UK: Mesothelioma And The Insurance Trigger

Last Updated: 8 April 2012
Article by Anthony Menzies, James Crabtree and Susannah Wakefield

Employers' Liability Policy Trigger Litigation
Durham v BAI [2012]1
Supreme Court, 28 March 2012

Background

This litigation concerned claims brought against insured employers by sufferers of mesothelioma, an incurable form of lung cancer caused by prolonged exposure to asbestos. A notable characteristic of the disease is that it can take many decades for it to develop after the original exposure to asbestos, and in some cases it might only be diagnosed by way of postmortem. In the past, the medical evidence suggested that malignant changes associated with the disease typically occurred about 10 years before the onset of symptoms, although more recently this has been revised by many experts to five years. At any rate, once the disease is identified the prognosis is poor. Most sufferers die within about 18 months of diagnosis. The condition is a major issue for the employers' liability insurance market, as current projections forecast a peak in the number of mesothelioma sufferers in the next 20 years.

Traditionally, EL insurers in the UK have as a matter of practice adopted the "exposure" principle in determining cover for mesothelioma claims. In other words, the responsive EL policy will be that in place at the time when the claimant was exposed to asbestos, rather than that prevailing at the time of onset of the symptoms, or diagnosis of the condition. Where, as is common, exposure spanned a number of policy years (perhaps an entire working life) liability would be shared between the various insurance interests pro rata to their time on risk.

That practice was thrown into doubt by the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance [2006]2. Importantly, the Bolton case was concerned with public liability, not employers' liability insurance. Under the terms of the relevant policy in Bolton, the insurer agreed to indemnify the insured in the event that it became liable for injury or illness which "occurs during the currency of the policy". The court held that the injury to mesothelioma sufferers occurred not when they were exposed to asbestos but much later, at the point when they became fatally ill, which typically was thought at the time to be about 10 years before exhibiting outward symptoms.

Commercial Court

The Bolton decision caused many EL insurers to look again at their approach to settlement, as it appeared that they might not be liable to indemnify on a time exposed basis after all. Accordingly, the matter went before the Commercial Court in a series of consolidated test cases, known as the Employers' Liability Policy Trigger Litigation, and on which Judgment was issued on 21 November 2008.

Generally speaking, the Commercial Court held that EL policies were not the same as public liability insurance. A typical EL policy was not concerned with the date of "occurrence", so much as the point at which "injury or disease was sustained or contracted" or "injury or disease caused". The Judge held these latter two formulations to be synonymous; the trigger for payment under an EL policy was in each case the date of exposure, such that several policies covering an extended period of exposure to asbestos would continue to be liable, as had been assumed previously.

Court of Appeal

The insurers appealed against this decision, upon which the Court of Appeal handed down its judgment on 10 October 2010.

Mindful that the various policies contained slightly different wordings, the judges in the Court of Appeal considered separately the meaning of the phrase "injury sustained" and "disease contracted". Agreeing with the insurers, both Rix LJ and Burnton LJ held that an "injury" was "sustained" only when the claimant became ill, and hence the "sustained" wording in an EL policy had the same meaning as the "occurring" wording in the public liability policy considered in the Bolton case. To this extent, therefore, they disagreed with the decision of the Commercial Court. While it was true that this meaning would, on the face of it, conflict with the apparent commercial purpose of an EL policy, it was not an absurd or meaningless or irrational interpretation.

As to the meaning of the phrase "disease contracted", all of the judges in the Court of Appeal held that this was capable of referring to the disease in its origin (ie exposure), albeit for slightly different reasons. The result, by a majority, was that EL policies containing "injury sustained" wording were found not to be responsive to mesothelioma claims on an exposure basis, whereas the reverse was true of those issued on a "contracted" basis.

Supreme Court

The matter proceeded then to the Supreme Court, in which both sides appealed. In judgment handed down on 28 March 2012, the Supreme Court upheld the view of the Court of Appeal that policies with "contracted" language were obliged to indemnify by reference to the time of exposure, and by a majority found the same to be true of those with the "sustained" wording, thereby overturning the Court of Appeal on the latter point.

In arriving at the proper construction of the "sustained" wording, it was necessary to look beyond the strict words and to consider the general nature and purpose of the policies. If the purpose of employer's liability was to focus upon the consequences of employment activities during the insurance period, such purpose would not be served if "sustained" were to be understood as meaning "manifested". In most cases, the condition would only become manifest long after the employment had come to an end. This interpretation was also supported by the implementation of the Employers' Liability (Compulsory Insurance) Act 1969, after which employers were obliged to take out insurance in respect of bodily injury sustained by employees and arising out of and in the course of their employment. Against this background, the Supreme Court held that the "sustained" trigger was concerned with the causation of the disease, being the exposure from which the disease arose, even though it may only manifest itself subsequently.

This still left the obligation to demonstrate the presence of an actual causal link between exposure to which the employer had subjected its employees and the manifestation of a disease many years later. The court acknowledged that exposure to asbestos could in part be attributable to general environmental dust, and that in some cases mesothelioma could be due to an unknown cause unconnected with asbestos altogether. However, where such independent factors could each be sufficient to cause the disease, the majority of the Supreme Court was satisfied that the case could be made out on a weaker causal link. Applying the principle in Fairchild v Glenhaven Funeral Services Ltd [2001]3, it was enough that exposure in the course of employment could have caused the mesothelioma, even though it could not be shown as a matter of probability to have done so.

Footnotes

1) [2012] UKSC 14

2) [2006] 1 WLR 1492

3) [2002] UKHL 22

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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