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Compensation Act 2006 (Contribution for Mesothelioma Claims) Regulations 2006

rose to move, That the draft regulations laid before the House on 2 November be approved [First Report from the Statutory Instruments Committee]. The noble Lord said: My Lords, I welcome the opportunity to present this debate on amending the Financial Services Compensation Scheme to help sufferers of mesothelioma to receive more timely access to compensation. As the House will know, mesothelioma is a cancer of the lining of the lungs or abdomen, which is almost always caused by exposure to asbestos. The Government legislated in the Compensation Act 2006 to help claimants suffering from mesothelioma to obtain the compensation to which they are entitled as quickly as possible. This was achieved through reversing the effects of the House of Lords judgment in Barker v Corus UK and conjoined cases. The Government took the view that the practical effects of that decision would have made it more difficult and time-consuming for sufferers of mesothelioma to obtain full compensation in circumstances where sufferers and their families were already under considerable pain and stress. The Compensation Act provides that, where a person has negligently or in breach of statutory duty caused or permitted another person to be exposed to asbestos, and as a result that person has contracted mesothelioma, the negligent person will be jointly and severally liable. This will enable the claimant to recover full compensation from any responsible person. When the change was made in relation to mesothelioma liability through the Compensation Act, an issue arose concerning the Financial Services Compensation Scheme and direct improvements that could be made to speed up access to compensation. The FSCS is an industry-backed fund of last resort relating to financial services products—in this case, insurance. It provides a consumer safety net in relation to financial services and can pay out compensation if a firm is unable or likely to be unable to pay valid claims against it. It is an independent body set up under the Financial Services and Markets Act 2000. The rationale behind the scheme is that it gives people the confidence to invest in and use financial services. It is not a fund to provide general compensation—that would be a fundamentally different compensation scheme. Following the Government’s decision to reverse the effects of the Barker judgment, the Treasury has laid legislation to allow the Financial Services Authority to make changes to the FSCS to help victims of mesothelioma to receive more timely access to compensation. Broadly speaking, under the proposed changes negligent employers and their insurers who have paid victims of the disease will now be able to claim a contribution from the FSCS in certain cases. This should help to avoid delay in compensation being paid to claimants while the FSCS’s liability is being established. It is also fairer to insurers and responsible persons who, without these changes, would not be able to pay the mesothelioma victim up-front and subsequently recover a contribution funded by the FSCS. It is a process change that does not change the overall liability of the FSCS. The proposals have retrospective effect and allow payment of compensation to a responsible person or their insurer notwithstanding that they have already made a payment to the victim where the application for payment is made on or after 25 July 2006. The Treasury’s powers under Section 3 of the Compensation Act 2006 and the regulations laid before Parliament, provided for in subsections (7) to (11) of that section, are part of the section on damages for mesothelioma. These subsections conferred a power on the Treasury to make regulations about the provision of compensation under the FSCS to a responsible person or an insurer of a responsible person in specified circumstances. Broadly speaking, these regulations include two additional powers to enable the Financial Services Authority to make various rules in relation to the FSCS. Regulation 2 sets out a power that deals with claims involving insurers subject to insolvency and other defaults that took place before the commencement of FSMA on 1 December 2001. The power applies where the following conditions are met. First, a claimant could have claimed under the FSCS order where Section 3(1) of the Compensation Act applies. The power is therefore restricted to claims relating to mesothelioma, because Section 3(1) applies only where a responsible person has negligently or in breach of statutory duty caused or permitted a victim to be exposed to asbestos. Secondly, the victim has contracted mesothelioma as a result of exposure; thirdly, it is not possible, because of the nature of the disease and the state of medical science, to say whether this exposure caused the illness; and, finally, the responsible person is liable in tort for the exposure in connection with the damage caused to the victim. Moreover, the power to make rules will apply only where and to the extent that a responsible person could claim a contribution from another personwho is also responsible for causing damage to a mesothelioma victim under the Civil Liability (Contribution) Act 1978 but is unable or likely to be unable to get a contribution because an insurer of the other responsible person is unable or likely to be unable to satisfy the claim for a contribution. The regulations also set out various specific situations that can expressly be covered by the FSA’s rules concerning the FSCS. These are that payment can be made under the new rules even though payment has been madeto the victim; the value of the payment to a responsible person would not exceed what would have been available to the victim from the FSCS; payments could be made concerning applications made on or after 25 July 2006, which was the date of Royal Assent of the Compensation Act 2006, and, by virtue of Section 16(5) and (6) of the Compensation Act, can cover payments relating to a victim’s claim on or after 3 May 2006. The power also enables the rules to include payments to insurers of responsible persons. Regulation 3 is in almost identical terms to Regulation 2. The power will allow the FSA to make rules concerning mesothelioma claims where insurers involved enter insolvency or default on their payment obligations on or after 1 December 2001. The only changes are to make the power work in the context of FSMA generally. The final provision in the regulations relieves the FSA of the statutory obligation to consult on its rules and any guidance that it publishes on this subject solely for the first time that this power is exercised. However, a joint consultation has in fact been carried out by HMT and FSA, a summary of responses to which has been published on the Treasury’s website. The proposal was widely supported. Once the Treasury’s regulations are made, the Financial Services Authority would put the proposed rule changes to its next available board meeting, which is scheduled to be later this month. In summary, we are making a minor change to the FSCS to allow the Financial Services Authority to make rules facilitating the faster payment of compensation to victims of mesothelioma. This step was required as a direct result of the Compensation Act 2006, but it is none the less an important step in helping victims of mesothelioma to receive timely access to compensation and to make sure that insurers and responsible persons are not prejudiced with regard to the operation of the FSCS. I beg to move. Moved, That the draft regulations laid before the House on 2 November be approved [First Reportfrom the Statutory Instruments Committee].—(Lord McKenzie of Luton.)