BLM distributed a client newsflash on today’s Court of Appeal EL Trigger Litigation judgment.
Please see below:
EL Trigger Litigation: The complex outcome
8 October 2010
The Court of Appeal gave its long awaited judgment in the EL Trigger Litigation on 8 October 2010. It had been hoped that this hugely anticipated judgment would bring certainty to the question of which insurer should meet a mesothelioma claim resulting from historic asbestos exposure. What has emerged however is a very complex outcome. The decision, covering more than 160 pages, has almost as many permutations as there were parties to the case.
- Bolton v MMI set the scene in 2006. It was a public liability (PL) case in which it was held that a mesothelioma victim sustains injury for the first time when the tumour starts to develop, 10 years before the manifestation of symptoms.
- Four insurers (Builders Accident, Independent, Excess and Municipal Mutual) had employers liability (EL) policies which were worded in a very similar way to the PL policy in Bolton and which responded if the injury was sustained or contracted during the term of the policy. Those insurers then started to decline EL claims on the Bolton principle.
- Until 2006 insurers had always taken the view that EL policies responded on a causation basis (i.e. if exposure occurred during the life of the policy), and the adoption of the ‘Boltonite’ approach had the effect of shifting insurer responsibility from exposure to the time when the tumour started to develop. This led to vast “black holes” in insurance cover.
- Strikingly, even if the tumour developed during the currency of the policy, claimants who were ex-employees at the time would not on the Boltonites’ argument be covered. This issued weighed particularly heavily on Burton J at first instance. Having considered the overwhelming evidence that until Bolton, the market (including the four insurers) used the verbs ‘cause’, ‘contract’ and ‘sustain’ interchangeably, he concluded that the four insurers’ policies should respond on a traditional causation basis.
- The Boltonites appealed.
The Court of Appeal judgment
The Court of Appeal judges took divergent approaches. However, the following principles emerge:
- Where the wording used is “sustained”, the policy which responds is the one in force when the tumour starts to develop.
- Where the wording used is “contracted” (that is synonymous with the word “caused”) then the policy in force at the time of exposure responds.
The lack of unity means each judge’s reasoning needs to be considered in turn.
- A disease is contracted (within the meaning of the policy) when it is caused.
- Mesothelioma is not sustained on inhalation. Although this frustrates the commercial purpose of the policies (to provide both cover for employers and security for employees), there is no ambiguity in the wording sufficient to justify an alternative interpretation.
- Policies which began after the Employers’ Liability Compulsory Insurance Act 1969, (which came into force in January 1972), respond if the mesothelioma was caused during the life of the policy. This is because such policies are deemed to comply with the Act.
- Insurers were entitled to depart from their previous practice of indemnifying and paying mesothelioma claims on a causation basis as the aetiology of mesothelioma became better understood.
- Considered the court was bound by Bolton. Policies with a “sustained” wording would only respond at the date when the tumour starts to develop. By contrast, policies with a “contracted” wording would respond if in force at exposure.
- The policies should be interpreted according to the understanding of the parties at the time they were entered into. Until Bolton v MMI it was not appreciated that a mesothelioma victim “sustains” injury only when the tumour starts to develop.
- Considered she was not bound by Bolton as that decision related to public liability cases only.
This is an extraordinary judgment. Such was the lack of consensus that the leading judgment (Rix LJ) has a seven paragraph postscript responding to the other judgments.
Crucially, Rix LJ considered the court bound by Bolton; had this not been the case he would have preferred to hold that where a victim develops mesothelioma there is actionable injury from the date of inhalation, because liability is created when an employer has materially contributed to the risk. Having not been allowed to arrive at his preferred solution, Rix LJ acknowledged that his decision led to “an unfortunate conclusion”.
For the market, this lack of certainty is deeply troubling. Public authorities will now have to make provision for exposure prior to 1974 (due to the MMI wording), and private sector businesses will have to meet claims if they have a pre-1972 ‘sustained’ policy.
Both defendants and insurers will, by virtue of the joint and several liability provisions in section 3 of the Compensation Act, become liable for an increasing burden of mesothelioma claims as they will now need to fill the insurance “black holes” which result from the vindication of the Boltonites’ position on EL policies written on a ‘sustained’ basis.
Further appeals to the Supreme Court are inevitable. Until that time, the judgment means that some claimants who have no solvent employer to sue may go uncompensated.
Partner, BLM Birmingham
T: 0121 633 6602
Partner, BLM Liverpool
T: 0151 471 5455
Henry Bermingham and Brian Goodwin both acted for the policyholders Derby City Council, Middlesbrough Council and AMEC respectively.