Employer's Liability Policy Trigger Litigation - Supreme Court Calls Cease-Fire In The War Of Words

Introduction

The Supreme Court of England handed down Judgment, on 28 March 2012, in the matter of Durham v BAI (Run Off) Ltd (In Scheme of Arrangement) and other appeals1 in which all five justices were unanimous in their interpretation of the policy wordings.

This appeal to the Supreme Court of England was lodged as a result of the judgment handed down by the Court of Appeals. This judgment was the culmination of a number of test cases instituted in order to ascertain when (in terms of the policy year) liability in terms of an employer's liability policy (EL policy) arises for employees who contract mesothelioma.

Mesothelioma is a cancer which results from asbestos fibres finding their way into the pleura (or lining of the lungs). The difficulty in terms of determining liability, in the case of such a cancer is that a person contracting the cancer does not do so at the time of inhalation of the asbestos fibre(s). Indeed, symptoms can take up to, and occasionally exceeding, 50 years from the date of inhalation.

Once these symptoms materialise, life expectancy is between 18 months and 2 years. It is generally accepted, however, that the tumour develops between 5 and 10 years prior to the symptoms materialising. The cancer is notoriously difficult to diagnose, often done only after death during a post-mortem. The cancer is incurable.

Background

Prior to this series of test cases it was accepted in practice that the EL policy in respect of an employee who contracted mesothelioma was the policy in force at the time when the employee was exposed to and inhaled the asbestos fibre(s).

It is likely that this approach was adopted as a result of the decision handed down in the case of Fairchild v Glenhaven Funeral Services Ltd2 which developed an exception (in mesothelioma cases) to the usual rule in negligence cases, which is that the claimant must establish, on a balance of probabilities, that the defendant's negligence caused his or her injury or disease.

However, in the 2006 case of Bolton Metropolitan Borough Council v Municipal Mutual Insurance Limited and Commercial Union Assurance Company Limited3, the English Court of Appeal considered mesothelioma claims in the context of public liability policies (PL policies) and raised doubt as to whether this practice was correct. It is worth noting that the Supreme Court of Appeal took judicial notice of the Fairchild judgment although the Court of Appeal did not.

The court in the Bolton case was of the opinion...