Select Committee on Trade and Industry Written Evidence


APPENDIX 2

Memorandum by the Department of Trade and Industry

TERMS OF REFERENCE

  The Committee intends to review the scope of the two schemes and their administration, including claims registration and handling, the coordination of these processes with the medical assessment procedures, the claims settlement process and the scope for accelerating the settlement and payment of claims.

 INDEX

  Title Page—Including Terms of Reference

  Index

  Glossary

  Introduction

  Background

    Judgments and Handling Agreements

    The Conditions

    Parties to the Process

    Flowchart for COPD claims

    Flowchart for VWF claims

    Flowchart for VWF Services claims

    Medical assessments

    Record collection

  Progress

  Constraints

  Electronic delivery

  Communications

  Monitoring the Processes

  Fraud

  Efficiency

  Recent Progress

  Remaining Issues

  Aspirational Scheme End Dates

  Conclusion

  Annex A—Copy of the COPD CHA on CD-Rom[1]

  Annex B—Copy of the VWF CHA on CD-Rom*

  Annex C—Copy of the latest COPD quarterly report to court

  Annex D—Copy of the latest VWF quarterly report to court

  Annex E—COPD Claims Process

  Annex F—VWF Claims Process

  Annex G1 & G2—Headline Statistics

  Annex H—Top 25 constituencies by total compensation

GLOSSARY

  ASEDS—Aspirational Scheme End Dates

  BCC—British Coal Corporation

  CAPITA—Is not an acronym

  CB—Chronic Bronchitis

  CBE—Chronic Bronchitis and Emphysema

  CG—Coordinating Group (the negotiating group of solicitors)

  CHA—Claims Handling Agreement (COPD)/Arrangement (VWF)

  CLU—Coal Liabilities Unit

  COPD—Chronic Obstructive Pulmonary Disease

  DWP—Department for Work and Pensions

  FEV1—Forced Expiratory Volume (of air breathed out in first second)

  FVC—Forced Vital Capacity (maximum volume of air that can be breathed out with maximum effort)

  IRISC—Is not an acronym

  MAP—Medical Assessment Process

  RS—Respiratory Specialist

  VWF—Vibration White Finger

INTRODUCTION

  1.  The British Coal health compensation schemes have attracted considerable regional media and Parliamentary attention since the original court judgments seven years ago. This has increased over recent months, following the introduction of initiatives by the Department, miners' solicitors and Sir Michael Turner, the judge who oversees the respiratory disease litigation, for speeding up the claims process.

  2.  This memorandum responds to a call by the Trade and Industry Select Committee for evidence in relation to the progress and administration of the coal health schemes.

BACKGROUND

Judgments and Handling Agreements

  3.  DTI has responsibility for the two largest personal injury compensation schemes in the world, one for lung diseases due to coal dust (Chronic Obstructive Pulmonary Disease), the second for hand injuries due to vibration (Vibration White Finger). There are nearly 770,000 claims registered under the schemes, which are both now closed to new claimants. Costs are likely to be around £7.5 billion, with nearly £2.5 billion paid to date. Nothing like this, in size or complexity, has been attempted before. The Coal Liabilities Unit administers the schemes with some forty staff plus 1,700 people at six service providers involved in delivery.

  4.  DTI took on these liabilities from British Coal on 1 January 1998 under the Coal Industry Act 1994. It had not been feasible to pass them on to purchasers of the pits due to uncertainty as to their nature and size and difficulty in obtaining employer's liability insurance. British Coal was taken to the High Court in two separate group actions and found negligent in both, in January 1998 for COPD and July 1997 for VWF. British Coal was found negligent in relation to exposure to coal dust from 1954 to 1994 and in relation to VWF from 1975 to 1994.

  5.  The courts ordered DTI and the miners' solicitors to agree detailed arrangements to assess compensation. The alternative, each claimant having to fight in court, was unacceptable to all, not least because the Personal Injury courts' capacity is in the region of 10,000 claims per year. Detailed Claims Handling Agreements (CHAs) for dealing with the claims, which have now been signed up to by 700 or so firms of solicitors acting for individual claimants, were negotiated with the claimants' solicitors coordinating group (CG).

  6.  As the judgments did not cover Scottish claims, a separate agreement for each scheme was negotiated for these. These agreements are substantially the same as those for England and Wales, differing only where Scottish law is different. In addition, separate agreements were also signed with the Union of Democratic Mineworkers (UDM) which were identical to those signed with the CG except for the levels of costs paid, which were lower as the UDM handle claims through their own claims handling agent.

  7.  The CHAs for each disease were then endorsed by the two High Court judges who manage all claims. They are necessarily complex as they specify how claims will be handled, in accordance with common law, and they reflect the judgments in the test cases presented in the group actions. Awards are set (at court levels) for given levels of injury, payments for financial loss due to that injury, and the broad weight of evidence is as required by a court. This is different to a "no-fault" scheme (eg the Coal Workers' Pneumoconiosis Scheme ) where less evidence is needed and smaller, less discriminatory awards are made. The courts oversee the CHAs' operation aiming to avoid further court action. The judges resolve points of law and DTI and the CG report back to them regularly (3-4 times a year) on progress in settling claims. As the CHAs are contracts between DTI and the solicitors all changes are by mutual agreement. Copies of the CHAs are attached, on CD-Rom, at Annex A (COPD) and Annex B (VWF). In addition, copies of the most recent reports to the Court are attached at Annex C (COPD) and Annex D (VWF).

The conditions

  8.  COPD covers chronic bronchitis and emphysema, with breathlessness the main symptom, as the lungs cannot get enough oxygen into the blood, and thus into the muscles, to allow normal exertion. COPD is irreversible and untreatable, usually progressive and can cause premature death. In the general population, the most common cause is smoking. VWF affects the fingers, with damage to blood vessels and nerves, and varies from temporary numbness and tingling, through reduced dexterity, to amputation in severe cases. It is irreversible and untreatable and worse when exposed to cold.

Parties to the Process

  9.  The Schemes are managed by the DTI who negotiate changes to the CHAs with the Claimants Group (CG). The CG represent the solicitors in the process. Sir Michael Turner presides as Court case manager for the COPD Scheme and Dame Janet Smith for the VWF Scheme. The administration of the Schemes is delivered through service providers contracted to the DTI who are responsible for claims handling, medical services, record collection and legal advice. The solicitors act on behalf of claimants and mainly deal direct with the DTI's claims handlers.

  10.  A more detailed summary of the other parties responsibilities are detailed below:

    (a)  Claimants Solicitors/UDM—Claims are submitted to the DTI Claims Handlers, IRISC. The DTI does not deal directly with claimants. Claimants representatives are responsible for taking instructions from their clients and providing the appropriate information and documentation to IRISC. They are responsible for assessing offers and arranging acceptance and payment.

    (b)  DTI Claims Handlers—IRISC have been the claims handling service providers for both Schemes since the CHAs were agreed in 1999. They were originally part of the Aon Group until February 2004 when Capita assumed responsibility for the service. Claims are processed at offices in Sheffield, Manchester, Edinburgh and Cardiff.

        IRISC's responsibilities include claims registration, agreeing employment history, collating the documentation prior to medical records collection for COPD, valuing claims, making offers where appropriate and providing claims handling policy advice to the DTI. They also have an MPs' unit that provides answers to MP enquiries and information for parliamentary questions, in consultation with CLU.

    (c)  Medical assessment—COPD—Healthcall were the service providers for the COPD Medical Assessment from 1999 to 2002. Responsibility for this transferred to Atos Origin, formerly known as SchlumbergerSema in November 2002.

        Atos Origin sub contract the collection of medical records to Elision previously known as MPC.

    (d)  Medical Assessment - VWF—ATOS Origin, formerly known as SchlumbergerSema, have been service providers for VWF General Damages since the formation of the CHA.

        Aon Health Solutions were the original service providers for the VWF Services medical assessment process when it commenced in April 2003. Capita took over the company and assumed responsibility for this service in March 2004.

    (e)  British Coal records holder;—Hays Record Management was originally the British Coal Records holder. The business was subsequently purchased by Iron Mountain. Whilst Iron Mountain store the British Coal Records all the data is wholly owned by the Department.

    (f)  Legal Service Provider—Nabarro Nathanson are the DTI's legal service provider for both schemes. They assist in the provision of legal advice to the DTI and with the management of the court process. McClure Naismith provide specific advice in relation to Scottish issues.

  11.  Disputes Procedures covering all aspects of claims handling, including medical issues, have been agreed for each disease with the CG. If the issues in dispute cannot be resolved the cases can, with the judges' agreement, go back to court. However, to keep to an absolute minimum the number of cases that go back to court, the option of mediation (a form of Alternative Dispute Resolution) is available after the disputes procedure. To date no cases have proceeded back to court.

  12.  Claims for deceased miners are handled in broadly the same way as living claimants, using any medical records, a death certificate and post mortem report (for COPD), and DWP assessment for VWF. A statutory bereavement award is payable to the widow where COPD was the main or a contributory cause of death.

  13.  Diagrams showing the flow of the claims handling processes are below , and descriptions of the process are attached at Annex E (COPD) and Annex F (VWF).







MEDICAL ASSESSMENTS

  14.  The CHAs set out the medical assessments which will be conducted. The assessment processes were agreed by the Department and the CG with advice from senior medical experts in each condition. The assessing doctors are regarded as joint experts answerable to both the Department and the CG. These defined medical assessments for each disease produce consistent, reliable reports and replace the individual referrals by each party to a doctor of their choice, which is more usual in common law cases. Major delivery contracts allow nation-wide processing to assured standards.

