Major UK Asbestos Insurer Insolvent
From the safety of the United Kingdom, we have watched many former asbestos producers in the United States declare themselves unable to meet their asbestos liabilities. While asbestos has crippled Lloyd’s of London, other UK insurers seemed to have weathered the storm. All this changed in January, 2001 when news began to circulate that Chester Street Insurance Holdings Ltd., the current incarnation of Iron Trades Holdings, was insolvent. Iron Trades Holdings Ltd. had been the Employer’s Liability Insurers for British Steel, The Central Electricity Generating Board, Swan Hunter Shipyards, Harland & Woolfe Shipyards and other shipyards and ship-repairers. According to one plaintiffs’ solicitor, "Since Employers’ Liability Insurance became mandatory, Iron Trades has been the UK’s biggest insurer of industrial risks." This has resulted in current asbestos liabilities of £60 million. Coverage under 2,000 Iron Trades policies is now uncertain due to "financial uncertainties surrounding the company’s financial position." Information on Iron Trades is difficult to obtain at this time. When contacted, Philip Grant, Chester Street’s Managing Director, required permission from the official liquidators to answer press enquiries. From the details which are available, it looks likely that corporate restructuring at Iron Trades is behind the economic failure of Chester Street. In 1989, Iron Trades Employers’ Association Ltd. dumped all existing policies, many of which have resulted in and will continue to generate asbestos-related liabilities, into the Chester Street company. Post-1990 policies went to a new subsidiary: Iron Trades Insurance Company Ltd. which, unsaddled by asbestos claims, was bought by the Australian-based insurance group: QBE International Insurance Ltd. Iron Trades most recent Annual Report and Accounts is extremely disturbing. The accounts relate to the year ending 31 December, 1999. On 16 December, 1999 the Board agreed to sell the profitable subsidiary; the sale was completed on 18 February, 2000 "following receipt of regulatory approval from the FSA (Financial Services Authority) and competition law approval." Shortly afterwards, the Group’s auditors noted that: "considerable uncertainty exists as to whether the undertaking (Chester Street Insurance Holdings Ltd.) can continue as a going concern if material adjustments are made to the provision for employers’ liability outstanding claims arising from latent disease." Despite concerns over the viability of Chester Street, Iron Trades Holdings planned and secured permission for the sell-off.
According to one insurer, this is a "controlled run off" rather than a fire sale. Chester Street is publicly acknowledging £200 million of assets. This sum would, according to an analysis by the Trades Union Congress (TUC), be enough to pay between 1500-2500 mesothelioma claimants sums of £50,000-£100,000 each. At this rate, two-four years’ worth of claims will exhaust the reserves. Once these are gone, cases stemming from post-1972 exposure will be covered by the Policyholders Protection Board (PPB), a scheme operated under the Department of Environment, Trade and the Regions. As the vast majority of asbestos claims arise from pre-1972 exposure, they will not be topped-up by the PPB. Claimants whose former employers are still in business, will be able to hold them liable for the full compensation due. Unfortunately, in many instances, defendants have disappeared by the time plaintiffs become ill. While a claim can be pursued against a defunct defendant when the company’s insurer can be identified, plaintiffs with such claims against Iron Trades could now find themselves under-compensated. The TUC concludes that: "Large numbers of victims therefore stand to lose out over the next ten to twenty years." It seems that the reorganization which ensured the viability of part of the Iron Trades group has been achieved at the expense of the growing numbers of UK asbestos victims.
A Scheme of Arrangement has been designed under section 425 of the Companies Act to ensure creditors receive part payment of claims "in the event that, at some time in the future the company’s liabilities exceed its assets." Policyholders told to "continue to submit claims information in the normal manner," on January 10, have reported paralysis at the Leeds office administering pre-1990 policies. This has been confirmed by news that on January 16, the liquidators ordered the stoppage of all checks, including those already issued but not yet presented, for pre-1990 business. Under their instructions, no settlement offers will be discussed, no admissions made or instructions given until after the creditors’ meeting in February. According to the provisional liquidators, if the Scheme of Arrangement is not approved by the creditors and court, the company would be put into liquidation. For the moment, government departments and the insurance industry are adopting a wait and see approach. Ian McFall, Head of the National Asbestos Team at Thompsons’ Solicitors, has been working to identify legal and political solutions: "There is enormous concern amongst our clients as to how these developments will affect their cases. Many of those who are terminally ill do not have the luxury of time to wait and see what may happen over the next weeks and months."
February 1, 2001
