d’finitive - Finity Consultingd’finitive. JUNE 2011. U.S. / Canada. The clinical research unit at Somalogic Inc., a Colorado based research firm has developed a technology that

1 d’finitive JUNE 2011

Asbestos NewsThe latest Australian and international news

Major developments as at 31 May 2011:

>> Home renovators are strongly represented in a new wave of asbestos-related

disease reports that are starting to emerge, according to a new study.

>> NSW Court of Appeal upholds a DDT decision which makes it clear that

prolonged exposure to chrysotile asbestos in an occupational setting satisfies

the legal test of causation for asbestos diseases.

>> Tasmanian no-fault asbestos scheme to be funded by a 4% levy on workers’

compensation premiums.

>> Uncertainty over the compensation of pleural plaques in the UK continues

>> AIG materially strengthens asbestos reserves citing increased medical

expenses relating to new treatments such as “pain management”, and higher

long term costs due to medical related longevity improvements.

>> Berkshire Hathaway takes on the majority of AIG’s asbestos liabilities

in a $1.6 billion transaction.

d’finitiveKeeping you informed. JUNE 2011

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Australia

The Minister for Workplace Relations has announced a review to make recommendations on the development of a national strategic plan to improve asbestos awareness and management. The review is to be headed by Mr Geoff Fary, and covers export and import controls, asbestos removal and disposal, mandatory reporting and data collection, and general education. The review is due to report back to the Minister by June 2012.

In a review of the New South Wales approach to asbestos control the NSW ombudsman recommended the creation of an Asbestos Co-ordination Authority. New legislation will give this body the power to coordinate asbestos remediation and risk mitigation in NSW.

Academics at Murdoch university have created an online resource named the Australian Asbestos Network (www.australianasbestosnetwork.org.au) aimed at increasing public awareness of asbestos in our surroundings and how to manage exposure. The creation of the website comes as Professor Peter Howatt from Curtin University recently announced that home renovators are strongly represented in a new wave of asbestos-related disease reports that are starting to emerge, and likely to increase in number over the next five to ten years.

The Workers Compensation (Dust Diseases) Bill 2010 was passed by the NSW parliament in December 2010. It increases the maximum lump sum benefit for families of asbestos victims from $245,700 to $311,050 over three years.

In Amaba Pty Ltd v Booth; Amaca Pty Ltd v Booth [2010] the NSW Court of Appeal upheld a DDT award for $360,000 to John Booth, who had been exposed to asbestos in both domestic and occupational settings during his working life.

The defendants appealed the DDT judgement on several grounds, the most significant being that the trial judge had incorrectly applied the materiality test referred to in Amaca v Ellis (see Asbestos News Oct 2010). They also appealed on the grounds that the medical expert at the trial had not given weight to the epidemiological evidence, which indicated no causal link between exposure to chrysotile asbestos used in brake linings and mesothelioma.

The DDT had to determine causation based on both the medical evidence for this particular case and epidemiological studies (i.e. trends in exposed populations). The medical evidence was based on the “Peto” model of exposure, which holds that each source of exposure contributes to a cumulative exposure which increases the risk of developing asbestos related disease. It is contrary to the “one-fibre” hypothesis - that mesothelioma is caused by the interaction of a single fibre with a single mesothelial cell – which the medical expert described as a “ridiculous proposition” in biological terms.


>> Oct 2010 – National Asbestos Management Review announced.

>> Nov 2010 – NSW ombudsman calls for a state asbestos authority.

>> Nov 2010 – DIY renovators identified as being at high risk of asbestos disease in the future.

>> Dec 2010 – Increase in NSW lump sum family benefits for asbestos victims.

>> Dec 2010 – NSW Court of Appeal decision concerns general standard of causation as well as use of epidemiological evidence.

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>>Feb 2011 – Queensland Industrial Magistrates Court overturns Q-Comp decision in mesothelioma case.

>> Mar 2011 – Detail emerges on the proposed Tasmanian no-fault asbestos scheme.

>> May 2011 – High Court to review new factual evidence in ASIC appeal against the overturning of bans against former James Hardie directors.


James Hardie Industries has released its 4th quarter results, indicating that its July 2012 contribution to the AICF will be reduced by a restructure during the 2011 financial year that will incur a tax charge of about US$33m.

James Hardie contributed US$64 million to the AICF in July 2010 and expects to contribute a further US$51.5 million in July 2011.

