Supreme Court upholds Scottish pleural plaques compensation law

The insurers sought to overturn a decision from the Scottish Court of Appeal and argued that the law which allows people with pleural plaques to claim compensation was irrational or not lawful.

The Supreme Court has upheld the Scottish Government's creation of a law which allows for compensation payments to people with pleural plaques. These are symptomless changes to a person's lung and demonstrate that the person has been exposed to asbestos and may develop debilitating conditions at a later date.

In its judgment (74-page / 273KB PDF) the Supreme Court decided unanimously that the Scottish Parliament had acted within the scope of its powers when it passed the Damages (Asbestos-Related Conditions) (Scotland) Act (Damages Act).

Health and safety law expert Simon Joyston-Bechal of Pinsent Masons, the law firm behind Out-Law.com, said that the decision would come as "a blow" to insurers and could even result in higher premiums for Scottish businesses.

"In Scotland, it is now confirmed that politicians were entitled to create a right to compensation even without any actual harm. We will wait to see whether that leads to higher premiums for Scottish businesses," he said.

Pleural plaques are small areas of thickening on the membrane covering the lungs which are caused by the inhalation of asbestos fibres.

Although the plaques themselves are harmless and, in almost all cases, symptomless they show that the person has been exposed to asbestos and so carries an increased risk of developing an asbestos-related condition, including cancers such as mesothelioma, in the future. Campaigners argued that many people diagnosed with pleural plaques become severely anxious about this risk.

The Damages Act was enacted by the Scottish Parliament in response to a 2007 decision by the House of Lords - now the Supreme Court - which found that there was no legal basis for pleural plaques claims.

Negligence law requires that the negligence causes injury and that the person claiming suffers damage as a result. As pleural plaques themselves are harmless there is no injury - the risk of contracting a future disease and the resulting anxiety are not themselves a reason to sue.

In April 2009 a group of insurers including Aviva, AXA Insurance, RSA and Zurich applied for judicial review of the Damages Act but their challenge was dismissed by the Scottish Court of Session.

The insurers argued that the Act was irrational, disproportionate and went against the European Convention on Human Rights (ECHR). That insurers would be deprived of their assets to settle claims under the law was an interference with their right to property under the ECHR, they argued.

However the Supreme Court said that the Scottish law was intended to correct a "social injustice" and was therefore in the public interest.

"There is no doubt that the negligence of employers whose activities were concentrated in socially disadvantaged areas... had exposed their workforce to asbestos and all the risks associated with it for many years," Lord Hope said in his judgment. "The anxiety that is generated by a diagnosis of having developed pleural plaques is well documented and it had been the practice for over 20 years for such claims to be met."

"The numbers of those involved, and the fact that many of them live in communities alongside people who are known to have developed very serious asbestos-related illnesses, contributed to a situation which no responsible government could ignore," he said.

Nick Starling of the Association of British Insurers said that the judgment was disappointing.

"The insurers brought this case because they believe that the Damages Act is fundamentally flawed in that it ignores overwhelming medical evidence that pleural plaques are symptomless, and the well-established legal principle that compensation is payable only when there is physical harm. Insurers will now consider carefully this judgment and what it means for them," he said.

However Scottish Justice Secretary Kenny MacAskill welcomed the "significant" decision.

"It has always been our belief that the legislation is right in principle and right in law and I am pleased that it has been unequivocally upheld," he said.

"It is our sincere hope that the insurers will now reflect carefully on the decisions reached by the Scottish Parliament, by both the Outer and Inner Houses of Scotland's Court of Session, and now by the UK's Supreme Court and settle those claims that have been stalled for so long."

The judgment will not have an impact in England and Wales, where the Labour Government decided against passing legislation intended to change the law on pleural plaques in February 2010.