Silicosis litigation – the settlement

With an out-of-court settlement taking place recently, the time is right to resolve the question of compensation for occupational diseases.

We have previously discussed the silicosis litigation, where we expressed a view on how this matter should be dealt with going forward. The current system – whereby employees sue employers in terms of the ill-defined and ill-suited common law, resulting in the establishment of multibillion-rand trust funds, which are vulnerable to being “captured” down the road – is not the way to go.

An out-of-court settlement was announced during May. This will lead to the matter being settled. The agreement is, however, still to be ratified by the court. While the details of the agreement were not made public, some have emerged and have become public knowledge. A R5-billion trust fund is to be established.

With this matter now moving out of the way, it is the right time to resolve the question of compensation for occupational diseases.

A few points should be emphasised:

• Employees have received compensation for occupational diseases for over a century

Since the early part of the previous century, miners have received compensation for occupational diseases. This case does not give compensation where no compensation existed previously.

A study of the early history of compensation for occupational diseases in mines demonstrates that the mining industry led the way in providing compensation. The compensation system was one of the best, if not the best, in the world. The current matter is about receiving double compensation; having been compensated in terms of legislation, to then be compensated again.

• Avoiding double or triple compensation

The original issue was whether or not miners, who had contracted occupational diseases, having received compensation, could sue their employers once again for compensation. Could they get a second bite of the proverbial cherry?

The High Court and the Supreme Court of Appeal had concluded that they could not. The Constitutional Court overturned the decision of the Supreme Court of Appeal, for the first time opening the way for double compensation.

This clearly leads to complications. One claim in terms of the legislative scheme, another in terms of the common law, another in terms of other social security benefits, another in terms of some other piece of legislation, another in terms of the Trust … and so on.

The possibility of double compensation is an everyday experience. You accidently drive into someone else’s car and you are insured. Your insurance company pays for the damage. It would be a problem if, having been paid, the claimant can then argue that he is entitled to be paid again by you, since you did not pay, but your insurance company did. You would, of course, argue that you have already paid via your insurance premiums.

Therefore, when a scheme is set out in legislation, it will always prohibit the compensated person from claiming twice, and if he or she can claim twice, then the first payment has to be subtracted from the second.

• Occupational diseases – government failure

The main argument put forward in the press in favour of the class action was that the compensation received was inadequate. The compensation payable is specified in the compensation legislation. The level of compensation can be increased by changing the legislation. It is unnecessary to achieve this by opening a second basis of liability – the common law.

So, if the employees did not receive adequate compensation, it is because the legislation was not updated. This could easily be achieved via negotiation between labour, business and government.

Nedlac was established as a forum for this purpose. If the legislation was inadequate, it is not a problem created by the employer; it is a failure of government. Trying to rectify government failure via the back door of the courts is a problem, and there are many examples from around the world to illustrate this. The so-called asbestos litigation crisis that has been raging in America for decades is a prime example.

• Confusing compensation with pensions

Much of the press coverage has been about former employees being sick without an income. There comes a time when we can no longer work. The funding for that period is a matter of pensions and not compensation. Compensation is for loss of earnings during the period a person could have worked.

In many cases, working people do not earn enough to create a pension, and thus, when they go on retirement, they survive from the government pension. Compensation for occupational diseases cannot put a person in a better position than he or she would have been in had they worked.

• Confusing public and private medical care

Another problem is the confusion between public and private medical care. If a person cannot afford private medical care, then they can still receive medical care in the public healthcare system. Worldwide, the provision of medical care is a difficult and intractable problem.

There seems to be a view that a person who contracts an occupational disease should get private medical care. Again, this is a matter to be dealt with via the compensation legislation. To resolve it via the common law is not a solution.

• The courts do not resolve the problem

The view seems to be that, if a matter can be taken to court, a court judgement will resolve it. From the very nature of a class action, it is clear that this is not correct. The court cannot assess 100 000 claimants to decide the level of their compensation.

Therefore, what happens is a trust fund is established. This fund then processes claims and makes payments. However, this is exactly what legislative schemes do. Thus, the trust fund becomes yet another unofficial workmen’s compensation scheme.

However, in this case there is a significant difference. This trust fund is not under parliamentary oversight and thus is more easily subject to “capture”. We have already dealt with the strange goings on in the asbestos trust funds, which were established earlier.

There are other trust funds in the mining industry, such as the rehabilitation funds. These should also be examined to see how they are being managed.

In the United States (US), asbestos litigation led to the proliferation of independent asbestos bankruptcy trust funds at a time when there was no framework for their oversight. As it turned out, many of the trusts were operating in opaque circumstances, with some claimants receiving payments from more than one trust for the same injury. This prompted Congress to pass legislation in 2016 to regulate the operations of asbestos bankruptcy trusts.

• The class action litigants do not want a judgment

The idea of going to court is to secure a judgement in favour of the litigant. This is not the objective of a class action. Its objective is to force the establishment of a trust fund.

Class actions have fallen out of favour in the US, where they started, as they are subject to abuse. It is interesting to note that, in the case of this trust fund, the mines seem to have learnt from the asbestos trust fund. The mines do not intend to pay R5 billion over to the trust fund, but have raised a provision and will pay over funds as and when needed.

The litigants have indicated that there are 100 000 former employees with silicosis. It will be interesting to see how many legitimate cases are found. Previous estimates have turned out to be excessively overestimated.

Several times in history, concerted attempts have been made to find people with specified occupational diseases, and they have failed in their quest. Sometimes there was a spike in numbers, but the spike was temporary.

It is for these reasons that we have maintained (and still do) that a long-term solution to the problem of occupational diseases is to fix the workmen’s compensation system, not to establish trust funds.

Published by

Professor Robert W Vivian and Dr Albert Mushai

Legally Speaking is a regular column by Professor Robert W Vivian and Dr Albert Mushai, both in the School of Economics and Business Sciences, University of the Witwatersrand. Vivian is a leading authority on insurance and risk management. He has written a number of books on South Africa’s business history. Mushai holds a master’s degree from the City University, London, and was the head of the insurance department at the National University of Science and Technology in Zimbabwe before joining the University of the Witwatersrand as a lecturer in insurance.
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