Appeal in benefits reimbursement decision: in for a penny, in for a... proportionate share?

England & Wales

The Secretary of State has appealed the High Court’s ruling in R (Aviva Insurance Ltd and Swiss Reinsurance Co Ltd) v. Secretary of State for Work and Pensions, a judicial review case, and the Court of Appeal’s judgment is anticipated to be available early in the New Year. We review the High Court judgment ahead of that appeal.

The focus of the judicial review proceedings is the interpretation and application of the Social Security (Recovery of Benefits) Act 1997 and its compatibility with the Human Rights Act 1998. The 1997 Act makes provision for the Department for Work and Pensions to recoup benefits, received by claimants, from defendant parties found to have caused the condition in respect of which benefits were paid. 

Through the prism of asbestos related disease claims and liabilities, insurers contended that DWP’s interpretation and application of the Act was outdated.  Whilst the law in relation to such claims has developed considerably since the Act was introduced, by virtue of a raft of high-profile decisions, including Fairchild v Glenhaven, Barker v Corus, Heneghan v Manchester Dry Docks and Carder v University of Essex (all of which will be familiar to industrial disease lawyers), the regime of recovery had not and this gave rise to an injustice. 

The insurers contended that the recovery of 100% of benefits, in circumstances where the insurer’s contribution to damages was often considerably lower than that by operation of those disease authorities, was incompatible with Article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms, namely the entitlement to the peaceful enjoyment of possessions. They submitted that there was often no correlation between the benefits that were recouped and the heads of loss that had been compensated.

The High Court held that three features of the 1997Act were incompatible with rights under Article 1, being the requirement to repay 100% of the recoverable benefits even where:

  1. A claimant is found to be contributorily negligent;

  2.  A claimant’s ‘divisible’ disease is in part unconnected with the insured’s tort; and

  3. Other tortfeasors would normally be liable for an indivisible disease but they or their insurer cannot be traced.

Whilst the decision arose within the specific context of asbestos related disease claims, if upheld, it is difficult to fathom a basis upon which a wider and more general application in other areas of personal injury litigation would not prevail and it will be interesting to see how this cascades into other areas which are subject to recoupment of benefits and/or what steps may be taken by Parliament. The implications for personal injury litigation are significant and insurers will be eagerly awaiting the result of the Secretary of State’s appeal.