Collectively referred to as the ‘Trigger litigation’, Durham v BAI (run off) Ltd & ors [2008] consolidated six test cases in the High Court that sought clarification as to what ‘triggers’ an employers’ liability (EL) policy to pay compensation to victims of mesothelioma (a form of cancer caused by previous exposure to asbestos). As well as its impact on the insurance industry, Burton J’s judgment of November 2008 is of great importance to all employers whose workers may be at risk of developing asbestos-related or other long-term injuries.
Background to the ‘Trigger Litigation’
To understand the background of this litigation it is necessary to consider the judgment in Bolton Metropolitan Borough Council v Municipal Mutual Insurance and Commercial Union [2006].
In Bolton Mr Green was employed at Bolton Council’s premises by a subcontractor. When he developed mesothelioma, the council settled his claim and then sought to recover an indemnity under its public liability policy. A dispute over liability arose between the two defendant insurance companies, who had provided cover over consecutive periods. Both policies used an ‘injury occurring’ wording, so that cover is provided if the insured becomes liable for an injury or illness that occurs during the policy period.
The High Court considered whether the injury occurred:
- when the claimant inhaled the asbestos fibre; or
- when symptomatic changes began to occur.
Mr Green had been exposed to asbestos in the early 1960s and he then died of mesothelioma in 1991. Medical evidence suggested that noticeable symptoms had begun around ten years earlier in 1980, for which year the defendant insurer, Municipal Mutual Insurance (MMI), was on risk.
Both at first instance and on appeal the judges agreed with option b), and it was held that the claim was ‘triggered’ when the malignancy started to develop, or possibly when symptoms began to manifest. MMI was therefore held to be liable to indemnify the council.
Durham
EL policies traditionally respond on a causation basis, so that cover is provided if an injury is ‘caused’ during the policy period. In cases of mesothelioma, the ‘causation’ date was traditionally taken to be the date or period of inhalation.
Following the decision in Bolton, several insurance companies, predominately those in run-off,1 attempted to apply the judgment to EL claims and refused to make compensation payments when they were not on risk at the time the malignancy started to develop. The claims were pursued, giving rise to the ‘trigger litigation’.
The litigation invited representations on behalf of all groups who might be affected by it, and the resulting judgment provides a detailed analysis of mesothelioma claims. In summary, Burton J rejected the defendants’ arguments and held that an insurer that had provided EL cover for ‘injury sustained or disease contracted’ was liable in a mesothelioma case if it had issued the policy in force at the time the employee inhaled the asbestos fibres, rather than if it had been on risk at the time the tumour developed.
Burton J took a pragmatic commercial view of EL policies and rejected technical legal arguments that would have enabled many insurers to avoid payment. He acknowledged that the insurance industry had traditionally paid such claims on an exposure basis for over 50 years.
Significantly, Burton J did accept that the injury did not occur at the point of inhalation but later, when the tumour/symptoms had developed. In contrast to Bolton, however, it was his view that only when a tumour began exceptional growth would a claimant start to suffer mesothelioma. According to the medical evidence before the High Court, this was found to be approximately five years before symptoms manifested themselves.
What next?
The defendants were given permission to appeal and, as many mesothelioma claims remain unpaid pending the result of the litigation, it has been confirmed that the appeal will be expedited. While the dispute was primarily between insurers, its outcome has significant implications for employees and employers alike.
A reversal of the judgment on appeal could leave ‘black holes’ for many claimants, who could find themselves without any recovery if their employer or its insurer, at the time that the symptoms appeared, were no longer trading. Similarly, it could create huge exposures for businesses who were expecting their insurers to cover claims on the traditional exposure basis but who would therefore be without insurance cover. Given the current economic climate, which is particularly affecting the construction industry where the majority of claims originate, the Court of Appeal may take account of public policy considerations and the impact that a reversal of Burton J’s judgment would have.
By contrast, if an appeal were to succeed, it is possible that the government would intervene and provide public funding to compensate claimants without other recourse.
Several points still require clarification. Given that Burton J found that symptoms manifest themselves within five years of exceptional tumour growth, it is arguable that no contribution should be due from insurers on cover within five years preceding manifestation. Similarly, it is not clear if the judgment in Durham is applicable to other latent, long-tail diseases such as black lung disease, deafness and hand arm vibration syndrome (HAVS).
The decision highlights the importance for employers of keeping accurate personnel and insurance records. The Health and Safety Executive notes that the annual number of mesothelioma deaths has increased considerably over the period for which statistics are available; there were 2,056 deaths in 2006 compared to 153 deaths in 1968. Sadly, asbestos-related claims continue to cast a long shadow, as the latest projections suggest that the number of deaths from mesothelioma in the UK will peak at up to 2,450 per year by around 2015.
By Nick McMahon, partner, and Kate Fortune, solicitor, in the property and casualty risks group, Reynolds Porter Chamberlain LLP. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
at-a-glance guide
- The judgment applies to mesothelioma claims brought under an employers’ liability policy. It does not apply to claims brought by third parties who were not employees.
- The ‘trigger’ for a claim is the date or period of inhalation of asbestos, rather than the date on which symptoms arose.
- The insurer on risk will be the one whose policy was in force at the trigger date.
- If no policy exists or can be identified for that date, the employer company or its successor would be uninsured for any liability.
points for employers
- Your company may be liable for asbestos-related claims if it is a successor to a previous business with relevant exposures, even if the nature of the company has changed significantly.
- Does your company retain a full insurance history and copy policies for itself and any predecessor companies in case any claims are made?
- Has your company made provision in respect of any periods for which insurance was not purchased or for which no records can be found?
- Are personnel records for former employees retained and updated?
note
- An insurance company is in ‘run off’ when it is either being wound up or no longer writes new business in a particular line. It will let current policies run to their expiry date and will continue to deal with claims on old policies.