Peter Watson: Shame of insurers who ignore victims’ rights

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YOU may have heard marketing spiel from insurers pointing out that when an uninsured driver hits your car: “Don’t worry; you’ll be fully covered with us.”

In truth there is little justification for making this appear a unique selling point; insurers fund an organisation called the Motor Insurers’ Bureau which pays claims to people who are hit by uninsured drivers.

The law requires every motor insurer to belong to the MIB and to contribute to its funding – a fact which they eagerly point out adds £40 per year to the average motor insurance premium. 

Nevertheless, it’s all very nice and helpful. So why does a similar scheme not exist for the only other form of insurance that is compulsory in the UK?

Just as you cannot legally drive in the UK without purchasing insurance, neither can you run a business which employs people without employers’ liability insurance. This type of insurance compensates individuals in the event of injury or illness caused by the negligence of employers and has been compulsory since 1972. Sadly, in the 40 years which have passed since then, thousands of employers have gone out of business, often leaving evidence of their insurance coverage in the best of circumstances residing within dusty filing cabinets or more typically, thrown out with the trash when the liquidators came.

With the demolition of Britain’s industrial heritage, the legal rights of many thousands of working people to claim compensation for injuries like asbestosis, mesothelioma, and lung cancer disappeared with it.

To explain very briefly – compensating injury introduces the concept of the “long tail”. Imagine your father worked in a factory from 1972-80 before his company went bust and he lost his job.

During that time, he was negligently exposed to asbestos by his employer. Illnesses associated with breathing in asbestos often take time to develop and incubate with many years passing between “exposure” and illness.

Fast forward to 2012 and your father has contracted mesothelioma and has three months to live; his employer between 1972 and 1980 was responsible for exposing him to asbestos and the insurance policy bought at the time should compensate him for this terrible injury – hence ‘long tail’.

And this brings us to today’s problem. Moves are afoot to create an Employers’ Liability Insurance Bureau, with the idea’s supporters – including myself – doing all we can to ensure the ELIB becomes a reality and injured employees are not left without recourse to compensation when their employer has failed to buy insurance. Insurance companies remain unconvinced of the idea for what are obvious reasons for any organisation schooled at taking bets; cost and uncertainty.

However the problem of uninsured employers today fades into obscurity compared to the issue of tracing insurance coverage backward through history. Many thousands of businesses have disappeared along with records such as their insurance policies.

It is the responsibility of the Employers’ Liability Tracing Office to find these documents, but the insurance industry has been woefully poor at policing itself.

Hundreds of men and women die each year without receiving reasonable compensation simply because records have been lost or destroyed.

A voluntary code of practice for tracing EL policies was set up in November 1999. Insurers signing up to the scheme agreed to keep historical data and maintain records of all current and future policies for 60 years in a format that makes searching easier.

However those of us who use the tracing office regularly attest to its inadequacy. It is particularly shameful that the success rate for policies written post-1999 is still running at less than a 50 per cent. The insurance industry has failed in its obligation to compensate working people with often life threatening illnesses after four decades of basic clerical errors. When insurers will give you a 50/50 chance of finding your employers’ policy even when it was written during Tony Blair’s reign, what chance do you think our veteran of Heath, Wilson, Callaghan and Thatcher’s administrations will have?

The bookmakers took these bets in the hope that punters would throw away their slips. While I acknowledge the problem is complex, insurers must take greater responsibility for their part in it by creating a fund to pay uninsured losses.

Former Labour MP Andrew Dismore sponsored the Employers Liability Insurance Bureau Bill in 2009 and the Government has yet to report on a consultation into the topic which ended in May 2010; the last I heard of it was on February 14, 2011, when Employment Minister Chris Grayling told the Commons: “We are in active discussions with all stakeholders on how this situation can be addressed and we will bring forward our proposals in due course.”

The Government is dithering and must help bring the insurance industry to account. I strongly urge organisations such as the Association of Personal Injury Lawyers, Consumer Justice Council, Trades Union Congress and all other parties who recognise this failure, to get behind this bill before it is kicked into the long grass permanently.

Peter Watson is managing partner of simpson Millar LLP, which has an office in Leeds.