significantly reduced. Another difference is the time for disclosure of the Claimant's witness evidence. The DPAP does not provide for this at all. The only existing provision is Practice Direction 3D, which necessarily applies only to litigated claims. This provision of itself will permit some claims to be settled very quickly after the letter of claim, which under the current system would have to be litigated. Requiring the evidence needed to progress the claim quickly the MPAP would not require anything from claimants which is not currently requested, but would simply request the key information to be provided at as early a stage as possible. As discussed above, the claimant s witness statement is a key piece of evidence for defendants to admit liability and assess quantum. The information contained in the witness statement would be needed from the outset in any event for the solicitor to assess the merits of the claimant's case. The requirement to provide the claimant s witness statement early on should ensure that this information is collected from the claimant quickly. In cases where further enquiries do have to be made of the claimant, early disclosure is more likely to find the claimant well enough to respond while minimising further distress. The current 7 month delay is an unacceptable time in the progression of mesothelioma symptoms There is a perception that collecting the claimant s witness statement early will be inconsiderate to the sufferer and their family. By contrast, the BLF 2 survey shows that one of the main concerns of sufferers and their families is to complete evidence gathering quickly so that they can get on with their lives. Further concern has been expressed about the requirement for claimants to hand over witness statements early. It is important to note that the claimant is already required to provide a witness statement under paragraph 3.2 of the mesothelioma practice direction to invoke the show cause procedure. 2 British Lung Foundation (BLF) In early 2013, the British Lung Foundation commissioned a qualitative survey of 250 mesothelioma sufferers and their relatives to give them an opportunity to describe their experiences of asbestos exposure, diagnosis and the legal process. This has helped inform how the package of reforms for mesothelioma sufferers has been shaped. P a g e 2

3 A tailored and effective pre-action protocol would also mean far fewer claims would go into litigation. At the same time, a mesothelioma specific protocol would also fit more precisely with the processes and timescales of the Mesothelioma Practice Direction and the particular procedures used by courts to process mesothelioma cases. Question 3: What are your detailed views on the ABI s proposed MPAP at Annex B? What further issues might it address? Do you think the criteria for entering the MPAP are the appropriate ones? If not, what criteria would you suggest and why? In what circumstances, if any, should a case fall out of the MPAP? The LMA has been involved in the development of the ABI's proposals, and we strongly support the draft MPAP. An effective pre-action protocol would mean far fewer claims would go into litigation. At the same time, a mesothelioma specific protocol would also fit more precisely with the processes and timescales of the Mesothelioma Practice Direction and the particular procedures used by courts to process mesothelioma cases. For the first time, the MPAP contains a formal provision for the interim payment of damages The timeframes listed in the MPAP will be challenging for all insurers to meet, however it is our view that this provides a reasonable improvement on the status quo. It is important to note that proceedings may be issued at any stage and the MPAP does not preclude this. Issues in dispute can be identified, closely defined and resolved swiftly using the MPAP, so that litigation over such issues should be the exception. It will ensure that where proceedings are necessary, those are brought in circumstances where both parties have already made full disclosure - leading to faster resolution of the clearly defined remaining issues. For this reason we do not consider that pre litigation claims should fall out of the MPAP. Question 4: To what extent do you think the proposed MPAP will result in reduced legal costs in mesothelioma claims? If the MPAP brings about a significant reduction in time taken to process claims by imposing strict timescales on both sides, this should result in reduced costs incurred. The reduction in time taken under the MPAP will not only be driven by the imposed timescales. The clearer instructions for both sides included in the MPAP on what evidence is required and when to process mesothelioma claims should also reduce uncertainty and unnecessary work undertaken. The introduction of a Secure Mesothelioma Claims Gateway (SCMG) to facilitate use of the MPAP should also provide additional information to help both sides process the claim quickly, thereby also reducing costs incurred. Question 5: To what extent do you think a SMCG will help achieve the Government s objective of ensuring that claims are settled quickly and fairly? The LMA supports the introduction of a SMCG, and believes it will help facilitate the timescales in the MPAP and help achieve the objective of claims settling more quickly and fairly. P a g e 3

