Developments. Dust Diseases

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1 November 2017 Dust Diseases Developments Dust Diseases Developments brings you the latest happenings in Australian asbestos and dust diseases compensation. You may have seen it before as Asbestos News. In this edition: Australian mesothelioma statistics update Amaca v Latz loss of pension claims, and pressure on exemplary damages The re-emergence of black lung disease James Hardie claims experience mid-year update

2 Mesothelioma Statistics Update In September 2017 the Australian Mesothelioma Registry (AMR) published its sixth annual report. We have summarised some of the key findings from the report. Australia is ranked high among other countries with the highest malignant mesothelioma incidence globally. National Mesothelioma Cases on the Rise? The numbers of mesothelioma cases reported nationally have increased since the 1990s. FIGURE 1 NATIONAL MESOTHELIOMA CASES No. of Cases Year of Diagnosis Reported to Date Potential Future Reports* *Estimated by Finity, based on historical delays in reporting. Source: AMR Annual Report, September 2017 Table A8. While there is uncertainty in the numbers of cases for recent diagnosis years, the number of national cases of mesothelioma appears to have continued to increase. This begs the question: are we yet to reach the peak of mesothelioma reporting in Australia? Not all cases of mesothelioma result in insurance or common law compensation. As such, while national cases of mesothelioma appear to be rising, the level of compensation activity may be stable or even reducing particularly if more cases arise from environmental and renovator exposures, where a liable defendant can be more difficult to identify. The makeup of the 2016 diagnoses by state and Territory, and the rate per 100,000 population, is shown in figure 2: Source: AMR Annual Report, September 2017 Table 2.2 FIGURE 2 MESOTHELIOMA DIAGNOSES BY STATE/TERRITORY IN WA Persons diagnosed Rate per 100,000 population NT 1 n/a SA QLD NSW 10 ACT 2.7 VIC TAS Dust diseases developments November

3 Age at Diagnosis Continues to Increase, Slowly. The age-mix of individuals diagnosed with mesothelioma has changed over the past two decades. FIGURE 3 AGE AT DIAGNOSIS 1996 cases 2006 cases 2016 cases < < < Sources: 2016: AMR Annual Report, September 2017 Table A6, 1996 & 2006: various sources In 2016, around 1 in 6 cases reported were for individuals under 65, down from around 1 in 3 cases in Contrastingly, close to 1 in 3 cases were reported by individuals older than 80 in 2016, up from about 1 in 8 cases in As time passes, the ageing of mesothelioma sufferers is likely to dampen pressure on awards for economic loss. Mesothelioma: a men s disease? FIGURE 4 FEMALE % OF MESOTHELIOMA DIAGNOSES 25% 20% Proportion 15% 10% 5% 0% Year of Diagnosis Source: AMR Annual Report, September 2017 Table A11 The proportion of females has risen from 1 in 8, in 1990, to about 1 in 5, in While always having less asbestos exposure than men, women s exposure has been relatively higher in (more recent) non-occupational and environmental settings, such as home renovations, than in (earlier) heavy occupational settings. The later exposure profile of females likely explains the increasing representation of women in diagnoses. Exposure data collected by the AMR from 2010 to 2017 highlights these stark differences in exposures for men and women; see Figure 5. FIGURE 5 EXPOSURE ASSESSMENT: MESOTHELIOMA DIAGNOSES Source: AMR Annual Report, September 2017 Table 4.6 Occupational only Males Females Environmental only Both occupational and environmental Unknown exposure Dust diseases developments November

