Experiment gone wrong
This article first appeared in Litigation Funding in October 2008.
Success Fee Levels in Asbestos Claims
The recent consultation document on pleural plaques claims indicates the Government wishes to impose a no fault tariff scheme for people suffering from this asbestos disease. It points to a deeper malaise threatening all asbestos victims.
Lord Woolf, in Callery v Gray, called for an evidence-based assessment of the risks of RTA claims, on the basis that claimant lawyers, on average, should be paid for all the work that they do, win or lose. He meant to address concerns that CFA “additional liabilities” could exceed damages.
Research was commissioned to calculate suitable success fees for RTA, work accident and lastly industrial disease claims. Success fees were set by the Rules Committee following a series of mediations between both sides of the industry.
For asbestos disease claims the “headline” success fee of 27.5% reflected historic evidence but did not reflect practitioners’ current assessment of risk. They had deep concerns the insurance industry would continue to run "generic" challenges and that the fundamental basis for any asbestos disease claim would remain constantly under threat. They were reassured by (1) an understanding that the claimant would be entitled to seek an uplift where "generic issues" were at large (but no such provision appeared in the CPR), (2) the expectation that success fee levels could be reviewed and (3) the robust nature of the evidence obtained by Professors Fenn and Rickman and their analysis of it.
Even so, there was a glaring flaw in looking at historic data to assess success fees for the future when asbestos cases were expected to become more risky and were only going to face more and more novel and potentially devastating challenges from the insurance industry.
And lo, what was predicted has come to pass.
The Insurers’ Challenges: Barker, Trigger Issue and Plaques
Since the mediation the Fairchild principle was attacked vigorously by the insurers and was overturned by the House of Lords in Barker. Without statutory reversal from a sympathetic government terminally ill claimants or their bereaved families would today be facing almost intractable difficulties in securing full damages in mesothelioma claims.
In the “Trigger Issue” litigation insurers now challenge the claimants’ entitlement to enforce judgment, so that they will go uncompensated. A vast swathe of asbestos cancer claims is now poisoned by an uncertainty that simply did not exist at the time that Fenn and Rickman prepared their statistics.
The low success fee of 27.5% for asbestos claims arises from the historically good rate of recovering some compensation (but not necessarily full compensation) in the many asbestos pleural plaques claims which Fenn and Rickman studied. The House of Lords has since ruled that such injuries (for injuries they are) are not compensatable at all. If those claims are taken out of the equation then the appropriate level of success fee changes dramatically.
A Philosophical Aside?
Fenn and Rickman’s research strongly assumes that the past serves as a good guide to the future. In RTA and work accident claims that assumption was always valid and remains so. In asbestos disease claims, uniquely, that assumption was always contingent, and is now demonstrably false.
Expert practitioners assess risk in asbestos disease claims using years of experience. Whilst we may be optimistic about our skills and abilities we often perceive considerable risk. This risk is then reflected in a significant discount as to damages. This risk is the measure used by counsel when advising clients, funding insurers and (in the “good old days” but today very rarely) the Legal Services Commission as to the strengths and weaknesses of a case. It is not, though, the basis upon which the “fixed success fees” were arrived at. The dissonance between the fixed success fees and practitioners’ expert assessments of the overall risks (supported by any number of SCCO decisions) is a big problem that needs addressing.
The fundamental principle underpinning Conditional Fee Agreements as a funding method is that lawyers must be paid for all the work that they do, on the average: the success fees in successful claims cover the costs lost in unsuccessful claims. Lord Woolf proposed a mechanism whereby the figure that achieves that aim (but no more) can be measured. That mechanism does not work when the assumptions of predictability on the large scale and uniformity over time are invalid. In asbestos disease claims those assumptions are demonstrably false.
The Barker attack, the Trigger Issue litigation and the Pleural Plaques decision all prove that an objective, scientific, evidence-based assessment of future risks is impossible. Uniquely, in asbestos disease claims fixed success fees have been shown not to work. They should be removed from the CPR without delay to protect asbestos claimants’ access to justice. Such access now hangs by a thread, simultaneously precarious and precious.
Andrew Morgan is a partner in our asbestos claims department. For more information or if you believe you may have an asbestos related claim please contact Andrew on 020 7861 4036 or email email@example.com