LONDON - (Mealey's) In a landmark majority decision, the United Kingdom Supreme Court on March 28 overturned a split ruling on what constituted the "trigger" for an insurer's liability to indemnify an insured, finding that an insurer's obligation to indemnify an employer for mesothelioma occurs at the time of asbestos exposure (Employers' Liability Insurance "Trigger" Litigation: BAI [Run Off] Ltd v Durham & Ors  UKSC 14, United Kingdom Sup.).
(Judgment. Document #64-120417-002X.)
Original Test Case
The original test case was held in the England and Wales High Court, Queen's Bench Division. The nine-week case was a collective hearing of six actions known as the "trigger litigation." The action was brought by BAI (Run Off) Limited Independent Insurance Co. Ltd., Excess Insurance Co. Ltd., Zurich Insurance Co. and others.The six consolidated actions are Durham v. Builders Accident Insurance (Run Off) Ltd. (In scheme of Arrangement), Fleming & Addleston v. Independent Insurance Co. Ltd. (In Provisional Liquidation), Edwards v. Excess Insurance Co. Ltd., Thomas Bates & Son Ltd. v. Builders Accident Insurance [Run Off] Ltd. (In scheme of Arrangement), Akzo Nobel UK Ltd. Plc v. Excess Insurance Co. Ltd. and Municipal Mutual Insurance Ltd. v. Zurich Insurance Co. & Others.Justice Michael John Burton of the High Court ruled that the injury was sustained when it was caused and that the disease was contracted when it was caused under the subject policies. Justice Burton found that the claimants, employees and employers in the actions are entitled to coverage from the employers' insurers at the time of exposure. The insurers appealed to the High Court of Justice, Court of Appeal. Actionable Injury
The insurers based their case on a reinterpretation of the "sustained" wordings in the ruling issued by the England and Wales Court of Appeal in Bolton MBC v. Municipal Mutual Insurance Ltd. ( 1 WLR 1492., England and Wales App.). In a split ruling, the appeals court reversed the High Court's ruling that insurers are liable to pay compensation to claimants who developed mesothelioma as a result of asbestos exposure in the workplace if they insured the employer at the time the exposure occurred. The appeals court found that in some actions, employers' liability insurance is "triggered" by the development of the disease.After the split appeals court ruling left some uncertainty, the test case trigger issue was appealed to the Supreme Court.
The Supreme Court said various features in the employers' liability policies established their correct construction, including that the wording of the policies required that the course of employment be contemporaneous with sustaining an injury and that the wording shows a close link between actual employment completed during each period and the premium that was agreed on by the parties in relation to the insurer's risk during that period. The Supreme Court said the Employers Liability Compulsory Insurance Act 1969, which states that every employer "shall insure, and maintain insurance . . . against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment," also directs to the proper interpretation of the policies.
In a majority ruling, the Supreme Court dismissed the insurers' appeals. The Supreme Court found that the insurance policies, when read as a whole, operated on a causation basis and covered liability that was generated by the activity of employers during the insurance policy periods.
"For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being 'caused' during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker [Fairchild v. Glenhaven Funeral Services Ltd. (2003) 1 AC 32 and Barker v. Corus UK Ltd. (2006) 2 AC 572). Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion [fulfills] precisely the conditions under which these policies should and do respond," Lord Justice Mance wrote for the court.
The case was heard by Lords Mance, Kerr, Clarke and Dyson. President Lord Justice Phillips partially dissented, finding that the approach taken in Fairchild and Barker did not give rise to an implication of when mesothelioma is initiated.
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