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Companies and local authorities will be able to seek
cover from their insurers after the Supreme Court has ruled that
insurance cover taken out will respond for mesothelioma. Savings of
Ł5 billion have been mooted.
In a judgment handed down in November 2011, the Supreme Court
held that policies of employers' liability insurance which
respond when disease is "sustained" or
"contracted" respond in mesothelioma claims upon
inhalation of asbestos fibres rather than the date of manifestation
of the disease.
The lead judgment of the court was given by Lord Mance. Firstly,
he concluded that policies of employers' liability insurance
are linked intrinsically to the period of cover. Payment is made
with regard to that period and cover relates to the policy period.
Thus he says that great care is taken to tie the premium to the
actual employment. He says this makes the link between the policy
and a later trigger unlikely.
Secondly, Mance indicated that changes in policy wording would
suggest that present insurances should not be read as providing
cover. Further, people will retire, companies will cease trading
and insurance may not be renewed. All suggests the relevant date as
being during the period of employment.
Thirdly, the excess policy is framed in respect of employees in
service. As soon as a delay between employment and occurrence of
symptoms is considered the policy wording would be curious, in
Mance's view.
Fourthly, the Employers' Liability Compulsory Insurance Act
required insurance, in Mance's view, which was only compatible
with a causation worded policy. He described this as a powerful
tool in the interpretation of such policies.
Turning then to the words "contracted" and
"sustained" Lord Mance indicated that he had no
difficulty in treating the word "contracted" as
looking to the causation or initiation of a disease, rather than to
its development or manifestation. In respect of the word
"sustained", Mance indicated that whilst
initially the word may appear to refer to the development or
manifestation of a disease, the only consistent approach in line
with the underlying purpose is one which looks to the initiation or
causation of the disease. He concluded that the disease may
properly be said to have been sustained by an employee in the
period when it was caused or initiated, even though it only
developed or manifested itself subsequently.
Finally, Mance turned to whether the risk of mesothelioma is the
correct analysis of the Fairchild principle and whether the risk
alone, with subsequent injury, can satisfy the concept of causation
for the purpose of the policies of insurance.
Whilst Lord Phillips dissented on this point, Mance and the
remainder of the court concluded that in light of the decisions in
Fairchild, Barker, Sienkiewicz and the Compensation Act
2006, policies which cover diseases "caused"
during the relevant period, should respond where liability for
mesothelioma following exposure to asbestos created during an
insurance period involved a weak or broad causal link for the
disease. Mance stated that the risk of mesothelioma is no more than
an element or condition necessary to establish liability for the
mesothelioma and that the concept of a disease being
"caused" during the policy period must be interpreted
sufficiently flexibly to embrace the rules laid down in
Fairchild and Barker.
In short, Mance concluded that "if (as I have
concluded) 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."
Mark Hemsted, partner, acted for Babergh BC, successful
appellant in the Supreme Court action.
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