In this article we consider the recent decision of the High Court from November 2020 in the case R (on the application of Aviva Insurance Ltd and Swiss Reinsurance Co Ltd) v. Secretary of State for Work and Pensions [2020] EWHC 3118 (Admin) which grappled with the issue of whether certain provisions of the Social Security (Recovery of Benefits) Act 1997 relating to repayment of recoverable benefits breached insurers’ rights under the Convention for the Protection of Human Rights and Fundamental Freedoms, as incorporated in the UK by the Human Rights Act 1998.
As well as discussing the case generally, which is significant for all liability insurers in the personal injury sphere, we explore how this important decision could potentially impact on clinical negligence cases in the future.
What was the case about?
The Claimants, an insurer (Aviva) with a substantial book of long-tail employers’ liability insurance and their re-insurer (Swiss Re), applied for judicial review of the interpretation and application of certain provisions of the Social Security (Recovery of Benefits) Act 1997 relating to recoupment of recoverable benefits.
As will be well-known to all personal injury and clinical negligence practitioners, the 1997 Act and regulations made under it require liability insurers and other indemnity providers to pay to the Department for Work and Pensions, via its Compensation Recovery Unit (CRU), amounts equal to certain social security benefits received by claimants in personal injury and clinical negligence cases.
The Claimants contended that statutory and common law developments since the 1997 Act, specifically those designed for the protection of victims of asbestos related diseases, have led to a situation where compensators (such as the Claimant insurers) are required to pay to the State amounts equal to State benefits that do not correspond in any real way to any injury caused by their respective insureds. In particular, (1) all the recoverable benefits have to be repaid even where there was contributory negligence or only partial responsibility, (2) certain benefits have to be repaid even though they did not correspond to a recognised head of loss, and (3) all the recoverable benefits have to be repaid despite the element of compromise present in most settled claims.
The Claimants argued that this, in turn, offended against, and was incompatible with, Article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms, i.e. the entitlement to the peaceful enjoyment of his possessions; Article 1 states that “no one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”
What did the court decide?
In what should be considered a significant and welcome decision for insurers, the Court held that three features of the 1997 Act were incompatible with the Claimants’ Article 1 rights, specifically:
1. The requirement to repay 100% of the recoverable benefits even where the underling claimant (i.e. the person seeking compensation) is found to be contributorily negligent;
2. The requirement to repay 100% of the recoverable benefits even where the underlying claimant’s “divisible” disease is in part unconnected with the insured’s tort; and
3. The requirement to repay 100% of the recoverable benefits even where other tortfeasors would normally be liable for an indivisible disease but they or their insurer cannot be traced.
Given the complexity of the matter, the parties were given permission for further submissions in respect of the issue of remedies, including the Claimants’ financial losses (the Claimants having sought an inquiry into damages as part of their Judicial Review).
Significantly, in his Judgment the Honourable Mr Justice Henshaw gave an ‘inclination’ that the first incompatible feature above – the requirement to repay 100% of recoverable benefits even when the underlying claimant is found to be contributorily negligent – was non-compliant from the date that the Human Rights Act 1998 came into force. Subject to limitation considerations, it may therefore be the case that the Claimants’ claimed losses will be significant.
Could the decision impact on clinical negligence cases?
The decision of the High Court comes with the caveat that it only relates to specific developments since the 1997 Act (both statutory and under common law) designed for the protection of victims of asbestos related diseases. It should not, therefore, be considered as having any wider application, at least at this stage.
That said, discussion within the Judgment of divisible / indivisible injuries in the context of material contribution will make all clinical negligence practitioners sit up and take notice. Arguments around divisibility of injuries in clinical negligence cases engaging the doctrine of material contribution are not uncommon and raise an obvious question: whether the rights of clinical negligence indemnity providers have also been breached by the requirement in those cases also to repay 100% of recoverable benefits and, in many cases, NHS charges (notwithstanding the availability of CRU reviews, mandatory reconsiderations and appeals).
Conclusion
The High Court has made it clear that the current system of recoupment of benefits in asbestos related disease cases under the Social Security (Recovery of Benefits) Act 1997 can no longer be considered a fair balance between the rights of insurers and those of the State.
What happens next with R (on the application of Aviva Insurance Ltd and Swiss Reinsurance Co Ltd) v. Secretary of State for Work and Pensions will be interesting, including whether there will be an appeal or whether Parliament will intervene. As things currently stand, however, it seems that for a certain category of claim, i.e. asbestos-related diseases cases, insurers can expect a reduction in indemnity spend in respect of CRU repayments.
Whether a similar challenge will be mounted on behalf of clinical negligence indemnity providers with a view to expanding the scope of the Court’s declaration remains to be seen but it is certainly something to keep an eye on.
