Industrial Disease Claim – Litigation Update
20 July 2016
Industrial Disease Claim (“IDC”) – Litigation Update
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
In 2006 a Court Approved Scheme of Arrangement (“Scheme”) was established to administer the settlement of valid claims against Cape relating to its historical asbestos activities, whilst at the same time protecting the company from the potential threat of insolvency. The Scheme has operated very effectively; Cape has met its obligations to fund the Scheme and valid claims have been paid out without reduction. To date, over £30m has been paid to those who have become ill or to their dependents.
As previously disclosed, Cape and the Scheme are subject to new developments and new types of claim as legal precedent in the area of industrial disease claims continues to evolve. Aviva has brought one such new type of claim, seeking to establish contribution and indemnity claims (“Insurer EL Claims”) from Cape towards employee liability settlements that it has made in response to policies that Aviva underwrote for a liquidated Cape subsidiary during the period 1956 to 1966 and for which Aviva has already benefited from the associated insurance premiums.
There has been a sequence of court hearings culminating in a determinant judgment on 19th July 2016, with some issues found in favour of Cape and some against. Cape is seeking leave to appeal a number of aspects of this litigation. Nevertheless the Board believes it to be prudent to increase the provision held against industrial disease claims by £9.7m to take account of the current judgment. This provision represents the Board’s best estimate, based on the current information available to it, of both the liability relating to the Insurer EL Claims currently being brought by Aviva and the discounted present value of potential future claims of a similar nature, using the same actuarial and economic assumptions as disclosed in the 2015 Report and Accounts (Note 28).
Given the increase in the provision, and subject to the outcome of any appeal, the Company currently intends to make an additional payment of approximately £9m by 31st December 2016 into the ring-fenced Scheme Fund in order to meet the funding requirements of the Scheme. This will permit the Company to continue to make dividend payments without recourse to the Scheme trustees.
This judgment is separate from a second type of new claim being pursued jointly by Aviva and RSA in respect of historical and current payments made by them in their capacity as providers of employer liability insurance in relation to claims by employees and former employees of third-party companies arising from asbestos-related diseases (“Insurer PL Claims”). The Board continues to believe that these Insurer PL claims are without merit, are being vigorously defended and no provision has been made. Further details have been previously disclosed in the 2015 Report and Accounts (Note 35).
Details of the Cape Scheme have been filed with the Registrar of Companies and can also be found on the Cape plc website /corporate-responsibility/asbestos-scheme-of-arrangement.aspx. A summary of the key aspects of the Scheme can be found in the 2015 Annual Report and Accounts (Note 36).
Cape (www.capeplc.com), which is premium listed on the main market of the London Stock Exchange, is an international leader in the provision of critical industrial services principally to the energy and natural resources sectors. Our multi-disciplinary service offering includes access systems, insulation, specialist coatings, passive fire protection, refractory linings, environmental services, oil and gas storage tanks and heat exchanger replacement and refurbishment. Cape employs over 16,000 people working across 21 countries and in 2015 reported adjusted revenue of £711.4 million.
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The Group will host a conference call for analysts and investors at 8am today, Wednesday 20th July.
The participant dial in details are as follows:
UK +44 (0)208 118 1016
Conference Code: 4809558386
Joe Oatley, Chief Executive, +44 (0) 1895 459 979
Michael Speakman, Chief Financial Officer, +44 (0) 1895 459 979
Ronan Tyrrell, Interim Head of Investor Relations, +44 (0) 1895 459 979
Bobby Morse, Ben Romney, Chris Judd, +44 (0) 207 466 5000