Done and dusted?
4 August 2008
Many within the insurance industry will have been keeping a careful eye on the employer’s liability trigger litigation – a series of test cases that began in June. These will likely determine the basis on which an insurer becomes liable for mesothelioma claims, but could also reassert the ability of asbestos to rewrite the legal rulebook.
Despite the fact that Marco Polo encountered asbestos (in the form of woven materials known as ‘dragon-cloth’ in Central Asia), and that even the ancient Greeks noted the debilitating effect of the substance on slaves in mines where the mineral was extracted, it was not until the 20th century that the full effects of asbestos on the human body were appreciated and legally regulated. Across Europe and the US, legislators began to recognise the potentially fatal impacts of asbestos and required employers to limit their workers’ exposure to it.
The advent of Ralph Nader and the consumer rights movement in the US in the 1960s and 1970s saw the law turn against manufacturers and employers.
A national restatement of the law of torts opened the door to liability for diseases caused by asbestos. Asbestos-related liability soon made the leap from workers’ compensation to product liability. Plaintiff lawyers seized the opportunity and few asbestos manufacturers survived. Secondary users of asbestos soon fell to the ensuing wave of insolvencies, and eventually even incidental users such as municipalities, schools, hospitals and homeowners woke up to the insidious killer in their midst.
The courts, mindful of the unusual etiology of the diseases that resulted from exposure to asbestos, addressed the theories of liability in tort. Having come up with increasingly variant concepts of ‘trigger’, such as exposure (to the material), manifestation (of a disease) and injury in fact (regardless of the onset of symptoms), the judges turned to the insurance policies that were in place at the time of each of these occasions and looked for coverage.
The wildly varying terminology used by insurers to identify the ‘thing’ that they were agreeing to cover led to a bloodbath among insurers. The ‘exposure’ faction sought to unload responsibility onto the ‘manifestation’ years, and an unholy hunting party of plaintiffs’ lawyers and coverage specialists alike roamed the corridors of law in search of wider and deeper targets of indemnity.
The insurance industry’s battle was largely lost when Judge Ira Brown in California imposed a judicial plague on all their houses with the concept of a ‘triple’ or continuous trigger of coverage that, in many jurisdictions, allows a policyholder to select the policy or policies that provide the most coverage – and claim on them to the ultimate degree. The insolvency whirlwind among US manufacturers and employers shifted its ground and knocked over a few US and UK insurers on its new trajectory.
Recent UK history
In the UK, meanwhile, ‘industry’ measures were swiftly put into place to try to hold back the tempest within the domestic liability market. Special clauses were devised to try to address the coverage of long latency and temporally indeterminate injury in the field of occupational disease. Market agreements were formed whereby major insurers agreed as a matter of practice to admit coverage on what was seen as a reasonable basis, regardless of the precise terms of the policies. Brokers were prevailed upon to seek out long-archived and lost chunks of coverage. The tide of litigation was channelled, although not stopped.
But the steady trickle of victims – and insolvency among employers and insurers alike – has gnawed away at the market’s defences. First at the tort level, major developments occurred in Fairchild v Glenhaven Funeral Services & Ors (2002). The House of Lords abolished the need for proof in mesothelioma cases. When their Lordships later sought to explain that they had not quite wanted to go as far as people thought they had, the UK Government was forced to respond by reinstating the rule in Fairchild by statute. In the more recent case of pleural plaques, judges seesawed their way through the appellate system to a denial of the claimant’s right to make a claim for ‘symptomless damage’. Once again, government, both north and south of the border, is under pressure to legislate to reverse the ruling in favour of the ‘worried well’ claimant.
Now, in the employer’s liability trigger cases, insurance coverage in the UK context has come under close judicial scrutiny for the first time, only 30 years after the US wrestled with the same issues to an uneasy stalemate, which landed the insurance industry with a headache from which it has yet to recover – and to which it has largely failed to react in terms of changing the terms and conditions of coverage used.
The courts are being called upon to decide whether words in an insurance contract mean what they say, or what some or most people think they ought to mean. Seemingly simple questions such as “What is an ‘accident’?”, “What is a ‘disease’?” and “When does an ‘occurrence’ take place?” will be fundamental in deciding whether asbestos makes another seismic intervention in UK law by shaking the rules of contract law to their very foundations.
Peter Taylor is a partner in the insurance and reinsurance dispute resolution team at Lovells