South Africa: Employer's Liability Policy Trigger Litigation - Supreme Court Calls Cease-Fire In The War Of Words

Last Updated: 21 May 2012
Article by Luke Choate


The Supreme Court of England handed down Judgment, on 28 March 2012, in the matter of Durham v BAI (Run Off) Ltd (In Scheme of Arrangement) and other appeals1 in which all five justices were unanimous in their interpretation of the policy wordings.

This appeal to the Supreme Court of England was lodged as a result of the judgment handed down by the Court of Appeals. This judgment was the culmination of a number of test cases instituted in order to ascertain when (in terms of the policy year) liability in terms of an employer's liability policy (EL policy) arises for employees who contract mesothelioma.

Mesothelioma is a cancer which results from asbestos fibres finding their way into the pleura (or lining of the lungs). The difficulty in terms of determining liability, in the case of such a cancer is that a person contracting the cancer does not do so at the time of inhalation of the asbestos fibre(s). Indeed, symptoms can take up to, and occasionally exceeding, 50 years from the date of inhalation.

Once these symptoms materialise, life expectancy is between 18 months and 2 years. It is generally accepted, however, that the tumour develops between 5 and 10 years prior to the symptoms materialising. The cancer is notoriously difficult to diagnose, often done only after death during a post-mortem. The cancer is incurable.


Prior to this series of test cases it was accepted in practice that the EL policy in respect of an employee who contracted mesothelioma was the policy in force at the time when the employee was exposed to and inhaled the asbestos fibre(s).

It is likely that this approach was adopted as a result of the decision handed down in the case of Fairchild v Glenhaven Funeral Services Ltd2 which developed an exception (in mesothelioma cases) to the usual rule in negligence cases, which is that the claimant must establish, on a balance of probabilities, that the defendant's negligence caused his or her injury or disease.

However, in the 2006 case of Bolton Metropolitan Borough Council v Municipal Mutual Insurance Limited and Commercial Union Assurance Company Limited3, the English Court of Appeal considered mesothelioma claims in the context of public liability policies (PL policies) and raised doubt as to whether this practice was correct. It is worth noting that the Supreme Court of Appeal took judicial notice of the Fairchild judgment although the Court of Appeal did not.

The court in the Bolton case was of the opinion that, in the case of mesothelioma, the injury does not occur at the time of inhalation of the asbestos fibres but rather at the time when the tumour develops. This was based on the wording of the PL policy in question and that of PL policies in general. These policies often provide cover if the insured becomes liable for injury or illness which occurs "during the currency of the policy" or "during the period of indemnity" and is therefore triggered at the time the illness or injury occurs.

In this case the PL policy would be triggered by the development of the tumour rather than the period during which the illness is caused (the exposure to the asbestos fibres). As a result of this, the court held that the insurers who effectively insured the employee at the time when the symptoms developed were the insurers liable rather than the insurers at the time of exposure.

As a result of the finding in the Bolton case a series of insurers became embroiled in six test cases relating to persons who had developed mesothelioma. Similarly to PL policies, EL policies provide for injuries "caused during the period of insurance". The insurers contested that EL policies in force at the time of exposure were liable where the EL policy refers to the date on which the injury is "sustained" or the disease is "contracted". These test cases were first heard in the High Court cited as Durham v Bai (Runoff) Ltd (in scheme of arrangement) and became known as the EL Policy Trigger Litigation.

In the judgment of the Court of Appeals, Lord Justice Rix held that there should be a distinction between policy wording referring to injuries or diseases "sustained" during the period of insurance, and those that refer to injuries or diseases "contracted" during the period of insurance. In the case of the former, Lord Justice Rix found that the decision in the Bolton case applied and therefore where the policy used the term "sustained" it referred to the time at which the tumour developed.

The court therefore held that "sustained" is not to be distinguished from the effect of the phrase "caused during the period of insurance". On the other hand, Lord Justice Rix found that the use of the term "contracted" referred to the cause of the disease and as such would trigger the policy in force at the time of inhalation or exposure to the asbestos fibres.

Therefore, before the matter was heard by the Supreme Court of England, the position was that where the wording used was "sustained" the policy in force when the disease starts to develop (i.e. when the tumour develops in the case of mesothelioma) is of effect; and where the wording used is "contracted" the policy in force at the time of negligent exposure responds (i.e. at the time of exposure or inhalation of the asbestos fibres).

