Reforms to long-tail liability laws will be no easy matter as business productivity is balanced against the rights of personal injury claimants, Parliamentary Secretary to the Treasurer Chris Pearce has warned.

The Federal Government proposes extending protection to the claimants so they will be treated as creditors should a company go into liquidation.

Changes to long-tail liability laws could make companies increase reserves to cover any potential liabilities, but this is likely to meet fierce opposition from business lobbyists.

Mr Pearce requested an inquiry into the treatment of unascertained future personal injury claims following the report of the 2004 James Hardie inquiry.

The head of that inquiry, David Jackson, QC, says current laws don’t make adequate provision for commercial insolvency where there are substantial long-tail liabilities.

The Corporations and Markets Advisory Committee released a discussion paper on protections for personal injury claimants in July this year.

Mr Pearce told a meeting of the Banking and Financial Services Law Association earlier this month reform must be balanced against competing policy objectives.

“On one hand, equity considerations suggest there is a need to provide some protection for personal injury claimants where there is a long latency period for an injury,” he said.

“On the other, it is recognised that, in the normal course of business, companies will have little information about the likelihood or magnitude of all future claims that may arise from their conduct.”

Mr Pearce says if all companies are required to set aside funds for possible injury claims it would introduce much uncertainty.

“The practical effect of bringing new stakeholders into insolvency proceedings is that the rights of conventional unsecured creditors may be adversely affected.

“I think it’s fair to say that balancing these competing equity and complexity considerations will be no easy matter.”