  15.  For COPD, the first stage of the assessment is screening spirometry which shows the extent of lung damage, but not the cause, allowing risk and fast track offers to be made, enabling claimants to leave th eprocess early. Alternatively it prioritises claimants, allowing the eldest and most severely injured to be seen first in the main Medical Assessment Process(MAP). In this a respiratory specialist, aided by lung function test results, medical records and a consultation with the claimant (in live cases), diagnoses any diseases and assesses disability due to COPD in 10% gradations, discounting co-morbidity (other disabling conditions for which DTI is not liable). The medical judgments involved require the use of specialists, they are not ones GPs could make.

  16.  For VWF, a long standing injury scale is used—though this is critically dependent upon the accurate reporting of his symptoms by the claimant—with evidence obtained by a combination of tests and an interview with a generalist doctor. The "staging" of the disease on assessment is then read across to agreed tariffs in the CHA.

  17.  The medial experts continue to provide advice and expertise as members of the jointly appointed COPD and VWF Services Medical Reference Panels.

RECORD COLLECTION

  18.  Iron Mountain (the company who have custody of the former British Coal records) are responsible for the collation of an agreed employment records pack and its dissemination to IRISC and the claimants' solicitors. The collection of these employment records has not been without difficulty as the existing records retrieval system was not designed for large scale, speedy retrieval. A further problem is missing employment records: some local records were destroyed as the industry contracted. Those records that survive can in some cases be incomplete, which can affect the agreement of the employment history.

  19.  The Department has funded improvements to the Iron Mountain database to allow for comprehensive searching amongst the files that Iron Mountain hold. This has reduced the number of no traces, thus making the establishment of employment history easier.

  20.  The DTI introduced scanning of employment records to move away from a paper based system to allow easier storage, to lay foundations for electronic archives more fitting for the 21st Century and to assist for any possible future claims against the Department.

  21.  Electronic links between IRISC and Iron Mountain enable electronic transfer of information between these two key service providers. This reduces the amount of time needed to transfer information and the possibility of losing files.

  22.  Atos Origin have sub-contracted to Elision Group the task of collecting the medical records for individual claimants. The records include both GP and hospital records, as well as those held by the DWP and BCC medical records—although hospital records are only collected if the GP records are not available.

PROGRESS

  23.  With regard to COPD, nearly 576,000 claims have been fully registered to date. In the last six months of the scheme over 250,000 claims (doubling the total number of claims) were received, mostly from younger men with potentially much lower levels of disability, and estate claims, where the miner died many years ago and is therefore unlikely to have any medical records. Nearly 183,000 claims have been settled and a further 78,000 interim payments made. In total over £1.3 billion has been paid to COPD claimants.

  24.  As to VWF, 170,000 claims were received prior to the cut-off date. Nearly 100,000 claims have been settled and 97,000 interim payments made. In total nearly £1.1 billion has been paid to VWF claimants. Copies of the national statistics are attached at Annex G which show the current position of the schemes and Annex H shows how much has been spent in the main coal constituencies.

  25.  Levels of compensation vary greatly, as shown in the statistics, but the average settlements are for COPD £7,800 and for VWF general damages £7,400.

CONSTRAINTS

  26.  The CHAs are, as Sir Michael Turner has previously stated, necessarily complex and the sheer scale of the schemes is unprecedented. This has meant that there have been a number of constraints in establishing and maintaining both schemes.

  27.  Following the Court Judgments of 1997 and 1998 there was tremendous pressure to see that compensation started to flow quickly to claimants, particularly those with lung disease, many of whom were old and sick and some dying of the disease. This meant that as soon as the structure and basic details of the Agreements were settled, the process had to be put into operation immediately. There wasn't time to pilot the process. The Department has worked with both its service providers and the CG to address issues as they arose and tried to ensure that these delays to the flow of claims were kept to a minimum.

  28.  Sir Michael Turner has kept a close watch on progress of the lung disease scheme and while concerned about delays has commended the efforts of all those involved to get the process going and noted that the complexities of the Scheme and the thorough medical assessment were a necessary part of ensuring that claimants get a fair deal.

  29.  Pressures to get money flowing out led to several significant changes in the process early on. On COPD, for example, the scope for expedited offers was extended—on professional medical advice and on the basis of evidence from cases that had already gone through. This successfully got compensation of around £80 million paid in three months but also produced difficulties with some claims which were half way through the process.

  30.  In May 2000 the VWF Agreement was extended to cover a further head of damages—Services. Damages are paid as compensation for miners with VWF needing help with common household work such as gardening, car maintenance and DIY. Their eligibility for this is determined from a further medical and questionnaires completed by helpers.

  31.  The volume of claims has been much higher than anyone expected and this has led to problems in scaling up the process. At the time of the lead case trial judgment there were less than 5,000 VWF cases and the forecast total was around 40,000. On COPD, the figures were 30,000 and 70,000. These were the best guess estimates of the CG and DTI. No one had any firm basis for making these estimates—British Coal had estimated their total liability very much lower (only £50 million was included as a provision in their accounts). The outturn has been very different (see National Statistics). As noted above, as at February 2005 there are nearly 170,000 VWF claims registered and 576,000 claims for COPD.

  32.  Managing rapid change has been a feature of both schemes. As claims began to increase significantly in 2000, plans were put in place by the DTI with its service providers to ramp up resources to deal with this increase. This included additional resources, enhancing existing systems and encouraging the use of e-technology amongst claimants' solicitors.

  33.  The key constraint on the COPD process has been the availability of Respiratory Specialists in the UK that could be available to be trained in the Medical Assessment Process ( MAP ). There are only 600 respiratory specialists in the UK and around 200 are involved in the scheme. Service providers have ramped up resources to deal with rapid flow through of claims. IRISC for example increased claims handling resources on COPD from 140 in 2000 to 532 by the end of 2003 to accommodate the growth in claims. Due to the complexity of the work new members of staff are required to go through a steep learning curve which means it takes time to train individuals to the required standard. The Department has always involved solicitors in projecting flow through to ensure that claims are delayed as little as possible at each stage. On both schemes we have organised workshops for solicitors so that they knew what was happening on the schemes and what to expect going forward.

  34.  On VWF, there have been two main constraints. Earlier in the scheme, the provision of training records to confirm occupation was slow and cumbersome but was speeded up largely by the use of electronic data imaging between IRISC and Iron Mountain.

  35.  Latterly, it has become clear that the remaining general damages claims have a high level of co-defendant involvement (the claimant worked for mines other than British Coal's); these claims are, by necessity, more complex to co-ordinate. A programme of activity is currently underway at IRISC to ensure the engagement of co-defendants in the process, particularly at offer stage.

  36.  If those negotiating the CHAs had been able to see the volumes which would be going through the processes, it might have been that both sides would have recognised that the complexity of the Agreements, while accurately reflecting common law and the judgments (and thus giving every man his due) was not suitable for what is effectively now an industrial process. The complexity has slowed delivery. Simpler schemes that involved more averaging would have been quicker in delivery, although less fair to the individual.

  37.  The slow start up caused by the formulation of the CHAs and the difficulties of resolving policy issues and then putting change into operation, have meant that many thousands of cases when they got to final assessment stage were held up because a full and final offer could not be made. The rapid increase in volumes of claims on COPD over a short period of time in 2000 meant that service providers and solicitors could not handle all the cases in the time frames set out in the Handling Agreement. It was agreed by the parties to suspend these timetables and a whole cohort of claims—those for miners' estates other than widows—were, with the agreement of the CG and the judge, set aside so that live claims and widows' claims could be dealt with first.

ELECTRONIC DELIVERY

  38.  When the parties were considering how to put into operation the administration of the Schemes in mid 1999 web use was only just taking off. The CG believed that some solicitors would have difficulty in adopting electronic technology.

  39.  From the beginning the Schemes had some innovative e-business elements. Employment and medical records were sent to IRISC and solicitors on CDs and there were internal database links between the Service providers but, initially, solicitors were not part of the web community.

  40.  E-solutions over the last three years have significantly speeded up the process. Both Schemes have embraced e-business and the Department's service providers and solicitors have greatly expanded the e-business element of delivery. For example, calculation models have been developed which have substantially improved productivity by reducing the time taken for complex calculations of special damages. These were shared with the solicitors on CD-Rom and are now available on the website.

  41.  Significant investments in electronic processes have included the DTI's claims handlers introducing in 2002 an electronic document management system which saw 30 million pages of paper documents scanned into the system. All work at IRISC is now handled exclusively via electronic means. In addition, as noted above, the British Coal's employment record archive was scanned, enabling copies to be circulated to both claims handlers and solicitors much more efficiently and speedily.

  42.  In August 2000 DTI contracted with Healthcall to develop a process by which, initially, certain databases could be accessed and claims forms could be completed electronically via the internet. The coalclaims.com website came on line at the end of October 2000 and solicitors welcomed the system as a way to speed up claims processing. The site was further developed in July 2001 to include a case tracking system. The site was fully revamped in September 2003 when the development and hosting contract was re-tendered and awarded to Cable & Wireless. This is the first e-claims website of its kind and is now used by over 2,000 individual users who represent some 60% of solicitors.

