UK Government Permitted to Appeal Finding that the Recovery of CRU Payments from Insurers Can, in Chose Circumstances, Contravene the European Convention on Human Rights

Last Tuesday, Mr Justice Andrew Henshaw announced that he would grant both claimant and defendant parties permission to appeal his ruling in Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin), at the Court of Appeal, but opted not to elaborate on the reasons why.[i]

We previously reported on the November judgment, in edition 319 of BC Disease News (here).

Under the Social Security (Recovery of Benefits) Act 1997, a tortfeasor [and their insurer(s)] is liable to reimburse the State [via the Compensation Recovery Unity (CRU)] for specified social security benefits (separate from damages) paid to a personal injury claimant.

At the Administrative division of the High Court, the claimants [an employers’ liability (EL) insurer and a reinsurer] in an underlying asbestos-related EL disease claim 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’. The 3 identified scenarios were as follows:

  1. When an insurer is required to repay 100% of the recoverable benefit, even where the employee’s (victim’s) own negligence also contributed to the damage sustained;
  2. When an insurer is required to repay 100% of the recoverable benefit, even where the employee’s (victim’s) ‘divisible’ disease is, in part, unconnected with the insured’s tort – see the asbestosis case of Carder v The University of Exeter[2016] EWCA Civ 790, where the defendant’s share of liability was just 2.3%;
  3. When an insurer is required to repay 100% of the recoverable benefit in ‘indivisible’ disease cases (i.e. mesothelioma claims, where s.3 of the Compensation Act 2006 applies), even where the insured’s tort only exposed the victim to asbestos for a limited period, such that at common law [following Barker v Corus UK Ltd [2006] UKHL 20] they would bear a share of the liability;

On appeal, the defendant will likely argue that Henshaw J’s decision was erroneous, in that the 1997 Act (and its reimbursing scheme) pursues a legitimate aim (to the extent that it justifies limiting a fundamental right) and that the measures adopted under the 1997 Act are rationally connected to said aim. Further, that a fair balance is struck between the interests of insurers and the public interest.

By contrast, the claimants will likely argue that Henshaw J’s decision did not go far enough and that there are, in fact, 2 more isolated scenarios which violate A1P1 rights enjoyed by insurers:

  1. When an insurer is required to repay certain benefits that do not correspond to a recognised head of loss, including benefits that do not correspond to heads of compensation that would be payable by way of damages, following a successful negligence claim.
  2. When an insurer is required to repay 100% of the recoverable benefit, despite the element of compromise that is present in most settled claims, even where settlement occurs expressly without admission of liability.

We will continue to monitor the progress of this case through the appeals process in 2021.

Unless and until the appealed judgment is overturned (or the Human Rights Act is repealed), we reiterate that Aviva has opened the door for insurers (especially those with books of long-tail insurance liabilities) to recover a proportion of social security benefits that have been paid to the Department for Work and Pensions (DWP):

  • Since the Human Rights Act was in force (2000), in respect of scenario (1);
  • Since Carder was handed down (2016), in respect of scenario (2); or
  • Since the enactment of the Compensation Act (2006), in respect of scenario (3).

 

[i] Joanne Faulkner, ‘Gov't Gets OK To Appeal Asbestos Insurance Liability Ruling’ (12 January 2021 Law 360) <https://www.law360.com/articles/1344039/gov-t-gets-ok-to-appeal-asbestos-insurance-liability-ruling> accessed 14 January 2021.