Insurers bid to overturn asbestos ruling

The industry has succeeded in forcing a judicial review of the Damages Act, which will allow claims for compensation from Scots who have developed fibrous deposits on their lungs following exposure to asbestos.

The Scottish legislation, passed earlier this year, reversed a ruling by the House of Lords two years ago that prevented such claims.

The Damages Act will come into force on 17 June, and insurers warn that it will result in a sharp hike in premiums for all customers in Scotland as they anticipate the total bill for claims is likely to reach into millions, and potentially billions, of pounds. The industry argues that the act will also "open the floodgates" to claims for other benign conditions, harming Scotland's competitiveness.

Business groups including the CBI, the Scottish Chambers of Commerce and Scottish Financial Enterprise (SFE) expressed concern during the law's passage through parliament that it would make Scotland a less attractive location for inward investment at a time when the economy is already facing serious challenges.

The insurance industry believed it had won a landmark decision when in 2007 the

House of Lords made a ruling based on medical evidence that the deposits, called pleural plaques, are not in themselves a health hazard, although some people with the condition can go on to contract life-threatening diseases such as mesothelioma – a form of cancer. The Law Lords decided that pleural plaques could not, therefore, lead to legitimate compensation claims.

Speaking ahead of the first day of the judicial review on Tuesday, Nick Starling, director of general insurance and health at the Association of British Insurers (ABI), said: "Insurers are not in any way seeking to avoid compensation for people who are entitled to it. What we are talking about here is the Act is changing the law so insurers have to compensate for a condition which is in essence an exposure to a risk without having any ill-effects.

"You could open the floodgates to lots more conditions where someone has been exposed but is not suffering. It will affect all insurance customers in Scotland in terms of higher premiums."

Estimates as to how much claims for the plaques will cost the insurance industry differ. The Scottish Government estimates the bill could reach 5.5 million-6.5m but figures produced by Westminster placed this cost at between 1.1 billion and 8.6bn.

Lawyers say it is extremely rare to challenge an Act of Parliament through a judicial review and there are only two other known cases in Scotland.

A spokesman for the Scottish Government said it intends to defend its case. He said: "

Unfortunately, despite the clear will of the Scottish Parliament, some insurance companies are trying to defeat it through a judicial review. As we have already made clear, we will vigorously defend the legislation and the rights of people with pleural plaques.

"We are confident our legislation is right in principle and right in law. We will not turn our backs on those who contributed to our nation's wealth in the past."

The judicial review is due to conclude on 12 June.