Worldwide: Construing a Commercial Contract of Insurance- Can More than One Policy of Insurance Respond to a Mesothelioma Claim?

Last Updated: 30 March 2010
Article by Andrew Spearritt and David Chong

Judgment date: 12 March 2010

Commonwealth Steel Company Ltd v Certain Underwriters At Lloyds Comprising Syndicate Nos 130, 144, 208, 210, 214, 235, 250, 404, 469, 490, 677 and 870 [2010] NSWCA 31

NSW Court of Appeal1

In Brief

  • The Court of Appeal was asked to rule on the construction of commercial insurance policies in terms of whether multiple policies may respond to a particular risk of injury.
  • The Court of Appeal considered the application of Orica Ltd v CGU Insurance Ltd2 and Vero Insurance Ltd v Power Technologies Pty Ltd3 and held that Orica should not be taken as an expression of a rule that once one policy responds to a claim in respect to the condition of mesothelioma, no later policy may respond.


Mr Kozaczynski (the deceased) was exposed to asbestos in the course of his employment with Commonwealth Steel Company Ltd (Commonwealth Steel), such exposure occurring between 2 December 1962 and 1986. As a result of his exposure to asbestos, the deceased contracted mesothelioma.

The deceased issued proceedings in the Dust Diseases Tribunal and those proceedings were resolved by way of negotiated settlement for the sum of $525,000, payable to the deceased by Commonwealth Steel.

Commonwealth Steel had a number of excess common law policies providing coverage for each policy year from 1963/64 to 1967/68. Commonwealth Steel sought indemnity in respect of two such policies taken out with the defendants covering the period 31 March 1967 to 31 March 1968.

The defendants sought to rely upon the "legal rule" laid down by the Court of Appeal in Orica and Vero that where there were a number of policies held by one insured, only the first policy responding in terms would in fact respond (in respect to a claim for mesothelioma).

The matter was referred to the Court of Appeal for determination under r 1.21(1)(a) of the Uniform Civil Procedure Rules.

Question to be Determined and Agreed Facts

The parties posed the following question to the Court of Appeal for determination:

"Whether, upon the true construction of Excess Common Law Policies ... in respect of the period of risk from 31 March 1967 to 31 March 1968 and in the events which have happened, [Commonwealth Steel] is entitled to indemnity for the loss occasioned to it by reason of its liability to the deceased in the sum of ... $525,000.00 pursuant to the judgment in that sum in proceedings in the Dust Diseases Tribunal of New South Wales ... or any part thereof under the 1967-68 policies ... or whether the only policies under which [Commonwealth Steel] is entitled to indemnity for the loss are those subsisting in any one of the policy years prior to the 1967/68 policy year. "

A crucial aspect of the decision was that there was a statement of agreed facts which may be summarised as follows:

  • From 2 December 1962 to 5 July 2000 Commonwealth Steel employed the deceased to work at its steel mill in the State of New South Wales.
  • During the course of each year of his employment between 1962 and 1986, the deceased was exposed to materials containing asbestos dust and fibre. Such inhalation was personal injury.
  • The personal injury in each policy period from 1962/63 materially caused or materially contributed to the contraction by the deceased of mesothelioma.
  • During each period of exposure, Commonwealth Steel was entitled to insurance cover under and in accordance with the terms of a number of excess common law policies of insurance.
  • The underwriters of each of the excess common law policies of insurance for periods of risk between December 1962 and March 1974 varied.
  • The policies in respect of the period from 31 March 1967 to 31 March 1968 were underwritten by the defendants.

Court of Appeal Decision

The defendants argued that, because an injury that materially caused or contributed to the deceased's mesothelioma occurred within the policy period, the policy for the 1967 to 1968 period responded.

The defendants relied upon the NSW Court of Appeal decisions of Orica and Vero, submitting that as there were a number of policies held by Commonwealth Steel, only the first policy in respect of the policy period which first materially caused or contributed to the disease should respond, to the exclusion of all later policies.

In Orica, Spigelman CJ stated:

"[56] The employer becomes "liable to pay' upon a single penetration with respect to the whole of 'his liability' at common law. When another penetration occurs the employer's 'exposure' or 'risk', and therefore 'liability', is not changed.... [57] Only one cause of action will arise at common law against the employer for the development of mesothelioma, despite there having been multiple 'injuries' within the meaning of the policy."

The Court of Appeal observed that the policy of insurance in Orica required that both injury and liability occur within the policy period. That type of policy was entirely different to the policies that were the subject of the Commonwealth Steel proceedings.

The Court of Appeal found that the Chief Justice's views in Orica were obiter in a case concerning quite a different insurance policy and should not be accepted as an expression of a rule that once one policy covering liability in respect of mesothelioma responds, no later policy can respond.

The defendants also submitted that in Vero the Court of Appeal applied the Chief Justice's reasoning in Orica and it should therefore be followed in the Commonwealth Steel proceedings.

The Court of Appeal stated that in Vero the Court was asked to determine whether the first or the last policy responded as distinct from whether or not more than one policy can respond to the particular risk.

On the basis that the defendants failed to establish a basis for denying indemnity under the policies the Court of Appeal held that Commonwealth Steel was entitled to indemnity.


  1. The Court of Appeal has sought to restrict the comments of Spigelman CJ in Orica and Beazley, JA in Vero to suggest that there may well be circumstances in which more than one policy can respond to a particular risk (such as to a mesothelioma claim).
  2. The Court of Appeal did not however extend its analysis or offer support for the "triple trigger" theory propounded by Santow, JA in Orica.
  3. The approach of the Court of Appeal suggests that on a different set of facts to those existing in Orica and Vero, more than one policy may respond to a mesothelioma claim.
  4. It is important to remember that what was under consideration was a commercial contract of insurance (and an agreed set of facts) as opposed to the wording of the common law extension to the statutory form of workers compensation policy which was under consideration in Orica.

1 Allsop P, Beazley and Giles JA
2 [2003] NSWCA 331
3 [2007] NSWCA 226

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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