The Court of Appeal has handed down its long-awaited decision in the appeal of the Employers' Liability Insurance "Trigger" Litigation. In a long and complex judgment, which runs to more than 100 pages, the Court of Appeal has overturned the main finding of the first instance decision (the judgment of Burton J of November 2008).
The Court was considering how employers' liability (EL) policies should respond to the claims of UK mesothelioma victims. The cost to insurers of the UK's mesothelioma liability problem has been estimated to be at least £10 billion and could be significantly more than that. As much as 90% of the cost is in the future. The peak incidence of the disease is several years away and claims are expected for the next 40 years or more.
The essential question is what "triggers" an EL insurer's liability to indemnify an insured employer; or as one appeal judge preferred to characterise it, what is the "temporal hook" that attaches the ultimate liability to the policy year in question. It is accepted that mesothelioma is caused by the inhalation of asbestos fibres during exposure. EL wordings that are expressed to indemnify for injury or disease "caused" during the period of cover (causation wording) have presented no difficulty and it has not been disputed that such policies respond (are "triggered") on an exposure (also called date of inhalation) basis.
Although caused by and during exposure, mesothelioma does not develop (a point called the date of the tumour by the Court) until decades later. It is this latency that gives rise to the dispute.
As well as "causation wording", two other forms of wording have appeared in EL policies issued over the last few decades and it is on these other forms that the Court of Appeal judgment focuses. A significant proportion of policies were expressed to indemnify in respect of injury or disease "sustained" during the period of cover, while others were expressed to indemnify where disease was "contracted" during the period.
The Court of Appeal has ruled that mesothelioma is not "sustained" during exposure; it is "sustained" when the injury occurs (otherwise described as "suffered") decades after exposure. In relation to "contracted" wording (a relatively unusual formulation), the Court of Appeal found that polices respond on the same basis as "caused" wording.
For decades, EL insurers have responded to claims consistently on an exposure basis, no matter what the precise wording of the policies. As a result of the Court of Appeal's ruling, the precise terms of the EL cover in force when the tumour develops as well as that in force during the period of exposure will have to be identified to establish which (if any) policy or policies should in the future respond. As for the past, EL insurers who underwrote policies on a sustained basis have indemnified mesothelioma claims on an exposure basis when they were under no liability (as their policy was not triggered). That is an issue that will no doubt be investigated among insurers and their reinsurers.
An appeal to the Supreme Court seems likely.