4 Question 6: How should the SMCG work (if at all) with the MPAP and procedure in traced mesothelioma cases generally, and what features should the SMCG have in order to complement those procedures effectively and efficiently? The SMCG can help facilitate the MPAP by consolidating how claimant solicitors gather key information from sufferers and families early on, expediting early exchange of information with defendants and thereby earlier settlement of claims. The SMCG can guide claimants and their solicitors through the information required to make a claim against both an existing employer or insurer, or in the absence of both, to guide them through submitting a claim to the untraced mesothelioma scheme. An approach that is consistent and helps to standardise will therefore speed up the initial stage of finding the correct defendant(s). This should complement rather than disrupt claimant and defendant firms existing claims systems. It is understood that the intention is also for entry into the Untraced Mesothelioma Scheme to be via the SMCG. This will help to ensure that the claimant has traced other potential defendants before coming to the Scheme, including using ELTO and the Technical Committee where relevant, and also that they have submitted the core information that is required for the Scheme to consider their eligibility such as medical diagnosis, employment and exposure periods. Question 7: What do you see as the risks of a SMCG and what safeguards might be required? The SMCG will collect some personal data e.g. name, age and contact details. The SMCG will therefore need high levels of security. Question 8: Do you agree that a fixed recoverable costs regime should be introduced to support a dedicated MPAP? If so should this apply primarily to claimant costs? Should any measures also apply to defendant costs? If so what form might they take? The LMA supports the introduction of a fixed costs regime. This can encourage quicker resolution of claims, discourage claims from entering litigation unnecessarily, and ensure more predictability on costs for sufferers and their families, claimant law firms, insurers and employers. Mesothelioma, as a terminal disease, rightly attracts high levels of damages for the claimant. However, we do not believe that the value of the claim should be the main factor in determining legal costs. A fixed fee regime can encourage quicker resolution of claims through supporting the aims and approach of the mesothelioma pre-action protocol (PAP). Equally, a costs regime can discourage claims from entering litigation unnecessarily - so reducing cost and delay. Fixed costs are particularly suited to mesothelioma claims as, once a solvent compensator has been identified, claims are relatively straightforward and usually successful. We accept that a fixed fee should be applicable to the majority of mesothelioma claims. For the small minority of exceptional claims that are most complex, whether in relation P a g e 4

5 to value or liability, the conventional hourly charging rate should apply. To drive appropriate behaviours we would advocate that the court take into consideration pre litigation conduct with the ability to curtail costs if appropriate. Question 9: Which proposed design of fixed recoverable costs structure do you support? Please explain your answer. We support a fixed recoverable cost approach that adopts a consistent fee level for all mesothelioma claims. This fee level would take into account a certain degree of contingency for the handling of more complex cases. To assist cash flow we would advocate that an interim cost could be paid at the point where interim damages are awarded. It is important to note however that in this example, this would be a staged fee rather than two distinct fee levels. Question 10: What are the key drivers of legal costs, both fixed and variable costs, and how strong are these drivers? We believe the key drivers of cost are time taken to reach settlement. Specifically this would cover: delay in bringing the claim; unnecessary litigation; and disputes over liability (either between Claimant and Defendant or between defendants. Question 11: Do you have any views on what the level of fixed recoverable costs should be, in relation to your favoured design? Please explain your answer. No - outside of our remit. Question 12: Do you agree that the fixed recoverable costs regime should apply only to cases which fall under the MPAP? No. We think that mesothelioma cases will follow a general pattern, and even if exceptional cases fall out of the MPAP, these should still only attract fixed higher costs. Question 13: To what extent do you think the reforms apply to small and micro businesses? Small businesses facing a meso claim should be able to navigate the process more easily through the SMCG Lowering legal costs could feed into overall EL costs and therefore eventually EL premiums. Question 14: To what extent do you think the reforms might generate differential impacts (both benefits and costs) for small and micro businesses? How might any differential costs be mitigated? P a g e 5

6 Question 15: Do you agree that sections 44 and 46 of the LASPO Act 2012 should be brought into force in relation to mesothelioma claims, in the light of the proposed reforms described in this consultation, the increase in general damages and costs protection described above, and the Mesothelioma Bill? S. 44 Conditional fee agreements: success fees S. 46 Recovery of insurance premiums by way of costs As part of his recommendations for civil justice reform, Lord Justice Jackson proposed the removal of some additional costs from claims (the success fee and After The Event (ATE) insurance premium), with the concurrent uplifting of claimant s damages by 10%. This was intended to provide more compensation to the claimant, while ensuring the cost to defendants remained proportionate. The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) included a provision to remove the additional liabilities (success fee and ATE premium), and to apply Qualified One Way Costs Shifting (QOCS) to ensure that the claimant is not liable for the defence costs of the claim if the claimant loses. Alongside the LASPO provisions, Simmons v Castle [2012] brought in the 10% uplift on damages. However, this uplift was only to apply to cases where the LASPO provisions were in force. This was to ensure that defendants were not required to pay an additional amount in damages to claimants, while not benefitting from a reduction in legal costs. While the LASPO Bill was progressing through Parliament, an amendment was introduced carving out mesothelioma claims specifically from the reforms. As a result, S.48 of LASPO provides that until a review by the Lord Chancellor is completed additional liabilities will continue to be recovered in mesothelioma claims from defendants in England and Wales. Consequently, mesothelioma claimants are not benefitting from the 10% uplift introduced in Simmons v Castle. There are clear financial advantages for claimants in the form of higher damages were the provisions of LASPO to apply to mesothelioma claimants. The Diffuse Mesothelioma Bill, currently progressing through Parliament, will if introduced, provide a fund of last resort where a solvent compensator or insurer standing behind them cannot be found. This removes a significant risk factor from mesothelioma claims as currently approximately 300 claims per year are unable to trace a valid compensator. The current 27.5% success fee reflects this high level of risk and once removed mesothelioma claimants would not need to rely on After the Event (ATE) premium to cover this risk. Tony Ellwood Senior Technical Executive - Underwriting Lloyd's Market Association T: +44 (0) M: +44 (0) E: tony.ellwood@lmalloyds.com P a g e 6