In December 2010 the Commonwealth and NSW Governments formalised arrangements for a standby loan facility for the AICF under which both governments will advance up to $160 million as required to allow the AICF to continue to make timely compensation payments to asbestos victims.

U.K. / Europe

In October 2007 the Law Lords ruled that asymptomatic pleural plaques are not compensable injuries at common law, effectively ending compensation for workers with evidence of asbestos exposure that had not developed into a recognised asbestos-related disease (see previous editions of Asbestos News for further detail). Contrary to this ruling the Scottish parliament (Holyrood) then legislated in 2009 to restore compensation for pleural plaques, and in England partial compensation (£5,000 per claim) was provided for claims that had commenced prior to the Law Lords’ ruling.

Northern Ireland has now followed suit with the Damages (Asbestos Related Conditions) Bill, which would restore compensation for Northern Irish workers with pleural plaques, having its second reading in the Northern Irish Assembly in January 2011. However, it is understood that the legislation will not be enacted until an appeal against the Scottish legislation has been resolved (see below).

Following the passage of the Damages (Asbestos Related Conditions) Act [2009], several insurers appealed on the grounds that the Scottish legislation was unlawful as it overturned an important principle of common law (that the right to compensation requires that an injury must have been sustained), and unreasonably interfered with the rights of insurers. In April 2011 the Court of Session found that while the legislation had interfered with insurers’ rights, the interference was justified overall, and that the Damages Act was valid.

The insurers have indicated that they will appeal to the Supreme Court.

>> May 2011 – James Hardie contributions to the AICF expected to be lower in 2012.

>> Jan 2011 – Northern Irish Assembly moves towards compensation of pleural plaques.

>> Apr 2011 – Court of Session rejects appeal against Scottish legislation overturning House of Lords ruling on pleural plaques.


U.S. / Canada

The clinical research unit at Somalogic Inc., a Colorado based research firm has developed a technology that enables the identification of blood based biomarkers for early stage mesothelioma and pancreatic cancer. Validation studies are underway which are intended to pave the way for diagnostic tests that would provide the opportunity for early treatment.

In 2003 the Texas legislature introduced an “innocent successor” provision in its Texas Civil Practice and Remedies Code which limited the asbestos-related liability of a successor corporation to the market value of the company with which it had merged. The legislation was apparently introduced with a specific company in mind, Crown Cork and Seal Co. which had merged with Mundet Cork in 1976, and had since paid out several times the value of the transaction in asbestos claims from Mundet’s exposure. The Supreme court found that the retrospective aspect of the legislation was unconstitutional as it did not overcome the “heavy presumption” against retroactive laws, which was designed to prevent abuses of legislative power. The case is considered to be significant in clearly setting a limit on the State’s power to pass retroactive laws.

According to the ATRF, Philadelphia is the worst of the “judicial hellholes” in the U.S. due in part to the practices of its Complex Litigation Centre, whose leadership it accuses of “viewing the increase in lawsuits and out-of-town lawyers as a boost for the court’s revenues and the local restaurants and hotels”. Among the practices criticised by the ARTF is a procedure for asbestos trials titled “reverse-bifurcation”, in which penalty amounts are decided (through hours of unchallenged and emotive testimony) before

the jury is asked to consider whether the defendant is at fault. California was also cited in the ATRF report, which included reference to a recent US$209m verdict for a single asbestos claimant in Los Angeles.

Following a finding by a Federal judge (Judge Jack) of extensive fraud by a Pittsburgh law firm in collusion with a West Virginia radiologist, CSX Transportation Inc filed legal action alleging fraud and racketeering. CSX had already settled thousands of fraudulent claims. CSX’s claim was initially found to be statute time-barred on the basis that the limitations period for commencing legal action began when the alleged fraud had occurred. The U.S. Court of Appeal overruled the initial decision, finding that the limitations period did not commence until CSX had reason to think it had been defrauded. Although CSX had access to the plaintiffs’ medical records and could theoretically have discovered the fraud earlier, it had, like many defendants in the U.S., made a commercial decision to settle the claims for less than the cost of investigation (had it decided to defend them).

>> Oct 2010 – New biomarkers found for mesothelioma and pancreatic cancer.

>> Nov 2010 – Supreme court overturns Texas legislation to retroactively immunise a corporation from asbestos liabilities.

>> Dec 2010 – American Tort Reform Foundation (ATRF) publishes list of “judicial hellholes”.

>> Jan 2011 – Washington Legal Foundation succeeds in reinstating fraud case against asbestos lawyers and doctors.



