Case Preview: Employers’ Liability Insurance “Trigger Litigation”
14 Wednesday Dec 2011
The Supreme Court is currently hearing nine appeals arising out of six test cases collectively known as the “Trigger Litigation”. The ‘trigger’ in dispute is insurers’ liability under various Employers’ Liability (“EL”) policies where an employee has contracted mesothelioma many years after their initial exposure to asbestos.
The issue in all the actions is whether the insurers liable for the employees’ claims are those that insured employers at the time the employee inhaled the asbestos fibres, or those, if any, that currently insure the employer when the exposure manifests itself in cancer. Following the decision of the Court of Appeal in Bolton MBC v Municipal Mutual Insurance Ltd  EWA Civ 50 regarding a Public Liability (“PL”) policy, some insurers have ceased to pay claims on an “exposure” basis. Employees whose claims would have been met under policies at the time they were exposed to asbestos may find they cannot claim when a tumour appears either because there is no insurer currently in place, the employer having gone out of business, or because the employer’s current EL policy does not cover the claim following Bolton.
The decision in Bolton
Bolton concerned a claim under a PL policy for mesothelioma. The policy covered liability for injury or illness “when such injury, illness . . . occurs during the currency of the policy“. The Court of Appeal found that the injury did not occur at the time of exposure, but much later when the mesothelioma appeared.
Traditionally, EL insurers would accept claims for mesothelioma on the basis that exposure was the trigger. However, following the decision in Bolton, many insurers began to reject such claims. It was out of this shift in policy that the “Trigger Litigation” arose.
Durham v BAI (Run Off) – Facts
The first lead case concerned Mr Screach, who was employed by G & C Whittle Ltd between 1963 and 1968, during which time he was exposed to asbestos. He was diagnosed with mesothelioma in April 2003 and died that November. The defendant, BAI, provided Whittle with EL insurance throughout the period of Mr. Screach’s exposure.
The wording of the EL policy at the time provided that:
“. . . the Company will . . . indemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the Insured or any dependant of such Employee in respect of any claim for injury sustained or disease contracted by such Employee between the [first day and last day of the period of insurance] both inclusive . . .”
Whittle has since been wound up and so there was no EL policy in place at the point Mr Screach was diagnosed with the disease. Instead he claimed under the BAI policy. BAI (now in a scheme of arrangement), rejected Mr Screach’s claim in 2006 following the Bolton decision. The claimant is Mr Screach’s daughter.
High Court Decision
In his judgment of 21 November 2008 ( EWHC 2692 (QB)), Burton J found for the claimant. The medical evidence pointed to the fact that there was no disease or injury at the point of or in the period directly following the claimant’s exposure to asbestos; the disease and injury followed many years later. The EL policy covered the employer in respect of injury resulting from exposure during the policy to a victim while he was an employee. If the policy was triggered when the cancer developed, then Mr Screach would not be covered because he had ceased to be an employee. However, if the policy was triggered at the date of exposure, then Mr. Screach’s injuries would clearly be covered by it.
Turning to the construction of the EL policies, it was held that the words “sustained” and “contracted” were, in their context, synonymous with “caused”, Bolton being distinguished. It followed from such an interpretation that Mr. Screach’s injuries fell within the wording of the EL policy.
Court of Appeal
The appellant insurers argued that Burton J erred in his construction of the EL policies, and that in fact a reading of “sustained” or “contracted” as synonymous with “caused” did not necessarily alter the policies’ meanings. An extract from the EL policy of the third lead case was given as an example :
“If at any time during the said period, any employee . . . shall sustain any personal injury”
This extract would be read, according to Burton J’s construction, as:
“If at any time during the said period, any employee . . . shall be caused any personal injury”
It was argued that such a construction would still leave the injury having to be caused during the policy period, rather than the cause of the injury having to occur in that period. The claimants argued that Burton J’s construction was correct and that, notwithstanding any primary reading of the language, the EL policies must be read in the context of the commercial understanding and public policy to which they were designed to give effect. It should be noted that the EL policies are compulsory and intended to provide security for employees who suffer injuries for which their employer is liable.
The High Court decision was overturned by a 2:1 majority on 8 October 2010, with Rix LJ giving the leading judgment in the Court of Appeal decision. Those hoping for clarification in the Court of Appeal’s judgment were to be disappointed – the judgment, running to over 160 pages, contains several different approaches.
However, a few key principles of construction arose – it was held that an injury was “sustained” when it occurred, and therefore EL policies containing that drafting could be read in the same way as the PL policy in Bolton, the injury not occurring until the onset of mesothelioma. In contrast, where an EL policy referred to an injury or disease being “contracted”, this was held to be synonymous with the word “caused” and therefore the insurer at the point of exposure would be liable for any claim.
Given the continuing uncertainty in the law following the Court of Appeal’s ruling, the appeal to the Supreme Court comes as no surprise. The decision will clearly have significant public policy ramifications (the Secretary of State for Work and Pensions is an interested party), and given the large number of claims contingent on the outcome the appeal has been expedited.
The case will determine whether some insurers will have to return to the pre-Bolton approach of meeting claims on an exposure basis, clearly a significant liability compared to the Bolton position, or whether the Bolton “injury” approach will prevail, an outcome that could leave many victims of mesothelioma without compensation or a remedy.
The appeals are:
BAI (Run Off) Ltd (In Scheme of Arrangement) v Thomas Bates and Son Ltd
BAI (Run Off) Ltd (In Scheme of Arrangement) v Durham
Municipal Mutual Insurance Ltd v Zurich Insurance Company
Municipal Mutual Insurance Ltd v Zurich Insurance Company & Adur District Council & Ors
Independent Insurance Company Ltd v Fleming & Anor
Municipal Mutual Insurance Company v Zurich Insurance Company & Ors
Excess Insurance Company Ltd v Edwards
Excess Insurance Company Ltd v Amec plc