  43.  The website contains the Dust Calculator (for apportioning damages), the Schedule 10 Calculator (for special damages) and details of work history can be agreed over the web and offers made. Claims handling teams can agree workflow of cases with solicitors so that both sides are working on the same claims to improve efficiency. Solicitors can use the website to provide management information about their own caseload.

COMMUNICATIONS

  44.  DTI has monthly meetings with the CG for each scheme on claims processing and policy issues, with ad hoc meetings as necessary. Service providers attend on a regular basis. IRISC have developed routine contacts with solicitors, with Solicitor Liaison Managers employed to deal with the top 10 firms (who represent 80% of the total claims) on a regular basis. The Department and the CG get quarterly reports on the quality of the medical assessments from the service providers' internal audits.

  45.  DTI produces a quarterly Compensation for Miners Newsletter which provides information on the schemes, progress to date, procedures etc and is circulated to GP surgeries, Citizens Advice Bureaux, Members of Parliament and mining unions. Ministers have also continued to write to interested MPs on a regular basis to bring them up to speed.

  46.  In addition, in November 1999 Helen Liddell, the then DTI Minister for Energy, established a Coal Health Ministerial Monitoring Group. The National Group comprises three members from each of England, Wales and Scotland with at least one MP and union official from each. The CG, DTI officials and service providers attend the Groups meetings.

  47.  The purpose of the Group is to monitor the process "on the ground" and report back to the Minister about problems. It meets 3-4 times per year. In addition Members from the three national groups (England, Wales & Scotland) also meet together in between National Group meetings to discuss issues which are specific to their areas. Within England there are further regional groups established which meet regularly to discuss the specific impact of issues on their region.

  48.  To assist solicitors and claimants, DTI set up helplines for assessment queries, apportionment questions and for help with electronic forms.

  49.  The DTI has its own website with background to the schemes, current issues and figures of payments made broken down by constituency. It gets around 15,000 hits a month.

MONITORING THE PROCESSES

  50.  The main risks to smooth delivery of compensation have been problems and delays due to changes in policy or process and operational risks between the service providers and solicitors. CLU keep service providers' performance under regular review and there are frequent meetings with them. There is a regular programme of audit of service providers - systems, processes, and disaster recovery arrangements. CLU keeps a comprehensive risk register and its risk management processes have been commended by the National Audit Office.

  51.  CLU has visited other public agencies handling claims to see if we could learn any lessons from them but no one is dealing with the handling of schemed litigated claims or with anything on this scale.

FRAUD

  52.  There is an inherent risk within any scheme of this size that there will be some fraud. In COPD the medical assessment process is the main protection against fraud and in VWF the employment requirement serves the same purpose. About 10% of COPD claims and 20% of VWF claims are denied. The unit and its service providers also have procedures and controls in place for managing potentially fraudulent claims. There have currently been 1,500 cases registered as potentially fraudulent—most of them concerned with VWF services claims.

  53.  The Department has received requests from solicitors and members of the Ministerial Monitoring Groups to disclose the guidelines which our claims handlers use to identify potentially fraudulent cases. These were intended as internal documents and the VWF judge, Dame Janet Smith, has indicated that she agrees it would be inappropriate to disclose them.

EFFICIENCY

  54.  Since the inception of the Schemes there has been a continuous focus at the DTI and with IRISC its claims handlers on efficiency improvements. Within DTI, for example, a high-level secondee from Shell UK worked with CLU for a year to restructure the CLU organisation and put in place improved arrangements for managing the CLU processes in line with commercial private sector practice for handling major projects. This work resulted in CLU taking on secondees from PWC and latterly Deloitte to provide professional input to project management, risk and audit work and process improvement. In addition, major benefits have been achieved at IRISC in terms of productivity improvement, quality enhancement, effectiveness of communications, and assurance levels. Overall we estimate that the measures taken improved efficiency by around £100 million. This figure includes a saving of around £40 million from the retendering of contracts and a major contribution from the introduction of electronic calculators for special damages.

  55.  Since 2002, IRISC have operated a Programme Office to manage major efficiency improvement programmes. In addition, both the VWF and COPD schemes have their own process improvement teams specifically focused on enhancing efficiency in their respective areas.

  56.  In addition to productivity improvements there have also been additional benefits in terms of accuracy and consistency. By allowing claimants' solicitors access to the calculators, disputes over amounts offered have also been virtually eliminated because solicitors are now able to check through the calculation themselves. This is a highly unusual, but beneficial feature of the claims handling work—it is not normal in litigation cases for defendants and claimants to co-operate to the extent of sharing systems.

  57.  Following the completion of the cut off dates for VWF Services and Group 3 claims in March and June of this year both schemes will be in "run-off" mode. The management challenges then will be to process difficult "pockets" of cases where the work resource required to complete each case may be substantially different and greater than that at present. To manage the run off effectively tight control of resources and strong management information systems will be required in order to set and control operational priorities.

  58.  To address the above management challenges, IRISC embarked, during 2004, on a "World Class Programme" with the overall objective of uplifting quality, service, and cost efficiency to top rate standards. The "IRISC World Class Programme" builds on the foundations and improvements already put in place, and will deliver a significant step change in performance to a "World Class level". In addition the programme aims to deliver a review of the strategic options and practical solutions to deliver the schemes within acceptable and realistic timescales.

RECENT PROGRESS

  59.  Given the number of COPD claims received prior to the cut-off date urgent and radical measures are required to speed up the settlement of claims. The steps in hand are described below in paragraphs 68-72.

  60.  The decision of key co-defendants, such as UK Coal, and AGF (the insurer representing the interests of small private mines) to sign up to the terms of the CHA is a welcome step forward. Work is in hand to make the necessary adjustments to the relevant calculators to accommodate these co-defendants so that cases involving more than one employer can be fully discharged. Cases involving small mines have already started to receive full and final payments.

  61.  In relation to VWF, there has been recent emphasis on progressing those general damages claims which have been through the medical process but have not yet had an offer. This broadly resulted at the end of last year in every such claim, where practicable, either receiving an offer or an interim payment. We have agreed cut-off dates with the claimants' solicitors for those remaining heads of damage; these come into effect over the course of this year. The Court has also endorsed a stalled claims process which is aimed at flushing out or closing claims which are no longer active. This is being put into operation at IRISC.

REMAINING ISSUES

  62.  A very small number of detailed COPD policy issues remain under discussion between the parties. In the great majority of cases, these issues do not prevent the offer or settlement of claims.

  63.  The parties are at present in discussion on the issue of minimum payments. The CG believe that claimants whose claims are worth less than £500 following apportionment should receive a top up payment to bring the claim to the value of £500. They have offered to fund this, asking the DTI to administer the payments on their behalf through IRISC. The DTI is willing to administer the payments but believes the payment mechanism should be sustainable, pointing to a need to fund the payments from solicitors' core costs, rather than the CG's preferred option of the "pot" of money available from forgoing the RPI increase on solicitors' costs (which DTI believes may be insufficient to meet requirements, in the first year of making such payments). The CG are considering this.

  64.  Claims from men who worked only on the surface in the mines were not covered by the COPD judgment which dealt with underground work. Surface-only claims are therefore outwith the scope of the scheme. Following a minute to Parliament on this potential liability in June 2000, the Department and the CG entered into negotiations on the possible inclusion in the scheme of surface workers and did agree terms on which men who had worked both underground and on the surface could be covered by the scheme. It was not however possible to agree terms for surface only workers and following a joint medical study, the DTI made clear that it could not accept that payments for COPD for surface workers could be schemed. The CG then initiated group litigation against the DTI. That litigation was withdrawn in December 2004. The DTI is of course willing to consider individual cases for surface dust compensation under a common law approach.

  65.  There are a small number of outstanding VWF policy issues affecting a relatively small number of claimants. On Services there are two main areas requiring resolution which affect claims:

    —  Crossover—where a claimant is entitled to a payment under both the COPD and VWF scheme and the extent to which any such payment should be taken into account and, if so, how that it to be calculated. A Court Hearing is scheduled for 22-23 February to resolve this issue.

    —  Employment—where a claimant is in employment which, at first sight, contra-indicates his claim for services (eg someone employed as a painter seeking compensation for help with decorating). The Department takes the view that it cannot, uncritically, accept the claimant's account and will seek clarification in relevant cases. The judge agrees that we should make reasonable investigations.

  66.  The Department has not yet agreed solicitors' costs in respect of services claims and a practical pilot is underway to evaluate this, looking at costs in a sample of cases.

  67.  On Group 3 (where claimants have to provide evidence of use of vibrating tools), there is an issue between the Department and the CG as to the extent to which apprentices and trainees should be routinely accepted into the scheme. An agreement is required as to the amount of time and usage of hand-held vibrating tools that such miners would be exposed to. It has been agreed that this issue should be referred to the Vibration Reference Panel, the jointly appointed advisory panel, for guidance.

  68.  There remains an issue about the qualifying criteria for Group 3 claimants and whether a solution can be found which would put them on a broadly equivalent footing to the criteria used for Group 1 and 2 claimants where the job done indicated sufficient exposure. The Department has made a proposal to the CG in this regard.