AIG has reported significant deterioration in its recent loss experience in property and casualty classes, and has strengthened its reserves by US$4.6 billion (gross), US$1.3 billion of which is attributable to its asbestos liabilities. The strengthening includes an allowance for the further emergence of latent claims and an industry-wide increase in large product liability verdicts.

AIG has attributed the increase mainly to increased medical expenses from new treatments such as “pain management”, and higher long term costs due to longevity improvements brought about by medical advances. Primary employers’ liability costs have also been affected by reduced return-to-work opportunities in the current economic environment.

Most rating agencies have maintained a negative outlook on AIG in response to the adverse experience, with only Fitch downgrading the stock.

Residents of Libby (Montana), the location of the W.R. Grace and Co. asbestos mine, appear close to settling claims against the state, which they assert should have warned them about the dangers of asbestos after the hazard was identified by state officials in the 1950s. The settlement would deliver compensation of US$20,000-60,000 per person depending on the severity of the illness of each of the plaintiffs. More than US$300 million has already been spent on remediation in the town after the Libby mine closed in 1999.

The Canadian prime minster has defended the local asbestos industry after the provincial government in Quebec gave conditional approval for a loan guarantee that would allow the reopening of the Jeffery asbestos mine. Mr Harper defended the industry on the basis that chrysotile asbestos is safe to handle if appropriate guidelines are observed. The prime minister’s support remains controversial elsewhere in Canada, where asbestos is being systematically removed from public buildings, including the Canadian parliament.

Subsidiaries of AIG International (Eaglestone Reinsurance Co.) and Berkshire Hathaway (National Indemnity Co., or “NICO”) have entered into a retrocession agreement transferring the majority of AIG’s asbestos liabilities for an upfront payment of US$1.65 billion. Under the agreement NICO will take on the majority of the asbestos loss portfolio acquired by Eaglestone from various AIG operations. It will also assume the benefit of third party reinsurance of US$2.8 billion held by AIG and responsibility for claims management. NICO’s losses are limited to US$3.5 billion net of third party recoveries and the deal is supported by a limited guarantee from Berkshire Hathaway.

>> Mar 2011 – Libby asbestos victims close to US$43m settlement with state agencies.

>> Apr 2011 – Canada steps up support for Quebec asbestos mining industry.

>> Apr 2011 – Berkshire Hathaway assumes AIG asbestos liabilities.

>> Feb 2011 – AIG strengthens long tail property & casualty reserves.

Latent Claims?

The risks associated with exposure to electromagnetic radiation from mobile phone use are back on the latent claims radar, with the World Health Organisation (WHO) having recently given mobile phone usage Group 2B classification, meaning it is “possibly carcinogenic to humans”. While the evidence is inconclusive, one study referenced by WHO showed a 40% increased risk of Glioma, a rare malignant brain tumour, for the highest category of users (average 30 minutes a day over 10 years). A November 2010 report from Lloyd’s of London “Electromagnetic fields from mobile phones: Recent developments” has acknowledged that if electromagnetic fields (EMF) are proven to cause cancer, long latency periods may be obscuring the evidence at present.

Lloyd’s has drawn the obvious comparison with the development of asbestos compensation, warning that a small number of legal cases can change the situation very rapidly, and that the insurance industry would likely be under reserved if EMF did emerge as a compensable injury under product and employers liability policies. The report also highlights that attribution of liability would be even more complex in EMF litigation than it has been for asbestos because the primary injury is more likely to emerge from other causes, and determining which product or period of usage caused the injury would be difficult.

“A small number of legal cases can change the situation very rapidly... “


Finity & Asbestos

Finity 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 to respond to changes in disease incidence as well as trends in the claims and litigation environment.

Contacts

Brett Riley [email protected] 02 8252 3382

David McNab [email protected] 03 8080 0903

Asbestos News is a summary by Finity 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.

Further clarification can be sought from our consultants.

If you have any queries relating to the material contained in this newsletter please feel free to contact Brett Riley on +61 2 8252 3382 or by email at [email protected]

Finity’s asbestos practice devotes considerable effort to keeping abreast of local and international developments in the legislative, legal, political and medical environments.

We are pleased to share this information with our valued

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asbestos-related news.

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d’finitive - Finity Consultingd’finitive. JUNE 2011. U.S. / Canada. The clinical research unit at Somalogic Inc., a Colorado based research firm has developed a technology that