When CRU Recoveries Breach the Human Rights Act 1998: Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin)

Under the Social Security (Recovery of Benefits) Act 1997, a tortfeasor [and their insurer(s)] is liable to reimburse the State [in the form the Compensation Recovery Unit (CRU) – a division within the Department of Work and Pensions (DWP)] for specified social security benefits paid to a personal injury claimant, which are separate from damages.

However, in the recent case of Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin), the claimants argued successfully that the 1997 Act was, in a number of specific circumstances, incompatible with Article 1 of the 1st Protocol (A1P1) to the European Convention on Human Rights (ECHR), which protects the rights of insurance companies to ‘peaceful enjoyment of possessions’.

‘Possessions’, for the purposes of A1P1, mean the rights and obligations existing under an insurance policy.

For contextual purposes, the underlying action in this judicial review was an asbestos-related occupational disease claim.

Not only were the claimants (an employers’ liability (EL) insurer and a reinsurer) held liable for full compensation, but also full State benefits. This was despite the fact that there were unnamed parties to proceedings that could equally have been held liable for a fraction of the total exposure period.

Whilst the claimants broadly accepted their obligations under the 1997 Act, they contended that there were 5 situations that should exempt them from reimbursing CRU payments to the tune of 100%:

  1. When an employee (victim) is contributorily negligent, e.g. to the extent of 50%.
  2. When the employee (victim) suffers a divisible condition and the employers and/or their insurers are liable for a diminutive share of the liability – see Carder v The University of Exeter [2016] EWCA Civ 790, where the defendant was responsible for 2.3% of the claimant’s asbestosis.
  3. When there are untraceable negligent employers and/or insurers and the Fairchild/Barker[i] principles apply (shift from the ‘but for’ test to the ‘material increase in risk’ threshold leads to joint and several liability for an indivisible disease) – see s.3 of the Compensation Act 2006, which enshrines this principle.
  4. When the employee (victim) is retired and does not seek damages for a specific head of loss (e.g. loss of earnings) in their civil action, but the objective of the benefit inadvertently does.
  5. When the employee (victim) settles a claim with an element of compromise, e.g. without an admission of liability.

Refuting this claim, the DWP averred that the 1997 Act (and its reimbursing scheme) pursued a legitimate aim and that the measures were rationally connected to that aim. Further, that a fair balance had been struck between the claimants’ interest and the public interest.

In the course of a long-winded 183 paragraph judgment, the Administrative Court assessed the claimants’ ‘5 situations’ in accordance with their rights conferred under A1P1, which entailed proceeding along the following line of questioning:

  • Is the objective of the 1997 Act/scheme sufficiently important to justify the limitation of a fundamental right?
  • Is the measure rationally connected to the objective?
  • Could a less intrusive measure have been used?
  • Has a fair balance been struck between the rights of the claimants and the interests of the community?[ii]

The result of this exercise was to find 3 of the ‘5 situations’ incompatible with A1P1, specifically (1), (2) and (3).

With regards to (1), Mr. Justice Henshaw observed that the 1997 Act/scheme had been incompatible with the claimants’ rights from the date that the Human Rights Act (HRA) 1998 was in force (in 2000), reason being that he could not be persuaded that ‘a scheme taking account of contributory negligence would be incapable of achieving the scheme’s objective’.

Moving onto the rationalise why (2) was incompatible with A1P1, the High Court judge stated succinctly, that his justification was rooted in the simple notion that:

‘Recovery from wrongdoers of the costs occasioned by their wrongdoing would be rationally connected with recovering State benefits in proportion to the extent of the wrongdoing in question, but not with recovering all State benefits without regard to the extent of the wrongdoing’.

For almost identical application of logic, it could not be said that a rational affiliation existed between the principle of 100% liability for social security benefits and the principle of 100% compensation for victims of indivisible mesothelioma on a joint and several basis, i.e. (3) was also incompatible with A1P1.

In summation, it was evident that the direction of tort law post-1997 had been influenced by ‘social policy objectives which, exceptionally …  led the courts and Parliament to take a novel and particularly generous approach to causation vis-à-vis the victims of asbestos-related diseases’.

As such, situation (2) was held to be incompatible with A1P1 from the handing down of Carder and situation (3) was incompatible from the enactment of the 2006 Act.

Taking stock of these ‘highly significant and unpredictable’ tort law developments, it was deemed impossible to ‘reasonably justify imposing on the insurers additional liabilities to the State’ that bore ‘no real relationship to the degree of injury or risk that those compensators had inflicted on the injured person’.

Parliament understandably could not have contemplated the Fairchild principle when the 1997 Act was being created.

Of additional interest, is the fact that Henshaw J analogised the present matter to the case of In re Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3, in which the Supreme Court found that formerly proposed legislation in Wales [this has since been reformulated and proposed in Scotland – see the Liability for NHS Charges (Treatment of Industrial Disease) Scotland Bill], which demands that tortfeasors reimburse the NHS for the costs of treating any asbestos-related disease, was also incompatible with A1P1.

For now, Aviva opens the door to insurers’ claims for the recoupment of social security benefit payments from DWP.

However, as David Hart QC, of 1 Crown Office Row, highlights, it is a genuine possibility that the HRA may be revised or repealed in the near future.[iii] If such an eventuality were to transpire and in the absence of any ‘comparable remedy’ in general public law, the momentous decision in Aviva could foreseeably ‘disappear’.

Full text judgment can be accessed here.

 

[i] Fairchild v Glenhaven Funeral Services Ltd & Ors [2002] UKHL 22

Barker v Corus (UK) Plc [2006] UKHL 20

[ii] Jessica Woodliffe, ‘Certain Compensation Recovery Unit Payments Declared Incompatible with the European Convention on Human Rights’ (30 November 2020 Ropewalk Chambers) <https://www.ropewalk.co.uk/knowledge-sharing/blog/disease/1746/certain-compensation-recovery-unit-payments-declared-incompatible-with-the-european-convention-on-human-rights> accessed 21 December 2020.

[iii] David Hart QC, ‘Successful insurers’ A1P1 claim concerning benefits reimbursement in asbestos claims’ (UK Human Rights Blog) <https://ukhumanrightsblog.com/2020/11/25/successful-insurers-a1p1-claim-concerning-benefits-reimbursement-in-asbestos-claims/> accessed 11 December 2020.