APPENDIX 3
Supplementary memorandum by the Department
of Trade and Industry
CONTENTS
Title page
Index
Minimum Payments
Small Mines
National Union of Mineworkers Correspondence
Fraud Guidelines
Rebuttal of CSG's additional report
Annex A—Letter from the DTI to the CSG
MINIMUM PAYMENTS
Nigel Griffiths offered to supply a note supporting
the DTI's calculations of the costs of the CG proposal for a minimum
payment and setting out why the Department considered there would
have been a shortfall on the basis of the CG's proposal.
If the CG and DTI had been able to agree a minimum
payment prior to March 2003 on the basis of half of the RPI on
solicitors costs, their current proposal, and the scheme had been
brought into operation in April 2003, the Department consider
the fund would have been £400,000 short by end March 2004.
— At the end of March 2003 there were
approximately 2,000 claims outstanding, which at an assumed £250
top up per claim would require £500,000 to clear.
— Over that financial year (2003-04)
there were 5,600 low value settlements. At a top up rate of £250
per claim £1,400,000 would have been required to top up these
claims in the year.
— Therefore for new and outstanding
offers at least £1,900,000 would have been needed over the
year. This is a conservative estimate, if settlement rates increased
as would have been expected more would be required.
— Half of RPI on solicitors costs in
that year would have yielded only £1,500,000—so the
fund would have been £400,000 short over 12 months, equivalent
to 1,600 claimants at a top up rate of £250 per claim.
The reality is that the DTI and solicitors were
not in a position to implement the proposal in 2003-04. The formal
proposal to use half of the RPI was not made until part way through
the financial year—July 2003, and would have taken some
months to agree the detail and put into operation. It is unlikely
that arrangements could have been put in place much before the
start of the next financial year, April 2004, at which point the
backlog of unaccepted offers would have been still higher.
In addition there were other elements of the
proposal of concern to the Department, apart from the lack of
suitable contingency arrangements should the fund run dry in year.
The CG request for additional process, a check for five years
employment underground before a minimum payment could be made
which is not part of the current process for these offers, was
of particular concern, as was the degree of solicitor support
for the proposal. The Department remains opposed to the introduction
of additional process checks in regard to the minimum payment
proposal (we want to focus on claims which have not yet had a
full assessment rather than revisiting completed ones), and seeks
greater certainty about the extent of solicitor support.
Prior to July 2003 the CG's proposal was that
the Department should fund a minimum payment. This was rejected
on the basis that the Department believed the focus at that time
should be the processing of new offers in accordance with the
CHA, rather than developing new processes and devoting resource
to those who had already had properly calculated offers under
the CHA. The Department also considered it wrong in principle
to fund top up payments for low value offers from the public purse,
where low value offers were properly calculated in accordance
with the CHA and were the result of discounting in regard to the
claimant's smoking history, dust levels in the mines he was employed
at, or for a limited period of employment with British Coal after
the accepted date of liability. This discounting is consistent
with the High Court judgment.
SMALL MINES
Private mines were not signatories to the COPD
Claims Handling Agreement (CHA) that governs the payment of compensation
for respiratory diseases to miners and ex-miners in respect of
British Coal Corporation (BCC) liabilities assumed by the DTI.
Although it contained proposals for dealing with claims where
there was a co-defendant element, representatives of the private
mines initially rejected the approach suggested and negotiation
was required in order to reach a position where they would accede
to the CHA.
There are two main groups of co-defendants.
The first is the small private mines which existed during the
nationalised period and which were licensed to mine coal alongside
BCC. These have concurrent liability with BCC. The other main
group is the successor companies, such as UK Coal, who have consecutive
liability, ie post 1994. This note describes the position in relation
to the small private mines. A small mine would have had only 30
employees or less underground at any given time. Conditions were
often different to BCC mines. Many small mines were much closer
to the surface, allowing miners to walk in rather than descend
in a cage. They were in general less mechanised.
The negotiations for the accession of small
mines to the CHA were lengthy and involved, being between three
parties, the small mines, the DTI and the claimants' solicitors.
