Re: T&N Limited (In Administration) and Associated Companies v. Royal Sun Alliance plc, the B R Smith Syndicate and Others
T&N (In Administration) today won its case against its employers' liability (EL) insurers in relation to coverage for asbestos liabilities. Whilst this is good news for the asbestos claimants, T&N's administrators and creditors, insurers will be disappointed with the result particularly when the insurance industry as a whole is still coming to terms with the effect of the House of Lords Judgment in the Fairchild case last year.
The dispute arose out of T&N historically having borne its liability to employees for asbestos injuries and wishing to continue that practice even after the Employers' Liability (Compulsory Insurance) Act 1969. T&N made arrangements with its EL insurers by which it complied with the legislation and had the appropriate certificates evidencing EL insurance, but nonetheless retained its asbestos liabilities by various terms of that EL insurance.
At a hearing in January this year T&N's Administrators sought recovery of asbestos liabilities from various insurers, contrary to T&N's own practice over the many years when asbestos claims had flooded in and ultimately caused it to seek protection by administration.
Insurers defended the claims on two bases. First, that the EL policies did not cover any type of asbestos injury. T&N relied on the narrow definitions used excluding liability only for "pneumoconiosis" and, in another policy, reference only to "asbestosis and mesothelioma". The judge agreed with T&N and has not allowed insurers to interpret the exclusions so widely, nor to rectify the policy wording.
Second, Insurers argued that the effect of the insurance was that T&N would bear all EL asbestos liabilities. T&N's Administrators argued that the true arrangement was that Insurers would provide full cover so that in the event that T&N became insolvent, insurers' liability remained in place notwithstanding that T&N was not then in a position to meet its obligations to pay asbestos claims. Again the court found for T&N.
The Insurers also sought to recover from T&N's captive insurer under the Third Party (Rights Against Insurers) Act 1930 on the basis that T&N had a liability to them and because T&N was insolvent they were entitled to access T&N's insurance for that liability from its captive. The Judge rejected this argument on the basis that the 1930 Act was not intended to apply to liabilities voluntarily incurred (i.e. a contract debt incurred between T&N and its insurers as opposed to a liability in tort owed to one of T&N's employees).
This morning's Judgment will be a blow to insurers but does not touch on the continuing difficult issues for the insurance industry which last year's Fairchild case created. Fairchild decided that liability for asbestos disease should, effectively, be shared across all employers who at any point employed an injured person, due to the practical impossibility of proving which individual asbestos fibre during the course of which employment actually caused the disease. The insurance industry is already grappling with how to allocate liabilities across various years and insureds and this decision will not bring much cheer in that environment.
For further information, please contact Susan Hopcraft by e-mail at susan.hopcraft@cms-cmck.com or on +44(0)20 7367 3056.
