EMPLOYERS’ LIABILITY TRIGGER LITIGATION SUPREME COURT JUDGMENT – HANDED DOWN 28th MARCH 2012
“LET THERE BE LIGHT!”
Tim Smith has been acting as junior counsel for Mrs Fleming in one of the 6 lead actions in the “Employers’ Liability Trigger Litigation” since first advising in early 2007.
Five years later on 28th March 2012 the Supreme Court handed down its judgment in what has been described as a “Landmark ruling” in asbestos litigation - fully endorsing the Claimant’s case that Independent Insurance Company should indemnify its insured in respect of its liabilities to mesothelioma victims where those victims had been exposed to asbestos during the period of insurance provided by the insurer.
This litigation has been through many twists and turns - starting with a 9 week trial in front of Burton J in the summer of 2008, pausing for a 10 day hearing in the Court of Appeal in 2009, and finally coming to the Supreme Court for an 8 day hearing in December 2011.
This litigation followed the Court of Appeal decision in Bolton v MMI & CU 2006 1 WLR 1492 in which Tim Smith acted as junior counsel for CU in successfully arguing that a Public Liability Policy (with “occurring” or “happening” as its temporal insurance trigger) responded to a mesothelioma claim at the time when the tumour developed and not at the time of exposure to asbestos. 4 insurance companies - either insolvent or in run-off (including MMI) then attempted to use the reasoning inBolton to reject claims under their Employers’ Liability policies by arguing that policy wording which provided an employer with an indemnity in respect of his liabilities to an employee for injury or disease that was sustained or contracted was “triggered” on the date of onset of tumour and not on the date of inhalation.
The Claimants all succeeded before Burton J.
In the Court of Appeal - each judge gave different reasons for either upholding or overturning the first instance decision and far from providing much needed clarity only served to provide uncertainty and confusion. In summary however the Court of Appeal found:-
i. That for EL policies with “contracted” wording the “time hook” or “trigger” for the policy was the causative exposure to asbestos during the policy year;
ii. That for pre-ELCIA polices with a “sustained” wording the time hook was the onset of the tumour during the policy year;
iii. That for post-ELCIA policies with a “sustained” wording the time hook was the causativeexposure during the policy year
Mrs Fleming successfully resisted Independent’s appeal to the Court of Appeal.
The Supreme Court has now handed down a judgment which provides much needed uniformity clarity and certainty to the insurance market as well as comfort to the many of mesothelioma victims who might otherwise have lost the compensation to which they were otherwise entitled.
The core issue before the Supreme Court was - what was required to take place in any one policy year to cause the different policies to respond so as to indemnify the insured against its liabilities - was it exposure to the asbestos that “initiates” or “causes” the mesothelioma or was it the onset of the tumour.
The Supreme Court Judgment addresses two issues - one of construction and one of causation. All 5 Justices agreed on the principle of construction; Lord Phillips dissented on the issue of causation and the result. The lead judgment was given by Lord Mance.
On this issue the Supreme Court held unanimously that all the EL policies - whether with “contracted” or “sustained” wordings - and whether written before or after the ELCIA- responded to and operated by reference to the initiating or causative factor of the mesothelioma. In reaching this conclusion Lord Mance stated that it was important to avoid an over concentration on single words and phrases viewed in isolation and that the policies should be construed by looking at them broadly and as a whole. He identified 5 features of an EL policy that underlay his conclusions on construction as follows:-
- The wordings on their face require the course of employment to be contemporaneous with the sustaining of injury;
- The wordings demonstrate a close link between the actual employment undertaken during each policy period and the premium agreed to be payable for the risks undertaken by the insurers in respect of that period;
- The potential gaps in cover if the insurances only address risks arising from employment during the insurance period;
- On the insurers’ case employers would be vulnerable to any decision by insurers not to renew cover;
- The way in which the policies deal with the issue of extra-territorial scope which could operate to very curious effect if sustained wording looks to the experiencing of a disease rather than causation.
Lord Mance found that a construction of the policies that was consistent with both the very nature and underlying purpose of the insurance was one which looked to the causation or initiation of the disease which injures the employee.
In reaching his conclusions on construction Lord Mance upheld the argument consistently pursued on behalf of Mrs Fleming that the ELCIA required EL policies to be written on a causation basis (an argument that until reaching the Supreme Court had only found favour with Rix LJ); it would seem that the other Justices agreed either expressly or implicitly with this opinion and this area of confusion has now also been laid to rest.
The issue of causation became a key feature of the Supreme Court Judgment and a thorough review was undertaken of the genesis and meaning of the asbestos jurisprudence emanating from the trio ofFairchild / Barker / Compensation Act 2006 as interpreted later in Sienkiewicz.
In his dissenting opinion Lord Phillips stated that the principle to be derived from Fairchild/Barkerwas that in cases of mesothelioma the basis of liability is the wrongful creation of or contribution to the risk of mesothelioma by exposure to asbestos. On his analysis the damage is the creation of the risk which can be apportioned between tortfeasors. However, exposure to the risk of mesothelioma does not satisfy the concept of injury nor the concept of causation for the purposes of the EL policies which require injury to have been sustained and/or disease to have been contracted during the policy period. On this basis he found that it was for the insured to prove that as a matter of fact the mesothelioma was initiated during a particular policy year and this they could not do.
Fortunately for the victims of mesothelioma and their families, as well as the solvent employers, Lord Phillips was a lone voice. Lord Clarke stated that this conclusion was remarkable; whilst Lord Mance recognised that if Lord Phillips was correct any causation policy would only respond in the case of a single employee exposed by a single employer holding continuous cover with a single insurer - such a case would be rare indeed.
The majority agreed that the special rule of causation founded in Fairchild and Barker operates byrelaxing the rule of causation so that a “weak” or “broad” causal link between tortious asbestos exposure and the victim’s mesothelioma was sufficient to found liability by deeming the exposure to asbestos of the employee who subsequently develops mesothelioma to have been the cause of his mesothelioma. This way of interpreting the effect of Fairchild and Barker does not pose any difficulties in terms of policy response. The EL policies respond to the employers’ liability for the disease of mesothelioma caused by the tortious exposure to asbestos in the policy period.
Bolton v MMI & CU
Bolton was not overruled and remains the law in so far as PL policies are concerned. It is likely however that in view of Burton J’s analysis of the medical evidence in the Trigger Litigation - the policy that responds is the one in force 5 years prior to diagnosability of mesothelioma.
- The market can now return to the position most insurers had adopted prior to 2006;
- Many cases that have been stayed pending a decision in this case can now proceed to settlement;
- Calls for an ELIB may now be reduced.
- The clouds following the Court of Appeal have now been lifted
Supreme Court Links
Judgment - http://www.supremecourt.gov.uk/docs/UKSC_2011_0031_Judgment.pdf
Press summary - http://www.supremecourt.gov.uk/docs/UKSC_2011_0031_ps.pdf
Press links - http://www.thelawyer.com/supreme-court-goes-against-insurers-in-trigger-litigation-ruling/1011992.article