The important legal issue in this test case was to determine the true meaning and effect of the terms of insurance policies that were sold to employers at a time when workers were being negligently exposed to asbestos.
Until 2006, employers’ insurers had always accepted that the policies meant that an insurer on cover at the time of the asbestos exposure would pay the claim even though the worker developed mesothelioma many decades later.
Following a Court of Appeal decision in a Public Liability insurance claim in 2006, a number of employers’ insurers decided to refuse to pay out in mesothelioma claims. Those insurers were Builders Accident Insurance (BAI), Independent Insurance Company Limited (IICL), Excess Insurance Company Limited (EICL) and Municipal Mutual Insurance (MMI). They argued that, despite the universal custom and practice that had always operated throughout the Employers Liability market, the policies really meant that the insurer was not liable if the mesothelioma developed after the period of insurance cover ended.
The terms of the insurance, or “policy triggers”, in dispute were:
BAI “Injuries sustained or disease contracted... during the period of insurance”
IICL “During the period of insurance... shall sustain bodily injury or disease”
EICL “During the period of indemnity shall sustain [any] personal injury by accident or disease”
MMI 1 “Shall sustain any personal injury by accident or disease”
MMI 2 “Shall sustain any bodily injury or disease”
MMI 3 “Bodily injury or disease...suffered... when such injury or disease... is sustained or contracted during the currency of [the] policy”
The central issue the court had to decide was whether the policy trigger was:
a) the inhalation/exposure to asbestos, or
b) the development of the mesothelioma tumour some 40 or more years later.
The most experienced and distinguished experts in the field of asbestos-related disease gave medical evidence at the trial. The court decided that, at the date of inhalation of/exposure to asbestos there is no injury and there is no disease – and even if there were, it was not actionable.
Custom and Practice
The court heard witness evidence from insurers, underwriters, and claims managers. One director of MMI who gave evidence acknowledged that his bonus would be affected by the outcome of the case and that up to £90 million in reserves that had been set aside to pay mesothelioma claims would be released if MMI won.
The court decided that the practice of paying mesothelioma claims on policies covering inhalation/exposure was universal throughout the Employers Liability insurance industry prior to 2006. However, it decided the practice was not binding between insurer and employer and did not constitute "usage" to be incorporated into the insurance contract.
Interpretation of the Insurance Policies
The interpretation, as a matter of law, must be consistent with the factual background, the ordinary and natural meaning of the words used in the policies and the commercial purpose of the insurance. The court also considered what Parliament had intended when it introduced the Employers Liability (Compulsory Insurance) Act 1969 by requiring employers to insure and maintain insurance in relation to employees’ bodily injury and disease
After a trial lasting two full calendar months of evidence and exhaustive legal argument, including 10 days of opening and nine days of closing submissions, the High Court has decided in a judgment running to over 100 pages that the words “sustain/contract” mean “be caused” and “sustained/contracted” mean “caused”.
The conclusion that injury is sustained when it is caused and disease is contracted when it is caused means that the insurance policies in dispute respond to claims against insurers where employers are liable on the basis of inhalation/exposure to asbestos during the policy period.
The technical legal arguments the insurers raised to avoid paying mesothelioma claims have been defeated for the time being. The insurers are likely to seek permission to appeal. Further guidance will be given as soon as the position becomes clear.
In the meantime the decision of the High Court is to be commended as a victory for fairness, justice and common sense in which the support of the trade union Unite has played a pivotal role.