The Supreme Court has today established that all employers’ liability (EL) insurance cover is triggered at the point of exposure to toxic materials that cause the asbestos-related disease mesothelioma rather than when the disease starts to develop.
The ruling has been widely praised by the claimant community. Norton Rose partner Michael Mendelowitz sums up the tone: “It brings clarity to an issue in relation to which the claims of the appellant insurers involved had given rise to significant uncertainty. In practical terms, it means employers should now be able to claim on older policies that they held when their employees were first exposed to asbestos. It also means that employees can claim direct against the original insurers in instances where the employer has gone out of business by reason of insolvency.”
For the victims and their families today’s ruling brings to an end an uncertain six-year legal battle.
Yet some suggest that the case need never have come to court had a legal loophole been created in Bolton Metropolitan Borough Council v MMI & Commercial Union(2006).
Pre-Bolton, EL insurers had accepted that pay-outs on mesothelioma claims were triggered at the point the claimant was exposed. Similarly, public liability insurance was governed by the occurrence trigger, where the insurer on cover at the point of exposure is responsible for the claim.
Bolton argued that under the PL policy it was the insurer on cover at the time of the development of tumour who should compensate rather than that at the time of exposure. The court agreed.
Following the ruling, four runoff insurers – Builders Accident, Independent, Excess and Municipal Mutual – which had EL policies that were worded in a very similar way to the PL policy in Bolton, started to decline EL claims on the Bolton principle.
A year later, MMI instructed lawyers to launch proceedings against 10 local authorities and live insurer Zurich, to clarify the position. Should the runoff insurers be liable because they were on cover at the point of exposure or should the live insurance market take the hit because they were on cover at the point the disease manifested itself.
The local authorities were selected because, as solvent employers, they would be liable for outstanding mesothelioma claims. Also defending was Akzo Nobel UK and Amec, both companies with asbestos liabilities. Insurance giant Zurich represented the interests of the live insurance market, contending that the EL policy trigger should not be switched from historic exposure to present-day injury.
The crux of the dispute focuses on the meanings behind two sets of wordings: ‘sustained’ and ‘contracted’.
The High Court ruled that both wordings meant ‘caused’, leaving the runoff insurers liable from the point of exposure. The CoA, however, could not agree on a suitable outcome.
Lawyers representing the victims told clients that two points had been reached.
Firstly, that ‘sustained’ means that the policy that was in force when the tumour began to develop is right and, secondly, if the policy states ‘contracted’ then claimants should revert to the cover in force at the time of exposure.
Today’s decision brings an end to that confusion and clarifies once and for all that EL cover is triggered at the point of exposure to toxic materials rather than when the disease starts to develop.