Although there are relatively few claimants—compared to
the overall size of the scheme—affected by small mine issues
(some 2,600) many of them are elderly.
The key issues that needed to be determined
by the parties were (a) how dusty were the small mines compared
to BCC mines and (b) how was liability to be divided between DTI
and the small mines. The original CHA suggested a simple "time-apportioned"
basis (ie DTI and the small mines to pay a proportionate share
of the total compensation, depending on how long the claimant
had worked for each). However, this method was not acceptable
to the small mines representatives, who argued that compensation
should be divided on the basis of the dust dosage the claimant
was subjected to by each employer. Whilst logical, this method
was more complex and therefore took longer to agree and implement.
The CG supported this approach and the DTI therefore consented
to adopt it also. It was not possible for the Department to pay
its full share of compensation while negotiations were ongoing,
as the final agreement would affect both the overall amount of
compensation payable (because the amount of dust the claimant
was subjected to would affect the overall recoverable portion
of compensation) and the amount payable by each party. However,
because of the delay in reaching a settlement, the Department
took the decision to make interim payments, wherever possible,
from December 2003.
Towards the end of 2003 the small mines representatives
made proposals for accession, which the Department could accept.
Certain key differences remained however between the small mines
and the CG. These were susceptible to mediation and so this was
arranged in January 2004. Although an agreement was not reached
during the mediation, a good deal of progress was made and the
parties were in a position to announce agreement in February 2004.
Sufficient progress was made on the memorandum
of agreement between the parties and on operational arrangements
to allow full and final offers to commence calculation in October
2004.
A number of claims—those where the final
period of employment was with the small mine rather than BCC—are
unable to receive a full and final offer pending the amendment
of the pension loss calculator to incorporate small mine cases.
The DTI, CG and small mines are seeking to arrange a meeting on
this issue. In relation to a number of issues, some of the factual
information required for amendment to the calculator is not available—for
example on certain wage rates. Once agreed, instructions will
be jointly drawn up for the software to be developed It is not
possible to give an accurate figure as to how many claims are
likely to be included in this group, as it will not become apparent
until the work histories are confirmed.
Coalfield representatives have raised with the
Department the issue of small mine claims pre-1972. Employer's
liability insurance became compulsory in the UK in 1972. Post
1972 the majority of Small Mines were insured under a block policy
initially with NEM and latterly with AGF. Although many were insured
prior to 1972 in most cases the insurers are not known or are
no longer in existence. Coalfield representatives have asked the
Department to consider accepting liability on behalf of the small
mines pre-1972 where there is no insurer, as well as paying for
BCC liability. The rationale for this is that BCC would have licensed
the small mines to produce coal, and should therefore accept the
liability where no one else is available to pay it. The Department
is meeting representatives of the NUM in the near future to discuss
the legal position, although the Department's current stance is
that it has no legal liability for the small mines, even in the
absence of an insurer. It is possible that the majority of the
claims may have some pre-1972 employment.
Letter from Peter Hain MP, Minister of
State for Energy and Competitiveness in Europe, to Arthur Scargill,
Secretary, National Union of Mineworkers
Thank you for your letters of 23 April, regarding
the Claims Handling Agreement for the NUM.
As I have said before, I am in full agreement
with you that the Department should enter into discussions with
your officials, with a view to signing Agreements for the settlement
of both respiratory and vibration related diseases. In fact, an
offer to enter into such discussions was made by Helen Liddell
in her letter of 5 July 2000. she also explained in her letter,
however, that our understanding has always been, and continues
to be, that members of the NUM have chosen to be represented by
solicitors, often on the advice of their regional NUM branches,
who in many cases are funding the claims. Notwithstanding this,
Ann Taylor, Director of the Department's Coal Health Claims Unit,
is happy to meet you and your officials to take matters forward
as a matter of priority. She and her team are better placed to
discuss the detail of the scheme and how it was put together.
Please feel free to contact her on 020 7215 5330.
