Employers’ Liability Insurance Trigger Litigation

The Court of Appeal gave judgment in six test cases concerning asbestosrelated mesothelioma claims and the liability of insurers under employers’ liability policies. They reversed in part the decision of Burton J which allowed all of the test claims. The court gave the appellant insurers permission to appeal to the Supreme Court (Durham v BAI (Run Off) Ltd).

Privilege and fraud exception

Where the defendant to a failed claim sought a non-party costs order against the claimant’s insurers, it was appropriate to order disclosure of communications between the insurers and their solicitors. The documents were not privileged because of the fraud giving rise to the original claim. The fact that neither the insurers nor the solicitors were implicated in the fraud was irrelevant – they had been used as the mechanism for achieving the claimant’s fraud and this was sufficient to preclude them from asserting privilege (The Owners of the Kamal XXVI v The Owners of the Ariela).

Claim against valuer

The principle in Smith v Bush that a valuer instructed by a lender owes a duty of care to the purchaser of residential property at the lower end of the market also applies to buy-to-let purchasers of similar property. The valuer had acted negligently in overstating both the capital value of the flat bought by the claimant and the expected rental income. The claimant was entitled to recover damages in respect of losses attributable to the overstatement of the capital value and rental value but not losses caused by the fall in the market (Scullion v Bank of Scotland (t/a Colleys).

Exclusions from cover

Where a liability insurance policy contained an exclusion in respect of “any liability arising under a contract unless such liability would have attached in the absence of such a contract”, a judgment that the insured was liable for breach of contract did not foreclose the question as to whether there was also tortious liability which came within the cover. The insured would have been liable in negligence in the absence of a contract and the insurer failed to discharge the burden of showing that the exception to the exclusion clause was inapplicable (Omega Proteins Ltd v Aspen Insurance UK Ltd).

Fraudulent claims

Aviva was entitled to avoid a policy from inception where a claim was made under the policy in respect of a fire at the claimant’s property. The insurer could rely upon an intentionally exaggerated prior claim, a false claim and nondisclosures pointing to moral hazard such as the non-disclosure of a (now spent) criminal conviction to an earlier underwriter (Fielding Properties (Blackpool) Ltd v Aviva Insurance Ltd).


The Court of Appeal rejected the claimant’s appeal against the decision that his claim was time-barred. His claim against the solicitors who had acted on a fraudulent transfer of his property accrued when they passed on the forged transfer. The claimant’s argument that he did not suffer damage until he ceased to be the registered proprietor of the property was wrong. The court also rejected the argument that the solicitor owed the claimant a continuing duty and that this was capable of postponing the commencement of the limitation period (Nouri v Marvi).

Privilege and accountants

Legal advice given by accountants and communications made in connection with obtaining such advice are not protected by legal professional privilege. The Court of Appeal dismissed Prudential’s appeal, holding that it is a matter for Parliament and not the courts to formulate an extension of the scope of privilege to accountants if that is appropriate (R (on the application of Prudential plc) v Special Commissioner of Income Tax).

Reinsurance and jurisdiction

The Court of Appeal upheld the decision that Gard’s excess of loss reinsurance claim should be heard by the English court. The claim against Glacier Re was intrinsically connected with the claims against the English insurer and broker and there would be a risk of irreconcilable judgments were the claim against Glacier Re to be determined by the Swiss courts (Gard Marine & Energy Ltd v Tunnicliffe).