ASPIRATIONAL SCHEME END DATES (ASEDS)

  69.  COPD—Following the large influx of claims into the COPD scheme up to end March 2004, it was clear that at current rates of progress, the COPD scheme would extend up to 2009 for live claimants, and 2011 for deceased claims. The Judge overseeing the scheme, the DTI and the CG all regarded this timescale as unacceptable. As a result, the parties entered into negotiations on ways to speed up the settlement of claims. In mid-October, the Judge approved new optional risk offers for 4 categories of live claimants, based on spirometry results. The idea behind the payments is that these claimants (who, for the most part, are not disabled, but who may have suffered from chronic bronchitis, which is a non-disabling condition) will have the option to take a risk payment based on the average for their spirometry category and leave the scheme. Those who do not wish to take the payment retain the right to a full medical assessment.

  70.  The payments will apply to over three quarters of remaining live claimants and will help to free resource in the MAP to deal with more seriously disabled cases. The risk offers will go live on 28 February. The risk offers fall into four bands but the amounts payable under each band are currently being contested by the CG. The rates currently on the table are £1,400 for those with normal lung function at screening spirometry and for those whose tests were avoidably unreliable; and £3,700 for those with a ratio failure; and £12,900 for those with failed reversibility.

  71.  The Judge has also ruled that risk offers of £1000 to estates and £1200 to widows respectively should be paid for deceased claims where there is no evidence on the death certificate of COPD. Such cases are likely to recover damages for CB only at MAP. Again, this approach will help to free medical resource to give a detailed assessment to the more disabled cases where recovery of damages for COPD is more likely. The parties are in discussion on how best to put into operation the risk offers for deceased cases.

  72.  The parties believe that, dependent on take-up, the risk offers should bring forward the end dates for the COPD scheme to around 2007 for live claims and 2009 for deceased claims.

  73.  The judge has made rulings on solicitors costs with which we do not agree and the Department will be appealing the judgment on this issue.

  74.  The Department has put in place a number of aspirational end dates for the VWF scheme. The first, the making of general damages offers, where practicable, to all claimants who have undergone their medical assessment, was achieved at the end of 2004.

  75.  The other aspirational dates are as follows:

    —  all general damages claims settled by end quarter 3 2005, subject to co-defendant cooperation;

    —  finish Services MAPs by end 2006;

    —  settle all Services claims by end 2007; and

    —  complete investigation of Group 3 claims by end quarter 3 2005.

CONCLUSION

  76.  The Department assumed the coal health liabilities in 1998. The COPD judgment was handed down only a few weeks later and the framework of negotiating handling agreements with the CG and operating under the supervision of the judges was quickly established. Nothing of this size and complexity had ever been done before. Throughout the negotiation and operationalisation of the CHAs there have been many delays, most of which were unforeseen, and the Department has worked hard in conjunction with its service providers to limit their impact and ensure that compensation was paid as speedily and as fairly as possible.

  77.  It should not be forgotten that the schemes have seen to date nearly half a million individual payments made to former miners, and their families, totalling nearly £2.5 billion.

Annex C

REPORT TO COURT—JANUARY 2005

  Department of Trade and Industry

  Overview

  Section I below sets out the headline statistics for progress since the last Report in October 2004 and the key points contained within the Report.

  Section II covers the main issues that have emerged since the last Report including the risk offer proposals intended to shorten the life of the scheme, spirometry, proactive management of stalled claims, surface dust litigation, post cut off date claims, smoking history protocol, the CG's minimum payment proposal, unassessable claims, COPD VWF services claims, co-defendants, and fraud management.

SECTION I—KEY POINTS—HEADLINE STATISTICS

  As at 9 January 2005, 322,232 claim packs have been received, up 16% since the last Report.

  As at 9 January 2005, total post MAP offers stood at 179,827. This is up 13% since September 2004. Capita met its target for 2004 of making 70,000 offers over the 12 month period. 178,132 claims have been settled since September 2004, up 15%. This figure increases to 195,352 if archived and denied claims are included. As at 9 January 2005, 39% of live mineworker claims had been settled, 43% of widows' claims and 18% of estate claims - reflecting the late influx of estate claims prior to the cut off date.

  As at 9 January 2005, total fully registered claims capable of progressing through the scheme stood at 575,222. 43% of these are live claims, 14% are widows claims and 42% estate claims. A further 29,500 claims are held pending the supply of further information to progress them, examples being date of birth, NI number, full name and address. As at 9 January 2005, total post MAP offers stood at 179,827 up 13% since September 2004. Capita met the target for 2004 of making 70,000 offers over the year. 178,132 claims have been settled. This is up 15% since September 2004. This increases to 34% if archived and denied claims are also included.

  There continues to be a steady increase in denials up 39% since the last Report. This is thought to be primarily due to the profile of claims now within the scheme where increasing numbers of claims relate to older deceased mineworkers who may have an invalid claim due to no BC work history after the date of guilty knowledge; insufficient evidence supplied via the CQ or available records in deceased cases to establish COPD/CB.

  Throughput and proposals to shorten the duration of the scheme

  As recorded in the last Report the Department, its contractors and the Claimants Group (CG) have been in discussions about how to manage the large volume of claims now in the scheme. On 22 September 2004, Sir Michael Turner was updated on these discussions at a workshop. These were worked up into proposals for shortening the scheme and special Hearings took place in October, November and December regarding these proposals. Sir Michael Turner ruled on 22 October 2004 that optional risk offers will be introduced, pre MAP, for surviving mineworkers with certain spirometry results, and at tariffs that reflect likely settlements under the scheme. The process is due to become operational at the end of February 2005.

  Sir Michael Turner ruled on 22 December 2004 that optional risk offers will be introduced pre-MAP for deceased cases. The implementation of the deceased risk offer process is to be discussed between the parties, who will report back at the Review Hearing. Capita intend to work closely with Claimants' Representatives (CRs) to ensure that the new processes are implemented with a minimum of disruption.


SECTION II—MAIN ISSUES—RISK OFFERS

  All parties are agreed that given the volume of claims now in the scheme, the majority of which were submitted in its closing months, it is imperative that ways are found to expedite the flow of claims to settlement. To this end a number of meetings have been held between the parties to consider ways of expediting the process. These have culminated in a series of Court Hearings in October, November and December.

LIVE RISK OFFERS—OVERVIEW

  Sir Michael Turner has ruled that optional risk offers will be introduced pre MAP for surviving mineworkers with the following spirometry results.

    —  FEV1 >90.

    —  Avoidably unreliable.

    —  Ratio failure (excluding where the RS's review did change the result).

    —  Failed reversibility (excluding where the RS's review did change the result).

  Sir Michael also ruled on the principles upon which the tariffs for the various categories should be calculated. Those calculations have been made and the results audited by Ernst & Young - see Annex 5. The tariffs applicable to the categories are shown below:
        FEV1 >90   £1,400
        Avoidably unreliable   £1,400
        Ratio failure  £3,700
        Failed reversibility £12,900


  Offers will be made after spirometry but before MAP appointment. Claimants currently categorised subsequent to their spirometry test as: FEV1 >90, avoidably unreliable, failed reversibility and ratio failure, and who have a MAP appointment after 28 February 2005 (the implementation date for the new process), will need to cancel the appointment to become eligible for the risk offer. Claimants who have less than seven days before their MAP appointment will NOT be eligible for a risk offer on canceling their MAP. This measure is to avoid undue disruptions to the medical process. The risk offer, once made, will remain open for 56 days, after which time, if the offer has not been properly accepted, the claim will proceed through the normal claims handling process.

DECEASED RISK OFFERS—OVERVIEW

  It has been agreed that there will also be a risk offer approach in deceased cases where there is no mention of COPD on the death certificate that would be attractive to claimants who might otherwise be likely to receive CB only awards under the scheme, ie claims where few or no medical records are likely to be available and where there is no available evidence of COPD. Tariffs of £1,000 in estate cases and £1,200 in widows cases were accepted by the Court, these are based on average awards in the scheme to date for CB only, with the addition of an uplift as an encouragement towards wider take up.

  Claimants will opt in to the risk offer via a formal acceptance prior to the MAP being dispatched to Capita. Detailed discussions are being held with the CG about how this proposal will be implemented and the parties will report back at the Hearing.

COMMUNICATION STRATEGY

  The success of the risk offer process is dependent on effective communication with claimants and CRs. The DTI had proposed regional workshops with CRs to discuss Sir Michael's rulings and facilitate discussion regarding the operational detail of the process, however these workshops have been declined by the CG on the basis that they do not believe these would aid planning. One to one meetings with the top 12 CRs to discuss suitable volumes of risk offers on an individual basis have also been declined by the CG.

  In the absence of such discussions a guide will be made available explaining in detail the operation processes involved for live and deceased risk offers. The guide will outline key aspects of the risk offer process; claim eligibility criteria; managing the live risk offer once it has been "opened"; solicitor communication and agreed cut off rules. It is important that this message is imparted to CRs as soon as possible to minimise unnecessary disruption to the normal scheme process which could follow from any misunderstanding of the operational details or claimant eligibility for risk offers.

  Information about the risk offers will also be provided in a DTI newsletter (which is distributed to GP surgeries, Citizen Advice Bureaux, unions, the CG and MPs).

RISK OFFER—VOLUMES AND CAPACITY

  In the absence of specific details about the capacity of individual firms to handle volumes of risk offers, as detailed above, the Department has accepted the CG proposal that it allocates capacity on the basis of a percentage of the number of CRs eligible claims at December 2004. Capita plan to make an average of 2,000 live risk offers per week with a view to make all live risk offers within one year of the first offers being issued. Initially offer rates will be 10% of this figure and will gradually ramp up to maximum capacity over eight weeks.