4 Latz v Amaca: Loss of Pension Claims and Pressure on Exemplary Damages In May 2017, the District Court of South Australia allowed a claim for loss of the Age Pension and a State Superannuation pension, for a man diagnosed with terminal mesothelioma. This is the first time in recent history that such a loss has been awarded in any Australian court, with loss of a pension generally not being a recognised head of damage at common law. In late October 2017, the Supreme Court of South Australia rejected an appeal against the decision. Pension awards at Common Law It is generally accepted that the Age Pension is intended to provide for the cost of living and that even if the loss of pensions were compensable, the amount of compensation would be offset (and effectively cancelled out) by the living expenses for the lost years. + - $0 The case Mr Latz was diagnosed with malignant mesothelioma at the age of 70, after his retirement. Mr Latz was exposed to asbestos dust and fibre in the late 1970s while undertaking a home renovation. He identified products produced by James Hardie as the source of exposure and proceeded to sue its successor Amaca Pty Ltd. In his initial judgement in the District Court of South Australia, Judge Gilchrist awarded Mr Latz a settlement of $1,062,000 including $500,000 for future economic loss. Judge Gilchrist stated But for James Hardie s tort, Mr Latz would have potentially continued to receive his State pension for the rest of his expected life. That life has been considerably shortened by its tort. Mr Latz is entitled to be compensated for the loss of the pension in the lost years. The settlement also included exemplary damages of $30,000. The Appeal Amaca appealed the judgement in the Supreme Court of South Australia, who rejected the appeal by majority and upheld the loss of Mr Latz s superannuation pension (though the quantum was reduced due to technical reasons not relating to the principles discussed here). Further, the court unanimously upheld a cross-appeal relating to the quantum of exemplary damages, increasing these to $250,000. In recent months, the award of lost pension has been tested twice in the NSW Dust Diseases Tribunal. Two men diagnosed with terminal malignant mesothelioma, Fred Dib and Peter Londos, separately launched actions against Amaca Pty Ltd from exposure to James Hardie products. Both plaintiffs argued they would forgo receipt of the Age Pension in the lost years. Judge Russell, who decided both cases, ruled against the award of lost Age Pensions as a form of future economic loss Conclusion While the only instance of this type of award, the Latz decision potentially represents a significant precedent in common law compensation for dust diseases, and could lead to pressure for lost pension in settlements particularly in matters where the plaintiff is in receipt of both age and superannuation pensions. In our view this case appears destined for the High Court. While the rulings in NSW for Dib v Amaca and Londos v Amaca were favourable for defendants, this remains an area that both plaintiffs and defendants will be monitoring closely. The $250,000 exemplary damages award in Latz vs Amaca is materially higher than other exemplary damages awards in South Australia to date. Historically, South Australian legislation has made the award of exemplary damages quite difficult, and typically awards have been under $50,000. The Latz decision could lead to additional pressure on exemplary damages awards, particularly in South Australia. Dust diseases developments November

5 Re-emergence of Black Lung? CWP, an entirely preventable disease, was thought for over 30 years to have been completely eradicated in Australia, with the last cases reported in the 1980s. The re-identification of the disease in Australia was first formally publicised in September 2015 following the diagnosis of a Queensland coal miner in May After a number of diagnoses of black lung in Queensland and significant public concern for the safety of coal mine workers, the Queensland Government established a senate committee to conduct an inquiry into the re-identification of the disease. Monash University was also commissioned to investigate the effectiveness of the existing medical assessment regime for black lung disease. Some of the key findings of the parliamentary inquiry, published in their report titled Black lung white lies 1 were that: What is Black Lung? Coal Workers Pneumoconiosis (CWP), otherwise known as black lung or coal miner s lung, is a progressive and potentially fatal disease caused solely by prolonged exposure to coal mine dust. In ,000 deaths globally were attributed to CWP, with most cases occurring in settings of inadequate occupational hygiene and dust control systems. There is no cure for CWP. There has been a catastrophic failure of the regulatory system intended to protect the health and safety of coal workers in Queensland. It is unlikely that black lung was ever eradicated in Queensland, nor did it re-emerge. It was simply re-identified after a long period of failed identification of the disease. Between May 2015 and May 2017, 21 coal mine workers in Queensland were diagnosed with black lung. There will almost certainly be many more cases of CWP diagnosed. There have been cases of black lung confirmed in open-cut coal mine workers, proving that black lung is not related exclusively to underground coal mining. There is evidence that current occupational exposure limits for respirable coal mine dust in Queensland are too high, and expose workers to excessive risk of developing black lung and other respiratory diseases. The inquiry made a number of recommendations to improve the regulatory system, and ultimately health and safety standards, in the Queensland coal mining industry. We can expect black lung cases to result in common law claims in the workers compensation system in Queensland. 1 Black lung white lies Inquiry into the re-identification of Coal Workers Pneumoconiosis in Queensland. May 2017 Dust diseases developments November

