Solicitors and claims companies are under fire for the way industrial disease claims are handled. Jon Robins investigates whether fixed success fees could ease the controversy

The practice area of industrial disease has been no stranger to publicity in the past few months – for a start, there is the unfolding controversy over allegations surrounding the administration of the huge miners’ compensation scheme, not to mention concerns about scan vans visiting the country’s dockyards in an attempt to disclose possible asbestos-related claims.


However, within the profession, a new initiative to standardise legal costs is also causing problems of its own. The Civil Justice Council (CJC) has just brokered a deal on fixed success fees for industrial disease cases, following on from the two similar schemes for road-traffic and accident-at-work claims. ‘Although there have been difficult decisions to be made, I am pleased that we are developing workable solutions to the problems that have occurred in the past due to costs,’ commented the Master of the Rolls, Lord Phillips.


The agreement effectively grades types of claim – there is a 100% success fee in claims arising from stress and repetitive strain injury (RSI); 27.5% to 30% in claims arising from asbestos-related diseases; and 62.5% from deafness, vibration white finger (VWF) and other diseases. For the fast-track, fees will vary from between 50% for asbestos cases and 100% for RSI and stress claims. Cases on the multi-track dealt with 21 days before trial will attract 75% for asbestos and deafness and similar injuries, and 100% for RSI and stress cases.


To put this in perspective, the Association of British Industry estimates that the big three sources of industrial claims are: deafness (34%), VWF (29%), and lung disease, mainly asbestos-related (10%). These claims dwarf upper limb disorder, including RSI, (6%) and stress (2%).


‘The problem with disease work is all the aggro involved,’ comments Jeff Zindani, managing director of West Midlands-based Forum Law, who specialises in asbestos-related claims, industrial deafness and VWF.


Mr Zindani reckons the first obstacle with industrial disease claims is the limitation period – the clock starts running as soon as the client walks in the door – and then establishing liability in a case that could go back decades, followed by obtaining the medical evidence. ‘In terms of the law, you can’t have anything more difficult than these as a class of claim,’ he says. Fixed fees present a problem in that environment, he argues: ‘If the rewards become so small, then what’s the point in taking a risk?’


By contrast, defendant lawyers welcome standardisation. Fixed fees are the right way forward, asserts Simon Staples, a partner at the defendant firm Davies Lavery in Birmingham. ‘There’s never usually a great deal of work in these claims – and most of them are fast-track because the damages aren’t high and we tend to run through them fairly quickly,’ he says. ‘The only real issue is if you have a long period of exposure, and where you find more than one insurer involved.’


One defendant lawyer involved in the CJC-sponsored mediation reflects: ‘In the way of most true compromises, both sides walked away a bit unhappy.’ He explains that while both claimant representatives and defendants could agree on 100% for stress cases, the defendants felt that deafness and VWF cases were over-priced and the claimant camp went away unhappy about asbestos claims.


‘What the Civil Justice Council has done is rank diseases, and for some reason asbestos has been given the lowest uplift of them all, and that almost implies that asbestos cases are easy,’ comments Adrian Budgen, a partner at national firm Irwin Mitchell who specialises in asbestos-related cases and occupational asthma. ‘That’s the myth that defendant costs draftsmen try and perpetuate.’


But Mr Bugden argues that high-profile challenges in the courts suggest that is not the case. He points to the Fairchild v Glenhaven Funeral Services [2002] UKHL 22 ruling more than two years ago, where insurers tried to bar claims by workers who had been exposed to asbestos by more than one employer, and the ongoing litigation involving insurers which have challenged compensation claims made in respect of pleural plaques cases (John Grieves v FT Everard & Sons & British Uralite [2005] EWHC 88 (QB)), which goes to the Court of Appeal in November.


Mr Budgen argues that the problem with fixed success fees in industrial disease cases is that ‘they are looking at pure win and loss scenarios, and they don’t take into account all the work you have to do at the investigation stage’. Often there will be problems as to where claimants have been exposed, and then tracing the old employer and their insurer, he explains.