  At these levels the average volume of live risk offers likely to be received by the top 20 CRs based on their eligible claims is shown below.
SolicitorAverage weekly no. of risk offers
Beresfords Solicitors402
Union of Democratic MineworkersTo be confirmed
Raleys Solicitors141
Browell Smith & Co136
Hugh James, Merthyr Tydfil99
Watson Burton91
Graysons Solicitors, Sheffield81
Thompsons Solicitors, Newcastle upon Tyne 73
Avalon Solicitors58
Barber & Co53
Delta Legal38
Gorman Hamilton Solicitors36
Thompsons Solicitors, Cardiff36
The Legal Warehouse34
AMS Law32
Thompsons Solicitors, Edinburgh31
Corries Solicitors, York29
Corries Solicitors, Glasgow26
Randell Lloyd Jenkins & Martin24
Kidd & Spoor Harper Solicitors21


            Further details are contained in Annex 6.

  As an opt in process volumes of deceased risk offers will be driven in their entirety by the activity of CRs. Timescales will be dependent upon firstly, keeping operational processes simple and secondly, information from the CG and other CRs on likely volumes, time estimates and dependencies to accurately timetable resource requirements. As indicated by Counsel for the CG at the Court Hearing on 16 November 2004 the CG are confident that solicitors will be able to cope with dealing with risk offers.

RISK OFFERS AND INTERACTION WITH EXISTING PROCESS

  At the Hearing on 3 December 2004 the Department raised its concerns about cancellation of cases pre MAP by CRs. Some 960 appointments have been cancelled or refused since 11 November 2004 however Atos Origin have managed to maintain throughput by making extra efforts to re-fill cancelled slots with other claimants. MAP cancellations will continue to be monitored and a further report will be provided at the next Hearing. Once the Risk Offer process goes live it is anticipated that MAP throughput will be dramatically reduced as up to 90% of living claimants ready for a MAP appointment will be placed "on hold" until such time as they have received and considered their risk offer.

RISK OFFERS AND SOLICITORS COSTS

  At the Hearing on 18 November Sir Michael ruled on the solicitors costs that will apply where live claimant risk offers are accepted. The Department indicated via Counsel at that Hearing that it may wish to appeal that decision. Sir Michael agreed that the time for seeking leave to appeal should run from the date of his ruling on solicitors' costs on deceased risk offers.

MONITORING RISK OFFERS AND THROUGHPUT—REVIEW OF MANAGEMENT INFORMATION

  Given the radical overhauling of the scheme to take account of the volume of claims now within it, it would seem appropriate to review the statistics produced to monitor the traditional elements of the scheme, and to commission new statistical reports to monitor the production and take-up of risk offers.

  The Department has undertaken such a review over the last several months and an update Progress Report has been produced, see Annex 7, which is intended to replace all the statistics normally provided in the standard Progress Report, as well as the statistics normally provided in the Court Report itself, in the one document. Additional statistics to track the new Optional Risk Offers will be added in the coming weeks. Some preliminary formats which indicate the type of data which is likely to be included in future reports is shown below.




TRADITIONAL SCHEME PROCESS AND ISSUES

  Annexes 1 and 2 show the activity in the scheme as at the last four Hearings and by month over the last year of the scheme.

  As stated above, as at 9 January 2005, total fully registered claims capable of progressing through the scheme stood at 575,222 43% are live claims, 14% widows claims and 42% estate claims. A further 29,500 claims are held pending the supply of further information to progress them, for example date of birth, NI number, full name and address.

  As at 9 January 2005, 322,232 claim packs have been received, up 16% since the last Report.

  As at 9 January 2005, total post MAP offers stood at 179,827. This is up 13% since September 2004. Capita met its target for 2004 of making 70,000 offers over the 12 month period. 178,132 claims have been settled since September 2004, up 15%. This figure increases to 195,352 if archived and denied claims are included. As at 9 January 2005, 39% of live mineworker claims had been settled, 43 percent of widows' claims and 18% of estate claims—reflecting the late influx of estate claims prior to the cut off date.

  Annex 3 illustrates that the percentage of claimants with COPD disability at MAP is currently 18.3% down from 34 recorded for MAPs completed in January to March 2002. Average COPD disability levels are 19.9 up slightly from 19.4 in the period July to September 04.

SPIROMETRY

  Annex 4 reflects claims that have not yet progressed to Atos Origin. At the end of December 2004 42,000 claims not yet at Atos Origin were currently awaiting a spirometry test. Atos Origin carry out an average of 1,346 tests per week and are on target to have tested the majority of claimants available to test by the end of March 2005. The average is based on the three months between weeks ending 2 October and 25 December 2005. This period also accounts for the holiday season, which naturally sees fewer claimants tested. There will of course be a number of cases which for one reason or another cannot be tested in this timescale. The DTI will be discussing with Atos Origin in the coming months how to make arrangements for the testing of these claimants.

PROACTIVE MANAGEMENT OF STALLED CLAIMS

  The end to end archiving procedures discussed in previous reports are now in operation. In a modification to the process put before the Court in the July 2004 Report the new procedures will only be introduced for claims which are not eligible for risk offers. This is to reduce nugatory work archiving claims that may exit the process as a result of acceptance of a risk offer.

  The archiving protocol operates where information or action is awaited to move a claim forward and where the claim would not otherwise be subject to a live or deceased risk offer. This supplements existing archiving processes where an expedited offer has been made post spirometry but a statement of truth is awaited, and where the claimant has persistently failed to respond to an offer of a spirometry appointment.

ARCHIVING PROCEDURES

  Notice of the intention to archive will be given in each case to be archived. At the relevant point of entry into the archiving procedure, a letter will be sent to the CR advising them that the claim, or schedule of claims will be archived in six months unless a substantive response is received. Five months later a reminder letter will be issued giving 28 days notice for a response before the claim is archived. Six months after the point of entry into the archiving procedure a letter to the CR will confirm that the file has been archived.

  Where a substantive response is received, then the claim will be removed from the archiving procedure. If the claim again becomes stalled at a later date then the claim will start the archiving procedure afresh.

  The timescales at which claims enter the archiving procedure will be as follows:
StageEntry point to archiving procedure
Denied claimsThree months after the denial letter was dispatched or claim withdrawn
Failure to provide a Substantive Response
to Capita or Atos Origin
Six months after the query has been raised.


  Once a claim is archived, Capita will no longer review or process the claim unless a response is received from the CR enabling the claim to progress. Should the claimant wish to re-enter the claims assessment process, he may do so at any time until the claim is struck out. However, if a claim has been denied within the last 12 months and evidence is received in support of disputing the denial this will be taken through either the general or medical disputes procedure as appropriate. Those denials over 12 months old will be considered on a case by case basis. As reported previously in a number of cases CRs have attempted to reactivate withdrawn claims. These claims have not been accepted back in to the scheme.

  Claimants may reactivate archived claims at any time up to the point of strike out should a strike out procedure be approved by the Court.

STRIKING OUT OF ARCHIVED CLAIMS

  As agreed at the last Hearing, the parties have set out their positions by way of Skeleton Argument. The Department's application to hear arguments on Strike Out was to be heard at the January Hearing. However given the number of issues to be considered at this Hearing the Department proposes that this application be postponed until the following Hearing.

SURFACE DUST

  Following the Hearing on 17 November 2004, the CG have given written notice to the Department to the effect that the Group Litigation will not now proceed. They have, however, indicated that proceedings may be commenced in a number of individual claims and it would seem appropriate for all other pure surface work cases to be withdrawn by CRs.

  The Department believes that the case management conference listed for 28 February is no longer required as a result of the developments above.

POST CUT-OFF DATE CLAIMS AND THE STAY

  It was agreed at the July 2004 Hearing that the retention of the stay should be considered at each future Hearing. The Department believes that the retention of the stay has provided a significant disincentive to the filing of post cut off claims in England and Wales. The Department believes the stay should continue to be retained to prevent "queue jumping" in view of the very significant numbers of schemed claims received before its closure. No further litigated claims have been received since the two claims reported at the October 2004 Hearing.

  To date, 247 late scheme claims have been received, as shown below.
MonthLate scheme claims
April91
May32
June27
July43
August12
September9
October13
November19
December1
Total:247

SMOKING HISTORY PROTOCOL

  In the last report to the court it was explained that detailed planning was taking place for the implementation of the agreed Smoking History Protocol. Implementation plans were agreed and the protocol is now being implemented.

MINIMUM PAYMENT

  The CG have proposed that CRs fund a minimum post MAP offer to cover all future post MAP low value offers and currently outstanding low value offers. The value of the minimum offer proposed is £500. The Department has accepted this offer in principle but has rejected the proposed method of funding (from half of the RPI uplift to CR costs in 2005-06). The Department is concerned that the method proposed is unlikely to raise sufficient to cover the top-up payments required in 2005-06 for new offers and outstanding low value offers from previous years. As at 31 December 2004 there were 9,000 low value offers outstanding, 7,500 of which relate to claims with CSG members. It is estimated that over £2.25 millionh would be required to make a minimum payment of £500 in these cases. This in itself is likely to exhaust the 50% RPI uplift fund proposed. As part of their proposal the CG also wish to introduce additional process to check for a minimum five year period of underground employment before a top up offer is made. The Department rejects this requirement which would slow down offer production at a time when considerable resource is being devoted to speed up processing.