6 James Hardie Half Yearly Results James Hardie recently announced its results for the half year ending 30 September There was limited commentary relating to developments in James Hardie s asbestos liabilities over the period, but it included: Mesothelioma claims reported during the half year to 30 September 2017 were: - 11% higher than actuarial estimates - 13% higher than the previous corresponding period Average claims settlements for the half year were 7% below actuarial estimates due to: - Lower average settlement sizes across most disease types - Favourable large and non-large claims experience for mesothelioma claims Since 2013, the number of mesothelioma claims reported to Amaca has been materially higher than earlier years. The chart below shows the history of mesothelioma claim numbers and actuarial estimates of future claims 3. It also shows the projected number of claims for the full year to March 2018, assuming the number of claims in the second half is the same as the first half of the year. FIGURE 6 JAMES HARDIE MESOTHELIOMA CLAIMS ? 12 months ending 31 March 2018 Mesothelioma Claims Reported months to 30 September Year of Report Claims reported to date Actuarial Estimate of Future Claims After a period of heightened activity, it will be interesting to see how claim numbers emerge in coming years. 2 Jame Hardie Q2 FY18 Management Presentation, 09 November Claims reported to date and actuarial estimate of future claims taken from Valuation of Asbestos Related Disease Liabilities of former James Hardie entitites ( the Liable Entities ) to be met by the AICF Trust, KPMG, 18 May Dust diseases developments November

7 Finity & Dust Diseases Finity s dedicated dust diseases team advises government agencies, insurers, reinsurers and other companies on their asbestos-related liabilities. Our experienced consultants remain at the forefront of actuarial research into compensation for dust diseases in Australia. Since 1991, we have collected and analysed data on dust diseases claims arising from industrial, environmental and product-related exposures; this extensive historical database represents a key resource for the provision of our advice. In 2016 we prepared a report for the Asbestos Safety and Eradication Agency which contained a projection of Australian national mesothelioma incidences until We regularly update our modelling approach, responding to changes in disease incidence as well as trends in the claims and litigation environment. Dust Diseases Developments is a summary of information from the media and other public sources. Finity takes no responsibility for the accuracy of the content. This newsletter does not constitute actuarial or professional advice. Our consultants can provide further detail. Finity Consulting is the largest independent general and health insurance actuarial consultancy in Australia. Our expertise is highly regarded and has been developed working in the industry since the early 1980s. AUSTRALIA Sydney Level 7, 68 Harrington Street The Rocks NSW Melbourne Level 3, 30 Collins Street Melbourne VIC Adelaide Level 30, Westpac House 91 King William Street Adelaide SA NEW ZEALAND Auckland Level 5, 79 Queen Street Auckland Through our industry publications we seek to share our insights into the key drivers of industry trends and to help our clients stay abreast of the latest issues that are important to their business. While Finity has taken reasonable care in compiling the information presented, Finity does not warrant that the information is correct. Copyright 2017 Finity Consulting Pty Limited ANZIIF Professional Services Firm of the Year (NZ) 2015 ANZIIF Professional Services Firm of the Year (AUS) Six time winner ANZIIF Service Provider of the Year ANZIIF Hall of Fame Contact us David McNab david.mcnab@finity.com.au Justin Portelli justin.portelli@finity.com.au Dust diseases developments November