On Balance Autumn/Winter 2015

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14 On Balance Weighing the issues of commercial law BRIDGING THE GAP Many companies now face ‘historic’ disease claims, where they are unable to trace insurance cover. If there is no insurance, payment of these claims comes straight off the bottom line. The cost of a single asbestos claim to companies will often exceed £200,000. Jim Bryant, Partner 0151 242 6940 jim.bryant@weightmans.com © Copyright. Weightmans 2015. All rights reserved.
Issue 8 Autumn/Winter 2015 15 Companies can now mitigate their expenditure on these claims, as a result of a new service launched by Weightmans. “A number of companies, particularly those previously on the acquisition trail, have gaps in their insurance cover and are facing legal claims dating back decades,” explains Jim Bryant, partner in Weightmans’ Disease Unit. “We are seeing a significant number of these historic disease claims being brought against subsidiaries that have been dormant corporate entities for some time. These subsidiaries have often been stripped of their assets but have not then been wound up. “A business may find itself defending a claim based on allegations relating to working conditions which may or may not have existed 20 or more years ago in a factory or premises that have long since been demolished.” Continued Jim: “The subsidiary often has no money and so the easy solution would be to let the company fail. However, this is not always the appropriate course of action. Claimant solicitors will often allege (incorrectly in most cases) that liability to pay these claims must rest with the parent company or another company within the business. “The good news is that with proper expertise in this complex area of claims, it is often possible to mitigate the costs of these claims to your business.” For companies facing a claim, Weightmans adopts a proactive approach, working to: ■■ ■■ ■■ ■■ ■■ Clarify the status of the corporate entity, if any, which needs to respond to the claim. Exhaust all lines of enquiry to determine whether insurance cover was in place for the corporate entity. Collate and archive all available documentation and witness evidence relating to the period of alleged exposure. Detect fraudulent claims utilising its extensive market intelligence and bespoke behavioural analytics tool; and advise on sanctions and recoveries where appropriate. Dispose of non-fraudulent claims in the most cost-effective way. “The objective of our GAP product is not just about helping companies to respond to these claims, but to raise their awareness of the potential for these claims. This is no longer just about traditional industry. We are seeing claims for companies across all sectors,” added Jim. If there is no insurance cover available, companies may wish to explore alternative corporate and insurance solutions. The right corporate/insolvency advice now may avoid the potential future liability to pay these claims. Insurance solutions can be complex, but if your business already faces these historic claims, or even the potential for these claims, a transfer of this liability may be an attractive proposition. Such a transfer should ultimately help to deliver a reduced risk profile for your business, improved solvency and operational efficiencies. This is also about driving capital efficiencies, corporate simplification and reducing the regulatory burden. Case study Weightmans was instructed by a large manufacturing company, in relation to a claim for mesothelioma, following alleged exposure to asbestos. Mesothelioma is a type of cancer that is invariably fatal. The claim was valued at £250,000. The claim was directed at a subsidiary of the main manufacturer and no insurance records could be found. The subsidiary had not traded for five years and had no assets. It did, however, hold a licence (non-transferable) to conduct business in a foreign jurisdiction which it did not wish to lose. The manufacturer also wanted to “do the right thing” in dealing with the claim. It therefore made an ex gratia offer of £50,000 to the claimant. The claimant solicitors refused the offer – instead looking to obtain a judgment and wind up the subsidiary; in the hope that insurance cover would be found. The manufacturer then sought to wind up the subsidiary first, so that it was able to control the process and limit further liability. The manufacturer is currently carrying out a review of its corporate portfolio to reduce the potential for a repeat of this experience in the future. ■■ Advise on suitable containment strategies for potential future claims.
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On Balance Autumn/Winter 2015

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