  Low value offers can arise for several reasons under the CHA, low levels of disability or no disability suffered by the miner, short periods of time working for British Coal after the agreed date of "guilty knowledge", and the reduction of damages for factors such as smoking and other disabling conditions for which British Coal were not found liable. The Department has made clear that public money will not be used to fund a minimum payment.

UNASSESSABLE CLAIMS

  There are currently a number of claims within the scheme which RS's consider to be unassessable. Further scrutiny of these claims and discussions with the CG are planned to clarify the circumstances where a claim is to be formally considered unassessable and how that decision is ultimately made. The Department will report back at the next Hearing on these discussions.

COPD/VWF SERVICES CLAIMS

  At the last COPD Review Hearing, directions were put in place by Sir Michael Turner for the determination of the issues in dispute. The timetable culminates in a two day Hearing listed for 22 February 2005 and 23 February 2005 to be heard before both Lady Justice Smith and Sir Michael Turner. The Hearing will proceed if agreement cannot be reached between the parties prior to that date.

CO -DEFENDANTS

Small Mines

  Small mines claims have now entered the operational stage. Full and final offers commenced calculation in October 2004. There remains a cohort of claims which will be held up pending agreement on pension loss issues and amendment to the model. Work has begun on tackling these issues.

Successor Companies

  Having examined UK Coal's proposals for accession to the Claims Handling Agreement in detail, the Department announced to the court on 3 December 2004 and subsequently confirmed in writing that it was content to proceed on this basis.

FRAUD MANAGEMENT

  The Department has continued to develop its approach to potentially fraudulent claims under both schemes. The following statistics provide an overview of the position to date:

  Since May 2002, 1,470 potentially suspicious cases have been referred for additional investigation. These claims have a total potential claim value of £21.3 million. Approximately 60 new cases are referred each month directly from Operations. The majority of cases still relate to VWF Services, but since the COPD cut-off date the number of COPD claims being referred has increased dramatically, currently 33% of all referrals are related to COPD claims.

  Of the 1,470 referrals, 737 are currently under investigation and 773 have had their investigations completed. Of those that have had investigations completed, 132 claims have been denied and 86 claims have been reduced, with a total value of £2.6 million.

  The remaining claims were returned for processing once it was confirmed that there was no fraudulent activity, a claim was valid within the remit of the schemes, or any anomalies were clarified. Process streamlining and improvements are continuing to be introduced to minimise any unnecessary delay to valid claims.

  Where the Department is unable to complete its investigations (for example, where a witness or a claimant declines to be interviewed), then such cases are held in abeyance until such time as the Department's concerns are either confirmed or allayed. Currently in excess of 34 claims are in abeyance;

  Various solicitors have been written to, addressing issues of professional conduct rather than fraud per se, eg intimating duplicate claims. Where appropriate, the Law Society is being included in this correspondence, with whom a working relationship has developed;

  The Department and the SID are providing a quarterly update to the CG on potentially fraudulent claims.

Annex D

THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

NEWCASTLE DISTRICT REGISTRY

BETWEEN:A B AND OTHERS

Claimant

and BRITISH COAL CORPORATION (Department of Trade and Industry)

First Defendant

and THYSSEN (GB) LIMITED HOLLYBANK ENGINEERING LIMITED CEMENTATION MINING LIMITED

Second Defendants

REPORT OF THE FIRST DEFENDANT AT HEARING ON 20 DECEMBER 2004 THE POSITION AS BETWEEN THE DEPARTMENT AND THE CSG

1.  The Department would, in particular, wish to raise with the Court the following issues between the Department and the CSG;

    (a)  Application of cut off dates for submission of evidence in Services, Group 3 and Wage Loss claims (see paragraph 9);

    (b)  Definition of "Significant period" in Group 3 claims (see paragraph 16);

    (c)  Warnings in Group 3 claims (see paragraph 17);

    (d)  Employment issues in Services claims (see paragraph 19);

    (e)  Stalled claims (see paragraph 22);

PROGRESS ON CLAIMS

Statistics

  2.  At Appendix A to this Report is a summary of the headline statistics relating to the processing of claims under the Scheme. The Court will note that to the end of November £1.041 billion has been paid to claimants by way of compensation.

  3.  At the date of closure of the Scheme the total number of claims is 169,601. Approximately 13% of claims are made on behalf of deceased mineworkers' estates. This number takes no account of Public Liability claims, which are outside of the Scheme.

Offers

  4.  The focus since the last hearing continues to be on those claims which have medical evidence but no offer (or are subject to the posthumous protocol) "the priority pools". These claims continue to be proactively reviewed by IRISC with the intention of a full and final offer being made, or a 100% interim being made, or the claim entering the Stalled Claims Procedure. At the last hearing there were 14,652 claims in this category and as at 28 November there were 11,350. The Department remains optimistic that it will meet the aspiration that all Claimants, whose claims are ready for offer (whether final, or in co-defended cases, interim) will receive an offer by the end of the year.

  5.  The CSG has expressed concern at this approach, claiming that correspondence which does not relate to the priority pools is not receiving prompt response. This concern is understood but the Department takes the view that claims ready for offer should take priority. Correspondence which raises matters of urgency, such as that relating to claimants with short life expectancy, is dealt with promptly. Other, less urgent, letters will be dealt with as expeditiously as possible.

Services

  6.  There are currently 11 Services MAP centres in operation; two in Scotland, two in Wales and seven in England. In the new year two further centres are already planned (one in Scotland and one in England) as part of efforts to increase the number of services MAP reports.

  7.  The numbers of claims and their current position in the process are shown below.


  8.  There are only a few remaining areas of disagreement between the Department and the CSG; these are referred to below. The focus is now on operational delivery and the achievement of the ASEDs. The aspiration was to complete all Services medicals by the end of 2006, however based on current volume the Department estimates that target is almost six months behind schedule. The Department is considering a number of options and initiatives with its service providers to see what might be done to rectify the position. The Department will report to the Court on the next occasion in this regard.

CUT-OFF DATES FOR SERVICES, GROUP 3 AND WAGE LOSS CLAIMS

  9.  As the Court will be aware, an Order (Appendix B) was made at the last Court hearing on 30 July 2004, providing for cut off dates for submission of evidence by Claimants' representatives in Services, Group 3 and Wage Loss claims.

  10.  The CSG has suggested to the Department that the cut off dates, set out in the Order referred to above, do not apply to cases involving co-defendants where occupation group is still to be confirmed. The Department is of the view that these cut off dates apply irrespective of any co-defendant involvement in a case. IRISC will confirm occupation group for the Department as soon as it can, irrespective of any co-defendant involvement.

  11.  Any Claimant must know whether he intends to advance a loss of earnings and/or services claim against the Department when he receives his General Damages MAP Report, or confirmation of occupation group. Any such claim against the Department should be made within the time period set out in the Order, irrespective of the co-defendant confirming employment, or whether that co-defendant is willing to accept any liability. In any event many co-defendants still do not accept the CHA occupation groups.

  12.  Furthermore, the Department does not accept that any delay on the part of a co-defendant in accepting liability has any effect upon the Claimant's claim for loss of earnings/services against the Department. This is particularly the case as, at the present time, no party other than the Department subscribes to the Services Agreement and Loss of Earnings and Associated Losses Protocol under which such claims are brought.

GROUP 3 CLAIMS

  13.  This cohort of claims remains contentious and at the forefront of the Department and CSG's attention.

  14.  To date, 23 claims have been raised with IRISC as being suitable for reference to the Vibration Reference Panel (VRP). Of these, two claims have been deemed as unsuitable for referral to the VRP as they related to issues with the calculator rather than of mining sense. Upon further investigation, a further two claims were accepted thereby rendering referral unnecessary. The Special Investigations Department (see paragraph 32) is investigating one of the claims and six are in the process of being prepared for sending to the VRP. In the remaining 12 cases the VRP has reported to the parties, and in all of the cases the VRP's recommendations as to the Claimant's likely tool usage have been accepted by the Department (and apparently not contested by the Claimant). This has resulted in liability being accepted in five cases and the denial being maintained in seven.

  15.  Over 7,200 Group 3 claim investigations have been completed. Of these, approximately 750 have been accepted as Group 3 with exposure, 3,600 remain denied as Group 3 claims and 2,800 have been accepted as Group 1 or 2 claims upon further investigation. The following pie chart shows the number of claims to be investigated and the number of claims where the contested claim does not comply with the OGP and is awaiting action from the solicitor. The Department remains confident that all current contested Group 3 claims, where evidence has been submitted, will have been assessed by the end of September 2005.


Definition of "significant period"

  16.  Having regard to the judgment following the hearing on 29/30 July 2004 the Department reviewed the documents leading up to the agreement of the CHA which included a number of drafts of the CHA and correspondence between the interested parties with a view to forming an informed conclusion as to how the qualifying periods of employment for Group 1 and Group 2 Claimants (12 months and 24 months) were arrived at and agreed upon. This exercise confirmed the belief that these periods were not fixed on any scientific basis and were not extrapolated from Table 5 of BS:6842. In order to give effect to the Court's indication that the qualifying criteria for Group 3 Claimants should be fixed so as to create a broad equivalence of treatment between them and Group 1 and Group 2 Claimants the Department endeavoured to assess the tool usage of typical employees in those Groups, and to extrapolate from those typical exposures periods by reference to Table 5. This analysis was then used to fix proposed qualifying criteria for Group 3 Claimants. These proposals have been put to the CSG with an explanation of the underlying methodology. The Department believes that its proposal does justice as between the parties and achieves in so far as is possible, the broad equivalence of treatment as between occupation groups that the Court desired. The CSG is considering the Department's proposal.