As to the payment of compensation to the NUM,
I cannot agree that offering to sign an identical agreement with
the NUM as that for the UDM is tantamount to accepting that the
NUM has been financially disadvantaged. As detailed in previous
correspondence, the UDM represent many claimants who have chosen
to pursue their claims via that Agreement, rather than via solicitors.
This option was always open to the NUM, indeed both the Department's
claims handling agents have always advised miners who enquire
about making a claim to contact either their solicitor of their
union. It would appear that many regional NUM offices are advising
members to use union backed solicitors. I know, for instance,
that the Scottish NUM instruct Thompsons Solicitors, who have
over 8,000 respiratory claims and nearly 4,000 VWF claims, and
are regularly represented in discussion with the Department over
the procedures. I am also aware that, in certain instances, regional
NUM branches do recover some costs or charge a fee where a claim
is successful. Given this, I cannot agree that any compensation
is due the National NUM for having been discriminated against.
To reiterate, we are happy to sign an agreement
with the NUM on the same terms as those signed by the UDM and
the Claimants' Solicitors Group. You have previously indicated
that this would be unacceptable, but I cannot agree to a different
agreement from that already endorsed by the High Court, and one
which would treat some claimants differently from others.
I hope this fully explains the position and
you no longer feel it necessary to proceed with any legal action.
Peter Hain
8 May 2001
Letter from The Rt Hon Helen Liddell MP,
Minister of State for Energy and Competitiveness in Europe, to
Arthur Scargill, President, National Union of Mineworkers
Thank you for your letter of 13 June, regarding
coal health claims and UDM cases.
As I stated in my previous letters, the Department
was ordered by His Honour Mr Justice Turner to negotiate with
the firms of solicitors acting on behalf of the 300 or so firms
who belong to the Claimants Solicitors Group. These negotiations
culminated in the signing of the Handling Agreement with them,
on behalf of the claimants, on 24 September 1999.
We signed exactly the same agreement, albeit
with reduced fees, directly with the UDM because they represent
some 8,000 claimants who have chosen to pursue claims via their
union, and not via solicitors.
if the NUM has claimants in a similar position,
we are happy to enter into discussions about settling these claims.
I understand, however, that the vast majority of NUM claims are
handled by firms of solicitors instructed on behalf of regional
NUM offices who form part of the Claimants' Solicitors Group and
who are party to the 24 September Agreement. This is a litigation
presided over by the High Court. We cannot simply bypass the solicitors
who represent NUM members.
As I stated in my last letter, I can see no
reason to reconsider the Department's position.
5 July 2000
FRAUD GUIDELINES
The Select Committee requested to see the guidelines
to which Capita's fraud investigators worked and with which claims
handlers identify potentially fraudulent claims.
The judge has ruled that it is quite appropriate
that these Key Fraud Indicators should not be shared with miners'
solicitors and the Committee is asked to keep them strictly confidential.
REBUTTAL OF
CG'S SUPPLEMENTARY
REPORT
Co-defended claims
The CG state in their supplementary report that
15,000 claims have co-defendant involvement. According to the
DTI's latest statistics, there are only 13,431 claims with potential
co-defendant involvement. This number may reduce as periods of
employment are clarified.
The CG further state that it is not known what
steps the DTI have taken at a high level to encourage CMC / CMR
co-defendants to deal with these claims as high priority. In fact,
various initiatives are underway and being run by Capita to engage
with co-defendant insurers. These include the introduction of
the insurer liaison manager role, liaison visits (some of which
attended by the DTI), face to face file discussions, operations
notices/bulletins, all party meetings.
The CG also state that the terms of the DTI's
arrangement with CMC defendants or their insurers have not been
disclosed. We understood that the CG were aware of the 50% reimbursement
in respect of employment at British coal mines and that a very
small number of labour-only subcontractors do receive a higher
percentage. The co-defendant protocol, which the CG have seen,
outlines the evidence that must be submitted in order to receive
these reimbursements. The department do not agree that the reimbursement
agreement allows us to exert any greater pressure than we currently
do through the liaison channels outlined above.
