Aviva Insurance Ltd & Anor, R (On the Application Of) v The Secretary of State for Work and Pensions

The Social Security (Recovery of Benefits) Act 1997 is incompatible with A1P1 where it requires insurers to reimburse the State for 100% of benefits despite their insured’s only partial responsibility for the disease, including responsibility affected by contributory negligence, independently caused divisible disease, or other liable employers whose contribution cannot be recovered. Those burdens lack sufficient rational connection with recovering costs attributable to the insured’s wrongdoing and fail to strike a fair balance, particularly where imposed retrospectively on historic policies. The scheme may nevertheless require payment of benefits attributable to the insured’s tort even where those benefits do not correspond to a recoverable head of loss.

Aviva Insurance Ltd and Swiss Reinsurance Company Ltd challenged the operation of the Social Security (Recovery of Benefits) Act 1997 and the Secretary of State’s failure to make regulations under section 22(4). They argued that the Compensation Recovery Unit’s demands required insurers to repay benefits bearing no proportionate relationship to their insureds’ contribution to asbestos-related disease.

The claim concerned the interaction between the statutory recovery scheme, later developments in asbestos causation and liability, and A1P1. The court considered justiciability, limitation, victim status, proportionality, and the scope of the regulation-making power.

1. The claim succeeded in part. The operation of the Social Security (Recovery of Benefits) Act 1997 was incompatible with A1P1 insofar as it required insurers to repay 100% of recoverable benefits despite contributory negligence, partial responsibility for a divisible disease, or limited exposure where other employers were also liable for an indivisible disease.
2. The interference was continuing. Section 22 created a deemed contractual liability whenever the statutory conditions arose, rather than making a single insertion into policies in 1997. The challenge was therefore not excluded merely because the Act pre-dated the Human Rights Act 1998.
3. The court applied the four-stage proportionality analysis identified in Bank Mellat v HM Treasury (No 2). Recovery of costs attributable to tortious wrongdoing and protection of public resources were legitimate aims. However, full recovery without regard to the insured’s degree of responsibility was not rationally connected to the former aim. Less intrusive methods, including apportionment, were available.
4. At the fair-balance stage, the first three challenged features imposed substantial retrospective liabilities under historic policies which could not have been priced. Later asbestos decisions and legislation were directed to protecting victims, not to transferring unrelated welfare costs to traceable insurers. No special justification for that retrospective burden was established. The reasoning in the Welsh Bill case was obiter but entitled to the highest respect and was apposite.
5. The position differed for benefits not corresponding to a recognised head of tortious loss. Such benefits could still be fairly attributable, in a practical sense, to the insured’s wrongdoing. Requiring payment of those benefits was therefore rationally connected to the legitimate aim and could strike a fair balance once the disproportionate features were removed.
6. A failure to make regulations under section 22(4) was not excluded by HRA section 6(6). The provision was unambiguous and its scope could not be confined by the Minister’s explanation of the purpose for which it had been introduced. Remedies and limitation issues concerning financial loss were left for further submissions.