Warnings

  17.  Notwithstanding the Court's judgment the Department has received representations from the CSG that cases that proceed solely on the basis of warnings (with no qualifying period of exposure) should be dealt with within the Disputes Procedure of the CHA. The Department is firmly opposed to that proposal. The difficulties identified by the Court in its judgment would still remain. The Minister has recently received representations on this issue and the Court will be updated at the hearing.

Apprentices and Trainees

  18.  This remains an issue between the Department and the CSG. It has been agreed that it should be the subject of a reference to the VRP.

EMPLOYMENT ISSUES IN SERVICES CLAIM

  19.  This issue was raised in the Department's last Report to the Court at paragraph 36 (Appendix C). It is the Department's position that it is entitled to question a Claimant about his employment history in relation to his Services claim, as it cannot simply accept uncritically a Claimant's account. The Department also contends that it is entitled to seek disclosure of documentary evidence such as the Claimant's employment records, in appropriate cases.

  20.  The Department had intended to make an application for specific disclosure in one case in order to obtain guidance and clarification from the Court on this issue. However, that Claimant's solicitors have recently agreed to provide this disclosure voluntarily by means of a signed authority from their Client.

  21.  The Court is referred to paragraph 37 from the Department's last Court Report on the Services Matrix. In light of the comments made by the MRP in relation to the Employment Matrix and the subsequent comments received from the CSG, the Department intends to instruct IRISC to assess each case on its merits (where there is an issue of employment that may contraindicate the Claimant's claim for services) and to base its initial judgement on the medical evidence guidance as opposed to the Employment Matrix. This guidance will be based upon already agreed medical descriptions of the relevant staging. Accordingly where IRISC identifies an employment that may contraindicate the claim for services, it will first carry out a desktop investigation and may then ask for further evidence from the Claimant. In some cases it will be appropriate to ask the Claimant to provide a signed Form of Authority for release of his personnel and/or medical records. The Court is requested to endorse the Department's position and proposals in this regard.

STALLED CLAIMS

  22.  The Stalled Claims Procedure was instituted on 1 October 2004. Since then 3,611 letters have been sent to solicitors under Stage 1 of the procedure. This is a larger number than it is anticipated will be sent in future because the process has only just started in earnest and there was a backlog of claims to which the new process applied. Representations have been made by Claimants' representatives concerning the lead-in time (90 days in most cases) for specific categories of claims and a proposal has recently been made to the CSG which the Department believes will go some way to reduce the volumes of letters presently being sent to Claimants representatives. Services claims are presently excluded from the Stalled Claims Procedure. A copy of the Department's Stalled Claims Procedure is attached as Appendix D.

  23.  The Department is disappointed that some Claimants representatives have failed to co-operate at all with the process, taking the view that it has not been agreed by the CSG nor approved by the Court. The Department views this as unhelpful. The Department's last Court Report outlined the stages of the Stalled Claims Procedure and the timescales which were to be applied. There was discussion about the merits of the proposal and there were no substantive disagreements with the CSG save on one issue on limitation on which it made representations at the hearing. See the transcript from the last hearing at Appendix E pages 8 to 10 and 47 to 50.

  24.  The Department has, in any event, agreed that the Stalled Claims Procedure should include a facility for Claimants representatives to be able to request extensions of time. These are viewed sympathetically by IRISC on an individual basis, depending on the reasons given. In addition, IRISC sends out lists to Claimants representatives each month of those claims in which the first letter has been sent; this allows Claimants representatives to check that correspondence has not slipped through the net or been misfiled.

  25.  Although apparently agreeing in principle to the Stalled Claims Procedure the CSG has raised a variety of criticisms of it which the Department is unable to accept. For example the CSG complains that the procedure has been implemented without appropriate desk instructions or training of claims handlers and that claims have been "inappropriately" placed within the Stalled Claims Procedure. The former criticism is incorrect. The Department is prepared to accept that there may have been mistakes made in a small number of individual cases and continues to work with its services providers to minimise the incidence of the same. Individual Claimants representatives have been critical of the operation of the procedure but investigation of those criticisms usually reveals that they have either not understood or misinterpreted the procedure.

OTHER ISSUES

Loss of Earnings and Associated Losses Protocol (Wage Loss)

  26.  The number of claims and their current position in the process is shown below.




  27.  The Department continues to consider claims in line with the Protocol.

  28.  The Department is continuing to provide counter schedules of loss in individual cases, which incorporate requests for further information where such information is necessary in the Department's investigation and assessment of a claim.

  29.  A meeting between the Department and the CSG will take place in the New Year to discuss these claims and the Department's general approach.

Amended CHA

  30.  The CSG in its letter of 5 November 2004 provided its comments on the most recent version of the CHA which had been sent to the CSG on 20 April 2004. This version of the CHA was forwarded to the Court on 13 July 2004. The proposed amendments suggested by the CSG have been considered and a revised draft was sent to the CSG on 10 December 2004. It is hoped that this version of the CHA will be agreed between the parties (subject to a small number of sections in the CHA that are not agreed and are put into square brackets so that they are easily identified). The revised draft of the CHA will be added to the Coal Claims Website and will be sent to the Court and the co-defendants.

Fraud investigation

  31.  The Department has continued to develop its approach to potentially fraudulent claims under both schemes (ie COPD and VWF).

  32.  IRISC have set up the Special Investigations Department (SID). SID will manage and investigate potentially fraudulent claims. SID management have been delegated authority to make case investigation decisions to help improve efficiency.

  33.  The Department and SID provide a quarterly update to the CSG on potentially fraudulent claims.

  34.  The Department has also recently made proposals to the CSG in relation to the payment of Claimants representatives' costs where cases are subject to investigation. In cases where Claimants representatives attend with their client for an interview and as a result of the interview the case is referred back for processing and there is no deduction from the value of the claim, the Claimants representatives' reasonable costs in attending the interview will be paid. This proposal is still with the CSG.


THE POSITION AS BETWEEN THE DEPARTMENT AND CO -DEFENDANTS

  35.  Co-defended claims account for almost 75% of the remaining post MAP pool. An insurer liaison programme has been introduced in an attempt to expedite the settlement of outstanding co-defended claims. Progress has been made as follows.

  36.  A letter outlining the current position on co-defendant claims was sent out to the top 16 insurers who, between them, are handling approximately 80% of outstanding co defended claims. The letter covered the closure of the scheme, ASED's, stalled claims, the insurer liaison process and improved communications. This was followed by a schedule of each firm's potential liabilities.

  37.  Twelve of the 16 companies have now responded. Of these, eight were extremely positive and welcomed the proposals to improve communications and progress the files. Of the remaining four, two were merely acknowledgements; one was fairly negative and one was not interested at all. This lack of cooperation is disappointing.

  38.  The 16 companies have now been contacted again, with a view to arranging meetings where necessary or to confirm their position (see Appendix F).

  39.  To date 10 visits have been made to seven insurers/claims handlers. File discussions have been arranged with three companies as a direct result. A further four visits are scheduled to take place before the end of the year, with another visit scheduled for January. A visit issues log has been created to keep a central record of actions arising from meetings.

  40.  DLA, for their clients, have provided an Annex A for the revised CHA detailing the provisions of the CHA to which their clients do not subscribe.

  41.  The Department has requested in correspondence confirmation from the other co-defendant representatives that they will prepare a similar document or confirm that their clients' position reflects that of DLA's clients. No response has been forthcoming save that Ricksons have indicated that, subject to formal approval by Zurich Insurance, the draft Annex A accords with their clients' position. The Department understands that a similar request has recently been made by the CSG.

  42.  Such information is helpful to all parties in providing a full and clear picture of the stance of each co-defendant in relation to the CHA.

  43.  Some difficulties have arisen in relation to reimbursement between co-defendants. DLA have recently written to IRISC claiming reimbursement said to be long outstanding. It is understood that IRISC is dealing with these requests. It is fair to point out however that, as agreed with co-defendants, the Department continues to make repayments to the Compensation Recovery Unit of sums in fact due from co-defendants

CROSSOVER

  44.  At the last COPD Court Review Hearing, directions were given by Sir Michael Turner for the determination of the issues in dispute. The timetable culminates in a two day hearing listed for the 22 February 2005 and 23 February 2005 to be heard before both Lady Justice Smith and Sir Michael Turner. The Hearing will proceed if agreement cannot be reached between the parties prior to that date.

COSTS

Base Costs

  45.  The CSG has made a request for an increase on base costs. A procedure for reviewing the level of Claimant's representatives' costs has been agreed as between the Department and the CSG. This requires the identification of a cohort of cases, randomly chosen, and the assessment of the Claimants representatives costs by a Cost Draftsman appointed by the Department. The Department will then consider whether an increase in base costs might be warranted in the light of the evidence that it has received. It is intended that the co-defendants would be consulted before the Department makes any decisions. The result of the Cost Draftsman's review will be shared with all interested parties.

Services Costs

  46.  The agreed assessment of a finite number of cases before the possible agreement of an appropriate fixed tariff is still underway. The other option that will be considered will be to continue to assess each case on its merits.

Co-Defendant Costs

  47.  The CSG has made representations that the costs paid in Co-Defended cases under the CHA should be uplifted to reflect the additional work undertaken by Claimants representatives in dealing with such claims. Neither the Department nor the co-defendants are attracted by the arguments so advanced by the CSG.

