Discontinued Business Group Update

Employers' Liability Policy "Trigger" Litigation

The Court of Appeal recently handed down its decision on the appeal from the decision of Burton J on the six actions, collectively called the "Trigger Litigation". In issue in the case is whether the employers' liability ("EL") insurers who were liable to meet claims arising out of the death of employees from mesothelioma were:

those who insured the employer at the date of inhalation of asbestos fibres; or those who insured the employer (if still in business) when the onset of the disease took place (in many cases, some 35 years after inhalation). The policies in question (broadly) covered "injury sustained" or "disease contracted" during the policy period. Unfortunately, the Court of Appeal delivered three judgments which varied considerably in their reasoning. Lord Justice Rix, delivered the leading judgment and described the outcome of the case as "an unfortunate conclusion." This assessment is reflected in the general disappointment that the judgment has failed to deliver a more cohesive determination.

The conclusion of the Court of Appeal is that different results arise from the different policy language.

Policies including "disease contracted" language are to be construed as being equivalent to policies covering injury "caused" during the policy period, with the result that the policy covering at the time of inhalation will respond. (Rix LJ reached this conclusion on the basis that it reflected the commercial purpose of the policies, although this view was not considered persuasive by Burnton LJ).

"Injuries sustained" language in EL policies is to be construed as meaning the time when the tumour started to develop, although Lady Justice Smith dissented from this view. Accordingly, when "sustained" language is used the policy in effect when the tumour develops responds.

The conclusion with regard to "sustained" wordings is that mesothelioma is not an "injury" until its onset. This conclusion was reached by the Court of Appeal on the basis that they were bound by the earlier Court of Appeal decision in Bolton MBC v MMI [2006] (concerning mesothelioma in relation to public liability policies). Although Rix LJ did not say that Bolton was wrongly decided, he did indicate that, had he not been bound by the precedent, he would have preferred the view that, once mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the injury. In contrast, Burnton LJ found the reasoning in Bolton convincing.

Permission to appeal to the Supreme Court on all the above issues has been granted.

COMMENT: From a practical viewpoint, it is arguable that linking cover to the date of onset (for injury sustained wording) is unsatisfactory. Whereas...