61/01
10 May 2001
UNCERTAINTY OVER FOR CHESTER STREET VICTIMS
The uncertainty of asbestosis sufferers and their families whose expectation of compensation was thrown into doubt by the insolvency of Chester Street on 9 January this year will soon be over thanks to a partnership between the insurance industry and Government.
Andrew Smith MP, Chief Secretary to the Treasury, said:
?This is good news for asbestosis sufferers and their families whose personal tragedies were made even worse by uncertainty over whether they would receive the compensation they were due following the collapse of Chester Street. It is also an excellent example of partnership between Government and the private sector, in which the Government is meeting its liabilities to former public sector employees and the insurance industry is covering claims from former private sector employees.
?I would like to pay tribute to the constructive and cooperative approach taken by the insurance industry, who have shown great flexibility in dealing with a very complex legal situation?
Concerns had been raised over the position of employees whose private sector employer insured with Chester Street and no longer exists or is insolvent, and whose injury was sustained during employment in the private sector before 1972 (1975 in NI). There were fears that these individuals would not receive the compensation for which their employers would have been liable.
However, the insurance industry will fund compensation to those individuals in the following circumstances.
The Policyholder's Protection Board (PPB) will make payment in accordance with their statutory powers if the compensation award was made prior to Chester Street's insolvency on 9 January 2001.
If the award was made on or after 9 January, the insurance industry will fund equivalent payments pending the implementation of the new industry funded Financial Services Compensation Scheme (FSCS), planned to come into effect no later than November this year. The Financial Services Authority (FSA) have been asked to explore rules to cover employee third party rights in employer liability cases to ensure that in cases where both the employer and the insurer are insolvent, victims receive compensation. The Government will itself fund the compensation owed to former employees of public sector companies for whom it is liable.
The arrangements outlined above apply only when the employer no longer exists or is insolvent. Where the employer still exists, or its liabilities have been carried forward to another company, that company or firm are liable to pay the compensation award.
Andrew Smith was responding to a Parliamentary Question from Tony Worthington MP (Clydebank & Milngavie).
Notes to editors
1. Chester Street Insurance Holdings Limited primarily wrote employers? liability insurance policies for heavy industries that were members of the Iron Trades Employers Association Limited. Provisional Liquidators were appointed to Chester Street on the 9 January 2001 as the Directors declared insolvency.
2. The Policyholders Protection Board (PPB) is a statutory corporation set up under the Policyholders Protection Act 1975 (PPA 1975). Its purpose is to protect the interests of individual policyholders in the event that their insurance company is unable to meet its liabilities also provides for all policyholders including to receive compensation in relation to specified compulsory insurance policies, including policies of employers? liability insurance.
3. Some of the policies written by Chester Street were non-compulsory as they related either to employers in the public sector , or to liabilities incurred pre-1972 (when the Employers? Liability (Compulsory Insurance) Act 1969 came into force). This initially created uncertainty over whether liabilities that were incurred prior to 1972 covered by the PPA scheme.
4. The FSCS is the new financial services compensation scheme, established under the Financial Services and Markets Act 2000. It will come into force at the date known as N2, not later than November this year.
5. The insurance industry, through the PPB, will ensure that private sector employer companies, or, where that employer no longer exists or is insolvent, the affected individuals, receive 100% of compensation awarded in respect of injuries incurred after 1972 (1975 in NI) (up to the statutory limit of £2 million per claim).
6. For injuries sustained prior to 1972 (1975 in NI), employees whose private sector employer no longer exists or is insolvent, will receive payment of 90% of the compensation they would have been entitled to from their employers. This reflects the provisions of the PPA 1975, which will apply to compensation awards settled on or before 8 January 2001. The insurance industry will make equivalent payments for awards settled after that date, until the new FSC Scheme is introduced.
7. If the injury was sustained during employment straddling 1972, the compensation award may be divided into post and pre-1972 (1975 in NI) elements, to determine how much compensation will be paid under the relevant policyholder protection scheme.
8. For further information, contact Liane Farrer, Treasury Press Office, on 020 7270 5192.