Phase V Generic Costs

  48.  Interim payments in respect of the Phase V costs have been made by the Department and the Co-Defendants. Apportionment of costs has been agreed as between the Department and the Co-Defendants.

Phase VI Generic Costs

  49.  The Department has made interim payments in respect of Phase VI. Apportionment as between the Defendants remains outstanding. A meeting between the Defendants' Costs Draftsmen is proposed to consider the CSG's Phase VI costs and it is anticipated that following this meeting, the Defendants will between them resolve the issue of apportionment of this phase of the generic costs.

Ronald Walker QC, Catherine Foster

13 December 2004

Annex E

PROCESSING A COPD CLAIM

  The following steps summarise the procedures for processing a claim under the Respiratory Disease Claims Handling Agreement.

    —  Upon receipt, the details of the claim are registered by IRISC, DTI's claims handlers.

    —  Live claimants are prioritised by age and date of claim to then undertake spirometry (basic lung function tests). In parallel, IRISC request employment records from Iron Mountain who look after the former British Coal records.

    —  If a live claimant is receiving Industrial Injuries Disablement Benefit from DWP for Chronic Bronchitis and Emphysema, they receive a £2,000 interim payment.

    —  Depending on the spirometry results IRISC may make an offer of an Expedited Payment in final settlement of the claim. The claimant can accept the offer and settle his claim, or decline the offer and proceed through the Medical Assessment Process (MAP). If the latter, in most cases he will then receive an interim payment equal to roughly 70% of the Expedited offer. Those who fail to attract an Expedited offer on the basis of their spirometry results can still elect to proceed through the MAP.

    —  Live claimants are then re-prioritised to proceed through the MAP on the basis of age, date of claim and the spirometry results—the greater the loss of lung function the higher the priority points.

    —  IRISC inform the claimants' solicitors of the revised priority score and ask them to send in claims packs—mandates (to allow access to the claimants' medical records), claims questionnaire and financial and other losses questionnaire—in priority order.

    —  Having received a completed claims pack, IRISC check it for completeness before passing it to Atos Origin, together with the associated priority score.

    —  Atos Origin extract the mandates and pass them to their sub-contractor, Elision, who is charged with obtaining and scanning (on to CD-ROM) the claimant's medical records.

    —  In parallel IRISC seek to agree the claimant's detailed work history with the claimant's solicitor, informed by whatever records Iron Mountain were able to supply.

    —  Once the medical records have been scanned, Atos Origin contact the claimant to arrange a MAP appointment at the nearest or most convenient centre (or at home if the claimant is unfit to travel). Here the claimant undergoes a more comprehensive set of lung function tests than at screening spirometry before having a consultation with a Respiratory Specialist of consultant status.

    —  The doctor checks the claimant's medical history and asks a series of standard questions. He diagnoses any COPD conditions, plus other conditions which may be contributing to overall disability but for which DTI are not liable and thus do not merit compensation. He also validates, or amends, the claimant's smoking history, before completing his medical, ie "MAP" report.

    —  The MAP report is then QA'd by Atos Origin (for completeness and internal consistency, not clinical accuracy) before being returned to IRISC.

    —  If IRISC have by then agreed the man's work history with his solicitor they then calculate any compensation that is due.

    —  If IRISC are unable to make a full and final offer because of an incomplete or unagreed work history, or other unresolved issue, wherever possible they make a further interim payment.

    —  Once the claimant's representative accept a full and final offer payment is made and the claim is closed.

  Claims relating to deceased men are handled in a broadly similar manner using the records only, obviously without the benefit of lung function tests and a consultation with a specialist. Claims are prioritised by age of the widow before the solicitor is invited to submit a Claims Pack, again consisting of mandates and questionnaires, in priority order. Claims from widows are also assessed initially for any entitlement to a statutory bereavement award. This is based primarily on the death certificate (and any post mortem report), and is paid where COPD caused or materially contributed to the death. Bereavement awards can also in some circumstances be paid post-MAP. For the full MAP report, the Respiratory Specialist completes this on the basis of the medical records and information in the claims documentation.

Annex F

PROCESSING A VWF CLAIM

  The following steps summarise the procedures for processing a claim under the Vibration White Finger Claims Handling Arrangement.

    —  Upon receipt of a claim details are registered by IRISC, DTI's claims handlers.

    —  IRISC request the claimant's employment records from Iron Mountain to determine the claimant's occupation—the first criterion for entitlement.

    —  Once the occupation group has been established, claimants are prioritised by date of claim before going through the Medical Assessment Process (MAP). At this point an interim payment is paid where a claimant is receiving Industrial Injuries Disablement Benefit for VWF from DWP.

    —  Claimants are invited to attend a convenient testing centre, run by Atos Origin, to undergo the MAP.

    —  At the centre, initially, a technician carries out a series of tests to establish the degree of injury to the man's blood vessels and nerve endings that may constitute disability due to VWF.

    —  The technician completes a report with test results which is then passed to the doctor, usually a GP, who asks a series of standard questions of the man and conducts some additional tests. The doctor then completes the MAP report.

    —  Atos Origin QA the report and forward it to IRISC, who then determine the amount of compensation where appropriate.

    —  If IRISC are unable to make a full and final offer because of an unresolved issue they make an interim payment where possible.

  The above procedures relate to general damages. In addition, there are many claims for certain heads of special damages—principally Loss of Services.

Annex G1

RESPIRATORY DISEASE HEADLINE STATISTICS
18 Jan
2004
27 Jun
2004
12 Sep
2004
09 Jan
2005
    Increase Since     Sept 2004
No.%
a. Total number of claims *1399,938 566,624570,247575,222 4,9750.9%
b. Compensation paid £ million959 1,1161,1911,292 1008.4%
c. Claims pack submitted to Capita*2201,932 241,328277,342322,232 44,89016.2%
d. MAPs completed167,784 195,891211,613242,372 30,75914.5%
Cases processed post MAP
e. Interim payments35,185 36,01436,26436,634 3701.0%
f. Full and Final Offers*3106,536 131,389143,216160,808 17,59212.3%
g. Denials11,95615,014 16,54019,0192,479 15.0%
h. Total Post MAP Offers118,492 146,403159,756179,827 20,07112.6%
Percentage of MAPs (d)70.6% 74.7%75.5%74.2%
Total Settlements
i. Expedited Settlements14,955 16,67217,72819,207 1,4798.3%
j. Post MAP Settlements81,226 101,597113,678132,072 18,39416.2%
  j(i) by payment79,699 99,630111,222128,650 17,42815.7%
  j(ii) by non payment (denials)1,527 1,9672,4563,422 96639.3%
k. Other Settlements (non-MAP)13,603 20,05423,48926,853 3,36414.3%
  k(i) by payment607 657688723 355.1%
  k(ii) by non payment (withdrawn)12,996 19,39722,80126,130 3,32914.6%
l. Total Settled claims (I+j+k)109,784 138,323154,895178,132 23,23715.0%
Percentage of Total claims27.5% 24.4%27.2%31.0%
m. Potential Settlements12,810 14,78415,71017,220 1,5109.6%
m(i) Archived (stalled) claims2,381 1,7371,6261,623 -3-0.2%
m(ii) Outstanding Post MAP denials10,429 13,04714,08415,597 1,51310.7%
n. Total Settled claims (l+m)122,594 153,107170,605195,352 24,74714.5%
Percentage of Total claims30.7% 27.0%29.9%34.0%

*1 Claim receipts are those claims that are fully registered, ie exclude pool of claims accepted with minimum data, awaiting further information to permit cross referencing and duplicate checks prior to full registration.

*2 Includes incomplete Claims Packs.

*3 Includes "Negative Offers".

Annex G2

VWF

 (taken from DTI's Report to Court December 2004)

HEADLINE STATISTICS
General Damages22/12/03 19/03/0429/07/04 20/12/04
Claims Received, excluding PL (i)169,538 169,563169,592169,601
Deceased %11%12% 12%13%
Settled by payment/denial77,652 83,05690,16896,795
General Damages Interims41,617 44,12546,70749,444
Offers Outstanding with Solicitors6,099 4,6984,6783,663
Settlement Value£612m £644m£707m £758m
Total Damages Cost£893m £933m£994m £1.041bn
MAP examinations completed107,921 109,290109,778110,277


Annex H

  Breakdown of 25 coalfield areas that have received the highest level of total damages since the schemes inception in 1999.
ConstituencyPayments as of 31/12/04 Total (£ Millions)
Easington11,81382.7
Barnsley East and Mexborough13,452 78.9
Hemsworth11,99968.7
Bolsover12,65664.6
Sherwood12,71462.7
Mansfield10,87858.1
Ashfield11,26957.4
Bassetlaw9,63857.3
Doncaster North9,105 55.2
Merthyr Tydfil and Rhymney7,217 52.8
Ogmore7,18851.3
Rhondda6,62549.6
Don Valley8,19948.2
Cynon Valley6,46448.1
Barnsley Central8,559 48   
Wansbeck7,38146.7
Pontefract and Castleford7,481 42.6
Caerphilly6,08340.9
Barnsley West and Penistone7,262 38.7
Houghton and Washington East5,320 36.6
Islwyn3,45535.3
Rother Valley6,13235.1
Blaenau Gwent5,52134.3
Wentworth5,89233.9
Carrick, Cumnock and Doon Valley4,745 28.8





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