Out-Law News 3 min. read
12 Feb 2015, 3:06 pm
The Supreme Court ruled that the Welsh assembly had overstepped its powers when it passed the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill in 2013. The legislation also breached the rights of firms and their insurers to "peaceful enjoyment" of their assets under EU human rights law, because it would force them to compensate the health service for historical claims, according to the judgment.
The Association of British Insurers (ABI), which intervened in the case, welcomed the judgment.
"The Welsh Bill would have seen increased insurance premiums for Welsh businesses, but no extra compensation for mesothelioma sufferers," it said in a statement. "The insurance industry remains committed to doing all it can to help the victims of this terrible disease and would be happy to work constructively with the Welsh government on this issue, as it does on other public policy."
Mesothelioma is an aggressive form of lung cancer caused by exposure to asbestos. The material was commonly used when constructing houses, offices, schools and hospitals in the 1950s and 1960s in particular. According to the Health and Safety Executive (HSE), asbestos-related illnesses cause the deaths of around 5,000 workers who were historically exposed to the material each year.
The Welsh bill was referred to the courts by the counsel general for Wales in response to insurance industry concerns. If enacted, it would have required employers to reimburse the Welsh assembly for an amount set by regulations in respect of Welsh NHS treatment provided to those treated for asbestos-related diseases as a result of exposure to the substance at work. It would also have extended the terms of employers' liability insurance policies to cover those reimbursements, where compensation payable to an employee was covered by that policy.
The Supreme Court said that the bill would have effectively created a new liability for "pure economic loss which does not exist and has never existed at common law", owed to the Welsh ministers by compensating employers and insurers. This liability would exist whether the employer had admitted liability when compensating the employee, and would be based on compensation payments made in respect of historical wrongs, it said.
The bill would also impose new contractual liabilities on insurers, irrespective of any policy exclusion or restriction, in respect of policies issued and covering events occurring many decades ago, it said. Although not fully retrospective, because employers and their insurers would only have to pay the NHS in respect of future treatment, it "significantly restructure[d] both the consequences of actual and possible negligence or breach of statutory duty committed long ago", the court said.
The 2006 Government of Wales Act (GOWA) gave the Welsh assembly certain powers over health and health services, including certain powers in relation to "organisation and funding of national health service". However, its funding powers are largely dependent on the 'block grant' that it receives from the UK government. Welsh ministers do have explicit powers to set and recover prescription charges, as set out in the NHS (Wales) Act, but no powers to "raise monies generally" for the health service, the Supreme Court said.
"In the case of prescription or other charges to users of the Welsh NHS service, a direct connection with the service and its funding exists, in that users are directly involved with and benefitting by the service," said Lord Mance in his leading judgment.
"In the case of charges under section 2 [of GOWA], the argument would have to be that a sufficient connection can be found in the actual or alleged wrongdoing that led a compensator to making a compensation payment to or in respect of a sufferer from an asbestos-related disease. But that is at best an indirect, loose or consequential connection," he said.
"The expression 'organisation and funding of national health service' could not, in my opinion, have been conceived with a view to covering what would amount in reality to rewriting the law of tort and breach of statutory duty by imposing on third persons ... having no other direct connection in law with the NHS, liability towards the Welsh minister to meet costs of NHS services provided to sufferers from asbestos-related diseases towards whom such third persons decide to make a compensation payment for liability which may or may not exist or have been established or admitted," he said.
Even if this "sufficient connection" could be found, it would certainly not be strong enough to impose the same liability on insurers, he said.
"Unlike [employers], insurers are neither actual nor alleged wrongdoers," he said.
"The rationales of imposing liability on insurers towards [employers] are no doubt (i) that this favours the Welsh ministers' prospects of making a financial recovery … and (ii) perhaps also that it lessens the blow for, and is likely to avoid objections by, [employers], or at least those who remain solvent and had arranged liability insurance. But legislation imposing on insurers new contractual liabilities under old insurance policies years after they were made engages obvious and important general principles," he said.