Employers’ liability insurance: “exposure” basis for mesothelioma claims

On Friday, the High Court ruled in the Employers’ Liability Policy “Triggers” Litigation that employers’ liability insurers remained liable to pay compensation for mesothelioma caused by exposure to asbestos in the work place if they insured the employer at the time the exposure occurred.

Traditionally, EL Insurers’ practice in relation to mesothelioma claims has been for the insurer on cover at the time of exposure to pay. (Occurrence of the disease, arguably the growth of a tumour of diagnosable size, can develop some 40 years after exposure to asbestos fibres.)

By contrast, in Bolton v MMI (2006) the Court of Appeal held, in relation to a public liability policy which responded on an “occurrence” basis that it was the policy in place when the disease occurred which responded to the claim - not the policy in place when the employee was exposed to asbestos. Following Bolton some employer’s liability insurers declined to pay mesothelioma claims under EL policies in force at the date the mesothelioma sufferer inhaled asbestos. This was on the basis that the words “sustained” or “contracted” in an EL policy had the same effect as the phrase “injury occurring” in a PL policy and that, by analogy with Bolton, injury is only sustained for the purposes of an EL policy at the time the tumour develops. This line of argument threatened to create a “black hole” for some sufferers where there was no insurance in place at the date of the tumour, for example, where the employer had become insolvent or no longer required EL cover.

In Friday’s decision the court distinguished Bolton on the basis that the latter involved a PL policy, which has a different origin from EL insurance and is not causation based. The court found that the EL policies in issue in the cases before it on Friday triggered in the same way as policies using the phrase “injury caused”. The decision meets what some would see as the fundamental commercial purpose of EL insurance, namely to cover the employer’s liability for injuries and illness caused to its employees while they are in its employ.

The decision will be seen as restoring a degree of consistency to EL Insurers’ treatment of mesothelioma claims. It should be noted, however, that:

• permission to appeal has been granted
• whilst a court will be driven to some extent by considerations of public policy, cases such as this inevitably turn on particular policy wording. It remains to be seen whether EL Insurers will seek to contain their exposure to long tail claims by changed language, or, more pertinently, whether Insured or their brokers will allow them to do so

Further reading: Employers’ Liability Policy “Triggers” Litigation [2008] EWHC 2692 (QB)
Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50