The success fees were fixed by reference to statistics from research by the academics Paul Fenn and Neil Rickman. The idea was that the uplift was set at a level which would achieve costs neutrality. Mr Budgen is not impressed. ‘What is the difference between a multi-defendant pleural plaques case and a deafness case?’ he asks. ‘They are both divisible injuries and accumulative conditions, and there are the same issues to do with apportionment, limitation and tracing the defendant.’


The one exception to the assessment of costs neutrality is the tricky area of stress cases, which are notoriously complex. ‘The sort of success that would be needed to be cost neutral in a stress case has to be 250% and, of course, you are restricted to 100%,’ comments Mark Harvey, author of the Association of Personal Injury Lawyers (APIL) guide to conditional fee agreements and a partner at Welsh firm Hugh James.


The CJC mediation was booked in for three days at the swanky setting of the One Aldwych hotel in London, but as it got to 5pm on the last allotted day, the negotiators had yet to consider issues relating to test cases. So the group relocated round the corner to the less salubrious Royal Courts of Justice to see if they could hammer out a deal – but in the end they ran out of time.


Martin Bare, an industrial disease specialist at trade union firm Morrish & Co in Leeds and APIL executive committee member, is disappointed that the so-called exceptionality provisions were not covered. He points to the upcoming pleural plaques appeal. ‘It could be that the risk profile of all the cases that you have in the filing cabinet changes overnight, and 30% would in no way be an appropriate recompense for that. Therefore, the test case provisions would have to be designed to take such cases outside the scheme,’ he says. Without an exemption for those cases affected by a test case, the asbestos success fee is ‘extremely low’, he adds.


While claimant lawyers feel they are being squeezed on costs, there is a growing public perception that industrial disease claims are becoming a lucrative source of income for lawyers and non-lawyer claims-handlers wanting to tap into the so-called compensation culture. The Law Society is presently conducting its biggest-ever investigation into several firms linked to the controversy over the £7.5 billion compensation scheme for sick and dying miners. Some solicitors and claims companies have been accused of overcharging for handling claims. There is currently a police inquiry into Union of Democratic Mineworkers (UDM) over deductions made from legitimate payments – the UDM has said it is confident there has been no wrongdoing and it has acted with ‘honesty and professionalism’ (see [2005] Gazette, 7 July, 4).


The Department of Trade and Industry (DTI) faces more than 700,000 claims from miners who suffer from conditions such as respiratory disease or VWF. ‘We are investigating some 30 firms out of the 550 firms that were on the panel,’ reports a spokesman for the Law Society’s regulation directorate. ‘The majority of firms didn’t make deductions from compensation, but many of the firms that been publicly associated with the making of deductions are big players in the scheme.’


Last year, the Law Society told firms to pay back money that was in excess of the £1,800 costs limit agreed with the DTI. ‘The Society wasn’t a party to the agreement between the department and hundreds of solicitors firms, and so we can’t police it. When ministers and MPs scream at us to get them to hand back the money, we simply can’t do that,’ the spokesman explains. ‘All we can do is to investigate whether firms have complied with the professional conduct regulations.’


The Department of Health (DoH) is currently investigating one claims company, FreeClaim IDC, based in Northumberland, that runs ‘scan vans’ (mobile CT scans) to check for pleural plaques. The DoH is considering whether such scans comply with Ionising Radiation Regulations, which impose requirements on the way they are conducted. According to the Health Protection Agency, the risk of developing a fatal cancer as a result of a chest radiograph is one in a million, compared to a risk of one in 2,500 for a chest CT scan. FreeClaim insists the scans do comply with regulations, and also claims to use a private CT scanning company that provides CT and MRI services ‘to the NHS and other health organisations’.


The insurer Norwich Union reckons there could be as many as 100,000 pleural plaques cases in the UK. According to spokesman David Ross, nine out of ten asbestos cases in the US are pleural plaques cases, and mobile scans are the main way to detect them. ‘Claims company reps used to stop you in the high street with a clipboard and ask whether you’ve had an accident in the last three years,’ he says. ‘This is just a more sophisticated way of filtering people.’


Jon Robins is a freelance journalist