2 d’finitive JUNE 2014

Asbestos NewsThe latest from Australia and elsewhere

News has been running hot in the asbestos area over the last six months. This d’finitive summarises key developments including:

>> James Hardie materially increases asbestos reserves

>> Settlement of ‘third wave’ claims by James Hardie and by

Queensland local council

>> Queensland government establishes new asbestos

management plan

>> Benchmarking of US asbestos reserves by Fitch

>> UK Mesothelioma Act establishes fund for mesothelioma

suffers who are unable to find a liable employer.

d’finitive®

Keeping you informed. JUNE 2014

[ accident compensation ]

www.finity.com.au

Sydney +61 2 8252 3300 Auckland +64 9 363 2894 Melbourne +61 3 8080 0900 Wellington +64 4 460 5213

Key:

Compensation and insurance

Court outcomes

Disease and research

Asbestos use and management

Read on for these stories and more in asbestos news from across the world.

2 d’finitive JUNE 2014

Australia

The Western Australian Law Reform Commission has announced a review of compensation for sufferers of asbestos-related diseases. Potential changes include to the ‘once and for all’ rule, which

would allow people who later develop a different or more serious condition to receive extra damages. The commission may also allow damages to reflect the commercial value of personal or domestic work for others that incapacitated people can no longer provide. Recommendations will be made to the Attorney General by July 2015.

The recent National Commission of Audit recommended that the Asbestos Safety and Eradication Agency (ASEA) be consolidated into a government department, and it is expected to be axed. ASEA

was set up in 2013 with a $12 million budget over four years, and was to deliver a national strategic plan on asbestos management and safety.

Research out of Curtin University concludes that the risk of developing mesothelioma increases following the cessation of exposure. The rate of increase levels out after 40-50 years. Read

the article here.

The claimant Stephen Wickham was reported to have contracted mesothelioma after knocking down his backyard shed in 1994. He stated that while he did know that asbestos was dangerous, he

hadn’t heard of fibro until coming to Australia in 1987, and didn’t know that fibro manufactured before the early 1980s contains asbestos. The case was regarded by some as a test of whether James Hardie would accept liability for third wave claims. The fund and Mr Wickham came to a confidential settlement and the case was not pursued.

Southern Cross University’s Regional Initiative for Social Innovation and Research has produced a report “The Asbestos Narratives”. The report provides new insights and evidence into the social,

psychological and economic impacts of asbestos-related disease. The report was funded by Comcare’s Asbestos Innovation Fund and can be found here.

The Queensland government has launched the Statewide Strategic Plan for the Safe Management of Asbestos in Queensland 2014-2019. The plan focuses on effective cooperation between local

councils, which will cover asbestos management for private residences, and the state government managing workplace safety. Penalties will be reviewed and an online register for contractors with asbestos licenses will be developed.

>> Jun 2014 – Western Australia to review asbestos compensation

>> May 2014 – ASEA to be axed

>> May 2014 – New research – mesothelioma risk increases after exposure ends

>> Apr 2014 – AICF settles with third wave victim

>> Mar 2014 – Comcare funds asbestos injury impact study

>> Mar 2014 – New Queensland Asbestos Management Plan

3 d’finitive JUNE 2014

Claimant Mr Prokop, 43, contracted mesothelioma after working as an apprentice carpenter in 1990-92, pulling down and crushing fibro sheets. He was due to go to trial, with the Gold Coast

Council defending the claim, but on the eve of the court date the case was adjourned and listed for settlement negotiations.

Victorian schools with on-site asbestos will display warning signs at their front gates. The Department of Education will also set up a taskforce to audit how schools manage asbestos. The actions

are the consequence of legal action from WorkSafe Victoria after safety breaches at several schools.

North America

Fitch Ratings has released its annual Asbestos Liability Dashboard, which highlights key trends in asbestos liabilities covered by US insurance companies:

• Fitch estimates that 2013 industry asbestos reserves are deficient by $2-9 billion, based on estimated ultimate industry costs of $85 billion. Current asbestos reserves total around $23 billion, and make up 4% of total insurance industry reserves.

• In recent years total asbestos claim numbers have continued to decline, but strengthening of ultimate loss estimates has continued due to higher average payments per claim. The higher average payments reflect a rising proportion of mesothelioma claims, which have larger payouts on average.

Wisconsin has signed into law a bill that requires plaintiffs to reveal how many businesses they plan to sue, and to seek compensation from asbestos trusts before they can sue for more in court.

The law is designed to prevent lawyers from filing multiple claims against trusts and businesses.