Group 3 Claims
As discussed with the CSG, re-planning was undertaken
in January 2005. The previous plan was produced in July 2004 since
when investigations have been completed in respect of 2,396 claims.
We also challenged the assumptions made in respect of the previous
plan.
The number of 6,600 is made of 5,400 certain
(ready for investigation but not completed) cases and a conservative
estimate of 1,200 or so additional cases that could arise by the
cut-off date of 30 June 2005. The current rate of submission of
additional cases suggests that we have been pessimistic.
The Department acknowledges that there is a
need for increased performance and productivity. A number of initiatives
are underway, including the recruitment of additional investigators,
that will support this need. There is still uncertainty about
the number of cases that will require investigation.
The Department has confidence that these cases
will be completed by the Aspirational Scheme End Date of 30 September
2005.
Services Claims
A copy of the Department's response to the CSG's
letter of 22 December 2004 is attached as Annex A.
Annex A
Letter from Department of Trade and Industry
to Irwin Mitchell
VIBRATION WHITE
FINGER
Services Claims: Throughput and aspirational Scheme
end dates (ASEDs)
Thank you for your letter dated 22 December
2004. we apologise for the delay in responding.
Over the past year we have made a number of
planning forecasts based upon potential claim volumes and processing
times in order to determine our ability to meet the ASEDs. However,
it has always been a forecast because of the uncertainty over
the final population post cut-off. As such, we anticipate being
in a better position to provide you with a more robust analysis
of our plans to meet the ASEDs early in Q2 2005 once the uncertainty
over the population is resolved. In the meantime, we would like
to provide a high level response to your letter of 22 December
2004.
OFFERS
We enclose a copy of the key stage analysis
as at 30 January 2005 that was shared with you in advance of the
Services meeting of 7 February. You will see that we have now
received 32,509 questionnaires of which 9,355 are post offer ie
29%.
Calculating our ability to meet the end dates
is not as simple as dividing the revised total outstanding by
the number of offers made each week, as this does not take into
consideration the additional staff that have been recruited (and
are currently in training) and those that Capita plans to recruit
in the future. Furthermore, Capita continues to progress cases
through the different stages where it can, however, many of these
are currently awaiting action outside of Capita's control:
— Of the 32,509 claims we have received
to date, 29,936 fall within the Services process having had a
General Damages interim payment.
— There are currently 20,581 claims
in the process pre offer (29, 936-9,355 (General Damages interim
paid—post offer)). Of these:
— 7,364 are waiting for further information
from the solicitor/claimant (query quality/employment).
— 1,197 have had several successful
helper call attempts—Capita has written and is awaiting
helper/solicitor contact.
— 4,411 claims are in Capita control
(either awaiting investigation to commence, under investigation
or awaiting helper calls to be made).
— 3,703 claims are in the Services
MAP queue.
— 3,906 claims are awaiting offer post
Services MAP.
Therefore, of the 20,581 claims that are pre
offer, 12,264 (60%) are not directly within Capita's control.
If we consider claims that are pre Services MAP, the percentage
without Capita control increases to 74% ie 12,264 out of a total
of 16,675. Of particular concern are those claims where there
is outstanding information with a solicitor, and we would ask
that you encourage your members to process this backlog as swiftly
as possible, particularly in view of the impending cut-off date.
MEDICALS
The planned staffing for medicals has been set
to match the throughput from Capita. CHS is already able to perform
medicals in excess of current demand and the plan reflects the
anticipated increased throughput from Capita. We continue to plan
for the future, for example CHS has recently found a new location
to increase capacity at Kilmarnock. Again, we anticipate being
in a better position to share with you our plan to meet the ASED
once the final populations are known.
We remain confident that the ASEDs can be achieved,
however, we do require the co-operation of yourselves and your
members to provide accurate and timely information to Capita,
so that claims can progress swiftly to the MAP process.
Nabarro Nathanson
28 February 2005
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