The High Court has dismissed the appeal of an employer who negligently exposed its former employee to asbestos fibres, causing the employee to contract mesothelioma. The High Court held that where the contraction of mesothelioma was the inexorable result of asbestos exposure, the cause of action accrues shortly after the initial exposure rather than when symptoms manifest. This decision may have significant ramifications for claimants, defendants and insurers throughout Australia as insureds may now be forced to have recourse to decades-old policies in asbestos litigation. In circumstances where the insurer which issued the policy is no longer operating, defendants may be deprived of indemnity, leaving both uninsured defendants and claimants potentially exposed to deal with impecunious defendants.

Background

Mr Zabic inhaled asbestos fibres in the course of his employment with Alcan Gove Pty Ltd between 1974 and 1977. It was not in dispute that Alcan Gove was negligent in this regard.

While initial molecular changes were made to Mr Zabic's mesothelial cells shortly after the initial exposure, no symptoms were exhibited until 2013 or 2014.

At the relevant times, provisions of the Northern Territory Workers Rehabilitation and Compensation Act 1986 statute-barred common law actions for damages against employers arising out of workplace injuries unless the cause of action accrued before 1 January 1987. In order to successfully bring the action, Mr Zabic had to establish that his cause of action accrued before he had experienced any symptoms.

The Supreme Court initially held that Mr Zabic was statute-barred from bringing the action. The Court of Appeal reversed this decision and found that, with the benefit of hindsight, Mr Zabic's mesothelial cells were damaged shortly after inhalation of asbestos such that this exposure "inevitably and inexorably" led to the disease. The Court of Appeal found that the cause of action accrued on the initial cell damage in the 1970s.

Decision of the High Court

The High Court agreed with the Court of Appeal and found that the initial changes to Mr Zabic's mesothelial cells in the 1970s were the "beginning of a continuum that led inexorably to the onset of mesothelioma".

This inevitability of the ultimate outcome meant that the cause of action accrued at the time the cells changed following exposure to asbestos fibres. Consequently, Mr Zabic's action for negligence was not statute barred.

The High Court drew a distinction between cases where exposure to asbestos fibres sets into motion a "domino effect" which inevitably leads to the contraction of mesothelioma, and those where asbestos exposure merely establishes a state of affairs in which a subsequent, external trigger (such as cigarette smoking) ultimately causes the disease.

In the former case, the High Court held that a cause of action accrues at the time of or shortly after the exposure to asbestos. In the latter, symptoms of the disease must eventuate for a cause of action to accrue.

In reaching its decision, the High Court diverged from previous authorities in asbestos litigation. The Court stressed that the question of actionable damage is one of fact and the outcome of each case will turn on its own circumstances. While we will not know the full gravity of the decision until subsequent asbestos claims are heard and dealt with by lower courts, this case is likely to have wider application.

The decision suggests that where a medical condition is the inexorable result of asbestos exposure, a cause of action will accrue at the date of the initial damage (although for the purposes of limitation periods, time will not commence until the cause of action becomes discoverable).

Implications for insurers, defendants and claimants

The High Court's decision to allow courts to wind back the clock on cause of action accrual dates in asbestos litigation may have significant implications for liability insurers.  Where a court finds that a cause of action accrued at the time of initial changes to cells, insureds may be forced to have recourse to liability policies from decades ago.

This changed approach may also have significant implications for defendants where the liability insurer that issued the relevant policy is no longer operating.  In such circumstances uninsured defendants (without the recourse to indemnity) may face exposure to significant financial costs. On the other hand, if a defendant no longer exists or is insolvent, a claimant may have no party from whom to seek compensation.