Garlock manufactures seals and gaskets, and has been a defendant in asbestos litigation for 40 years. A US bankruptcy judge has accepted that Garlock’s future asbestos liability is $125 million,

much lower than the $1.3 billion proposed by plaintiff lawyers. The judge said that plaintiff attorneys have ‘unfairly inflated the [claims] against Garlock’ by withholding evidence about claimants’ other exposures.

>> Mar 2014 – Mesothelioma settlement with Gold Coast Council

>> Dec 2013 – Victorian Schools to have warning signs

>> Apr 2014 – Fitch dashboard

>> Mar 2014 – Wisconsin asbestos compensation laws

>> Sep 2013 – Garlock liability cut

4 d’finitive JUNE 2014

UK

In January the UK government passed the Mesothelioma Act 2014. It provides for compensation to mesothelioma sufferers who are unable to find a liable insurer or employer, with eligible claimants to

receive an average of £123,000 from the scheme.

The scheme expects to pay out £30 million in compensation each year, with over 800 people to be compensated in 2014 and 300 each year thereafter. The scheme is funded via a levy on insurers, which will not exceed 2.74% of employers’ liability premiums for the first four years of operation.

The UK government’s impact assessment for the scheme shows that around 1,500 employers’ liability mesothelioma claims are reported each year. These represent around 60% of all mesothelioma cases. About 300 claims per year with untraceable occupational exposure are expected to qualify for the new scheme.

Other international

A Finnish study of census data from 1961 to 2005 has concluded that firefighters have a higher risk of mesothelioma; in the study the mesothelioma incidence for firefighters was more than 150% of the

‘normal’ incidence. The study also found that asbestos exposure may not be the only cause of the higher incidence; shift work and exposure to by-products of burning fuel may also contribute.

The Osaka High Court has found in favour of 58 plaintiffs, holding the government liable for failing to prevent workers from being exposed to asbestos. The court awarded 340 million yen (about

A$3.6 million) in damages, much higher than the 180 million yen (A$1.9 million) awarded by the district court in March 2012. The plaintiffs were exposed between 1947 and 1999, some in asbestos spinning mills.

>> Jan 2014 – Mesothelioma Act

>> Jun 2014 – Higher mesothelioma risk for firefighters

>> Dec 2013 – Japanese Government liable

5 d’finitive JUNE 2014

Feature Piece

James Hardie Asbestos Liabilities

KPMG’s 31 March 2014 valuation of asbestos-related disease liabilities of former James Hardie entities was released on 22 May 2014. The valuation shows an estimated outstanding liability of $1.87 billion. This is $294 million (19%) higher than the expected March 2014 liability ($1.58 billion).

The primary driver of the movement is an increase in the projected number of future mesothelioma claims, following a significant increase in claims reported during the past 12 months. In 2013/14 370 mesothelioma claims were received, compared with an expectation of around 300 claims. This is also 20% higher than the previous highest of 309 claims received in 2012/13.

For other disease types, recent claim experience has been more consistent with expectations, and only modest changes in the liabilities have been made.

Other observations on the mesothelioma claims experience are:

• Previous estimates of the liabilities expected that mesothelioma claim reporting would peak in 2010/11

• The recent spike appears to be related to increases in direct James Hardie claims (rather than cross-claims), particularly where James Hardie is the sole defendant

• At a jurisdictional level, materially higher claim reporting was observed in NSW, SA and WA

• The age and asbestos exposure profile of the 2013/14 claimants is broadly consistent with the profile of claimants reported in the three years prior to 2013/14.

Finity & asbestos

Finity’s dedicated asbestos team advises government agencies, insurers, reinsurers and other companies on their asbestos-related liabilities.

Our experienced consultants remain at the forefront of actuarial research into compensation for asbestos-related diseases in Australia. Since 1991, we have collected and analysed data on asbestos-related disease claims arising from industrial, environmental and product-related exposures; this extensive historical database represents a key resource for the provision of our advice. We regularly update our modelling approach, responding to changes in disease incidence as well as trends in the claims and litigation environment.

Contacts

Brett Riley brett.riley@finity.com.au 02 8252 3382

David McNab david.mcnab@finity.com.au 03 8080 0903

Claire White claire.white@finity.com.au 02 8252 3305

Asbestos News is a summary of information from the media and other public sources. Finity takes no responsibility for the accuracy of the content. This newsletter does not constitute actuarial or professional advice.

If you have any questions about the material in this newsletter please contact David McNab on +61 3 8080 0903 or at david.mcnab@finity.com.au

Keep your eye out for news of our second

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Colin Biggers & Paisley lawyers.

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Contact the Author

David McNabTel +61 3 8080 0903david.mcnab@finity.com.auMelbourne office

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Wellington

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