Judgment in the Supreme Court of England (Lords Clarke, Dyer, Kerr, Mance and Phillips)

Specific wording and phrases

Lord Mance, held that the judgment handed down in Bolton (which held that in the case of mesothelioma, the injury does not occur at the time of inhalation of the asbestos fibres but rather at the time when the tumour develops) did not apply to EL policies and consequently, was not relevant. This is so despite the fact that the High Court and the Court of Appeal relied heavily on the decision handed down in Bolton.

Significantly, Lord Mance emphasised the close link between the actual employment of an employee during each insurance period and the premium in respect of the risks undertaken by insurers in respect of that period4. It was a result of this "link" that Lord Mance held that "courts should avoid over concentration on the meaning of single words and phrases viewed in isolation and look at the insurance contracts more broadly."

In respect of the issues pertaining to phraseology, as discussed above, the Supreme Court of England considered the meaning of the words "contracted" and "sustained". The court had no difficulty in interpreting the word "contracted" as being levelled at the catalyst of the disease. However, the Supreme Court of England noted that "disease sustained" did not fall within the same causative analysis.

Notwithstanding this, the court expressed its reluctance to view words or phrases in isolation, and decided that to read "sustained" as meaning "developed" or "manifested" would be to ignore the underlying focus of the insurance cover. Lord Mance held that "the disease may properly be said to have been sustained by an employee in that period when it was caused or initiated, even though it only developed or manifested itself subsequently"5.

Special approach to mesothelioma

The case of Fairchild and Barker provided a special consideration and exception to mesothelioma cases, in that the plaintiff need not prove that the negligence caused the damages suffered. This is because the symptoms develop a long while after the asbestos fibres are inhaled.

In this respect, Lord Mance concluded:

"the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if ... the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in the course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond"6.

In light of this, the Supreme Court of England decided that EL policies should cover claims for mesothelioma. This was the decision of the court, regardless of the premise that, as a question of fact, the mesothelioma cannot be proven to have been caused by the actions of the employer during a particular policy year.

As discussed previously, the Supreme Court of England took judicial notice of Fairchild and Barker and held that the special rule in Fairchild and Barker resulted in doctrine that is a matter of law, which is in essence "those creating the risk are deemed to have caused the injury".

Interestingly, Lord Phillips (President of the Supreme Court of England) dissented on this special consideration point and suggested that this was an incorrect interpretation of the "special rule". His view was, essentially, that EL cover should not cover mesothelioma claims where the year of contraction cannot be proven. He was of the opinion that it is the prerogative of parliament, and not the courts, to impose liability on insurers when their insured cannot prove injury was caused during a specific period of cover.

Current position

The Judgment of the Supreme Court of England has restored a large degree of certainty and in many ways retained the status quo before the test cases were heard. Lord Mance held that, "the natural inference to draw from the references to being engaged in the employer's service and in work forming part of the employer's business is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occurring during it"7. Meaning that it will be difficult for insurers to repudiate cover on the basis that the insured cannot provide specifics with regard to the period of cover, under which the insured is claiming.

This is essentially bad news for insurers, although the benefits of achieving the level of clarity provided by the Supreme Court of England cannot be underestimated.


1 (2012) UKSC 14, on appeal from: (2010) EWCA Civ 1096

2 [2003] 1 AC 32

3 (2006) EWCA Civ 50

4 Paragraph 21 (2012) UKSC 14, on appeal from: (2010) EWCA Civ 1096

5 Paragraph 50 (2012) UKSC 14, on appeal from: (2010) EWCA Civ 1096

6 Paragraph 18(2012) UKSC 14, on appeal from: (2010) EWCA Civ 1096

7 Paragraph 27(2012) UKSC 14, on appeal from: (2010) EWCA Civ 1096

8 Minister of Finance & others v Gore NO 2007 (1) SA (SCA) par 17 referring with approval to Van Staden v Fourie 1989 (3) SA 200 (A) and Nedcor Bank Bpk v Regering van die Republiek van Suid-Afrika 2001 (1) SA 987 (SCA)

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.