Class action lawsuit involving 27,000 affected miners or their families may represent just 10% of the total number of silicosis sufferers in South Africa
The South African gold mining industry faces a number of challenges including falling gold prices, sticky labour pricing, the increasing costs of production, inconsistent energy supply and policy dithering on the part of the African National Congress-led government, to name but a few. This notwithstanding, the industry seems to be weathering the storm; South Africa remains a significant producer of gold and the industry remains an important cog in the South African economy.
However, a new threat, which up until 2011 was merely nascent, is bubbling under the surface: the industry is now under fire from tens of thousands of current and former mine workers (or their families) who allege they contracted silicosis while working in the gold mines. At between $1.5bn and $10bn, the potential exposure is staggering, if not potentially crippling for some of the producers. These issues were among the topics discussed at Clyde & Co’s legacy disease seminar in London on February 5 and will be analysed in more detail in a follow-up seminar in Johannesburg on March 17.
Silicosis is a well-known occupational lung disease caused by the inhalation of silica dust produced, typically, during blasting operations. Silicosis is characterised by inflammation and scarring of the upper lobes of the lungs. It is incurable and symptoms include shortness of breath, coughing and chest pain. When combined with tuberculosis, to which sufferers are susceptible, it can lead to a slow and painful death.
Being an occupational disease, compensation for affected employees has traditionally been regulated by a compulsory workmen’s compensation scheme. As a matter of fact, a specific legislative framework, most recently codified in terms of the Occupational Diseases in Mines and Works Act 78 of 1973 (ODIMWA), was developed and operated for the benefit of mine workers.
Although mine worker-specific, traditionally ODIMWA was read together with the overarching workmen’s compensation legislation, most recently codified as the Compensation for Occupational Injuries and Diseases Act 130 of 1993 (COIDA) in force at the time. COIDA specifically precludes claims in tort for damages against an employer, at all or over and above any compensation received under the compensation legislation.
However, in a seminal judgment, the South African Constitutional Court, which is the apex court, ruled in the case of Mankayi v AngloGold Ashanti (2011) the two pieces of legislation create two separate systems of compensation and because ODIMWA does not carry the same bar to a damages claim, that such claim can, in principle, be pursued against an employer. In doing so, the court overturned the carefully considered majority judgment of the Supreme Court of Appeal. This appears to be a demonstration of the political sensitivity of the issue. It is, of course, not unusual for claims of this nature to become politically charged. There is precedent for this in other countries (for example claims relating to coal mining illnesses in the UK).
What followed in its wake has been nothing short of extraordinary: by 2012, three separate firms of attorneys – supported by class action lawyers based in the US – representing applicants in potential class action proceedings, launched applications for certification of three separate class actions. Certification is a pre-requisite for launching a class action and requires the applicant( s) to demonstrate good cause for the allowing the class action to proceed. Some of the key requirements include:
- whether the class is defined with sufficient precision;
- whether the members have a prima facie case;
- whether there are common issues of fact or law that are capable of class-wide determination; and
- whether allowing a class action is appropriate in the circumstances.
Cumulatively, the applicants claim to represent 27,000 affected mine workers (or their families). These claimants may represent a mere 10% of the total number of silicosis sufferers in South Africa. The three applications have since been consolidated and the combined application for certification will be argued on October 5 in the South Gauteng High Court in Johannesburg.
However, in a parallel process, an additional 6,000 mine workers, represented by a fourth set of attorneys, supported by a UK-based law firm, have instituted damages claims against Anglo American SA (and against AngloGold Ashanti) in South Africa. This followed on from a failed attempt to pursue the damages claims in the UK against its parent company, Anglo American plc (Young v Anglo American South Africa Ltd and others (2014)). These claims are proceeding by way of public arbitrations and are in advanced state of readiness. Even though the miners have fought hard up to now, the pressure appears to be building and the settlement of 23 test cases by Anglo American SA in October 2013 would certainly have encouraged the claimants.
It goes without saying these developments cannot be ignored by the market, in particular the liability market and its reinsurers. Accepting that coverage is complicated by factors like timeous notification, whether policies have been issued on a claims made or losses occurring basis (and therefore the potential effect of retroactive dates) and potential exclusions based on occupational injury, much will depend on the specific wordings.
One can almost certainly not discount the inadvertent consequence of the Mankayi judgment, which distinguishes between ODIMWA and COIDA (traditional workmen’s compensation) claims.
There is a further factor that may have an impact on coverage: since the 1990s, labour sub-contracting in the mining industry has been relatively commonplace. The result is notwithstanding potential contractual protections that may have been negotiated by the mine owners, many claims may in fact be framed against the mine owner as a third party responsible for complying with mining safety legislation, not as employer.
Finally, it should be borne in mind even if underwriters are to be called on to carry only the costs of defending these claims, this will, of itself, be significant. To illustrate the point: the test cases referred to above, involving a mere 23 claimants, were scheduled to run for six months and the bundle of documents disclosed by Anglo American SA ran to one million pages.