Mesothelioma and the Insurance Trigger: Date of Injury - Employers' Liability Policy Trigger Litigation

Durham v. BAI [2010]

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]¹. 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 occurred "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.

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, know 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.

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 it actually occurred, 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. In the case of Rix LJ, this was because the commercial purpose of EL policies pulled towards the causal origins of the disease in the employee's exposure to the noxious activities of his employment. Burnton LJ came to the same conclusion on the basis of the policy wording alone, without recourse to the "commercial purpose" of the EL policies. 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 "disease contracted" basis.

This being the conclusion as a matter of construction of the insuring clauses, the court also had to consider the effect of the Employer's Liability (Compulsory Insurance) Act 1969, and in particular the corresponding standard wording that applied in post-1972 EL policies as follows:

The Court of Appeal held that the effect of the 1969 Act was to render post-1972 EL policies obliged to respond on an exposure basis in the first instance, even those on "injury sustained" language. However, the insurers would have a claim against the employers to recover such part of the said liability as went beyond the insuring terms of the policy.

Footnote

1. [2006] 1 WLR 1492

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