Making it easier to pursue insolvent firms
The government hopes to introduce legislation to make it easier for injured people to pursue insurers of insolvent employers. But its impact will be limited without an insurance fund of last resort, writes Ian McFall.
In the current economic climate, workers are the biggest losers when employers declare themselves insolvent. Waiting at the end of the creditors’ queue, statutory redundancy pay is scant relief for lost wages and benefits.
But what of the employees injured or made ill through work and needing to pursue a compensation claim against an insolvent employer?
Pursuing defunct companies for damages requires that company to be restored to the UK Companies Register.
It is a procedurally complex and costly operation but is a prerequisite to claimants establishing a right of action against insurers.
For victims of the fatal asbestos-related disease mesothelioma, the time taken to achieve the restoration can make all the difference to whether they are able to recover compensation in their lifetime.
But now the government has taken an important step towards making it easier to pursue insurers directly when former employers are or become insolvent.
By resurrecting a Bill first drafted by the Law Commission in September 2002, the Ministry of Justice plans to eliminate much of the procedural complexity and cost of restoring and pursuing defunct companies.
The Third Parties (Rights Against Insurers) Bill, if it becomes law, will enable claimants more easily to pursue insurers directly when their former employers are insolvent.
The Bill is being introduced to Parliament through a new procedure for Law Commission Bills and it is hoped that it will start its legislative passage this spring.
But pursuing an insurer directly depends on knowing who that insurer is. So, while Thompsons fully supports the Bill, its scope will be limited unless the government also establishes an Employers Liability Insurance Bureau (ELIB).
Hundreds of mesothelioma victims across the UK receive no compensation from the employer that caused their illness because the company has ceased trading and an insurer cannot be traced.
While the failure of some employers to obtain insurance is a problem, bigger still is the fact that, even though employers’ liability insurance was compulsory since 1972, there was no requirement for employers or insurers to keep records until 1999. And there is no central record of historical employers’ insurance policies.
Some insurance companies have also ceased trading while some have been taken over by other insurers.
The problem is compounded by the fact that increasingly asbestos claims are for people who worked for smaller employers – building contractors, plumbing and electrical firms for example – some of which were family businesses. The insurers of employers in the shipbuilding, heavy engineering and manufacturing industry are usually well known or easier to trace than of firms that may only have traded for a short time and for which there may be no records.
And while the insurance industry runs its own voluntary “tracing scheme”, it has been exposed as ineffective by a government report that disclosed that just 41 per cent of enquiries to the scheme were successful with more than 7,000 enquiries failing to trace an insurer.
An insurance fund of last resort for employer liability claims (modelled on the long-established Motor Insurance Bureau fund for victims of uninsured drivers), where the employer no longer exists and was either uninsured or the insurer cannot be traced, would ensure that people injured by that employer would still receive compensation.
It would pay out to around one in 10 mesothelioma sufferers or their families whose claims currently fail.
Nick Starling, the Director of General Insurance and Health at the Association of British Insurers, told BBC Radio 4 PM News on 17 October 2007 that the insurance industry was “committed to making sure that people who are affected by the deadly effects of asbestos, get their compensation quickly.”
So Thompsons has called on the ABI to demonstrate that commitment by joining us in our campaign for an ELIB. After all, what’s good enough for the motor insurance market is good enough for injured workers.
Without an ELIB, the well-intentioned aims of the Third Parties (Rights Against Insurers) Bill will have limited impact for asbestos victims. The underlying problem of untraceable insurers, due to the insurance industry’s failure to keep proper records, will remain.