RSA Insurance PLC v Assicurazoni General SpA 
The High Court has ordered that a contribution claim brought by RSA following settlement of a mesothelioma claim against another employers liability insurer was statute-barred. Two years, not six years, was the relevant limitation period.
A painting and decorating company ("the Company") employed Mr Merritt between the years of 1975 and 1986. The Company was dissolved in 1996. The Claimant, RSA, provided employers liability cover to the Company for the final 6 months of Mr Merritt's employment.
Mr Merritt developed mesothelioma and medical evidence attributed this to asbestos exposure suffered throughout his time with the Company.
The Claimant (RSA) insured the Company's employment risk for a short period of Mr Merritt's employment, with other insurers covering the EL risk during the rest of the employment period. Nonetheless, the Claimant was obligated to indemnify the Company for the entirety of the claim per section 3 of the Compensation Act.
An offer to settle was accepted by Mr Merritt on 17 January 2011, with the claim settling for over £170,000.00. The Claimant conducted Employers Liability Tracing Office (ELTO) searches against the Company after settlement, these not having been available earlier.
The searches revealed that the Company's employment risk was additionally covered by Aviva between 1975 and 1979, and Assicurazoni Generali, the Defendant, between 1981 and 1983.
The Claimant sought contribution from both insurers on a proportional Fairchild basis, claiming it had an equitable right to contribution from them. Aviva agreed to make a 60% contribution. The Defendant refused to make the requested 32% contribution.
The Claimant made a claim against the Defendant seeking either:
- Equitable contribution to the sum paid to Mr Merritt
- A sum the Court considered to be just and equitable
The Defendant responded that the claim was statute barred on the basis that the contribution claim fell under Section 1(1) of the Civil Liability (Contribution) Act 1978 ("the 1978 Act"). Further to section 10 of the Limitation Act, the 1978 Act provides a limitation period of two years for contribution claims running from the date that the offer to settle the initial claim is accepted. This was as opposed to the six year period argued for by the Claimant.
In the alternative, the Defendant put RSA to proof as to the reasonableness of the settlement.
HHJ Rawlinson provided judgment on the following issues:
- If the contribution claim fell within Section 1(1) of the 1978 Act, and thus was statute-barred;
- Whether it was reasonable to allow the Defendant to challenge the reasonableness of the settlement reached with Mr Merritt;
Section 1(1) of the 1978 Act states "Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)."
The Claimant argued that the circumstances of its claim did not correspond to the circumstances set out in Section (1) of the 1978 Act. The Defendant disagreed.
The parties respective Counsel did agree that the answer to the question of whether or not RSA's claim is a claim covered by Section 1(1) was determined by "answering the question as to whether the Company's claim against RSA, for an indemnity in respect of Mr Merritt's mesothelioma claim, was a claim sounding in debt or a claim sounding in damages."
HHJ Rawlinson considered the appropriate case law including IEG v Zurich and accepted the Defendant's submissions that "there is a long line of cases which have decided or confirmed that the liability arising under an insurance contract of indemnity is a Damages Indemnity Liability."
The Judge was therefore satisfied that the Claimant's liability to the Company sounded in damages rather than debt, and their right to contribution from the Defendant fell within Section 1 of the 1978 Act.
The claim had settled on 17 January 2011, and therefore, having not brought within 2 years of the date of settlement, the claim was therefore statute barred.
The Judge rejected the second limb of the Defence, although it was not necessary to do so. He dismissed the proposal that any contribution should have been reduced to reflect that RSA had not pursued other possible interested parties during Mr Merritt's claim.
Creating further uncertainty in the common industry practice regarding how contributions are divided between employers would be "highly undesirable" and would lead to increases in time, costs and create additional disputes in settling rights of contributions between insurers.
What can we learn?
- The Judge's decision ultimately hinged on the interpretation of the Company's claim against RSA for an indemnity as 'damages' and not a 'debt'.
- Notwithstanding any appeal, this decision provides important guidance for those legacy insurers who are required to settle asbestos claims on a 100% basis in line with Fairchild and IEG, and then identify other insurers with a relevant liability.
- The assumption of many within the industry was that an insurer had 6 years in which to bring a contribution claim, which was particularly important in this context as the Claimant only became aware of other liability insurers several years after settlement via ELTO. A six year period to identify details is obviously far more beneficial for insurers than two years.
- For those insurers dealing with a claim from a claimant who worked for a company for numerous years across several different insurers and periods, this decision reemphasises the need for insurers to ask companies for all their previous information. There will of course be circumstances where changes in management, brokers, and the loss of information make this difficult, but it should not be dismissed.
- The importance of ELTO can also not be overstated. Although the claim was ultimately unsuccessful, the Claimant was able to trace the additional insurers via ELTO in this instance. At year end in 2017, their records totalled 22.7 million. However, as noted above, there will inevitably be gaps in the system.
- The dismissal of the second, albeit irrelevant, limb of the Defence by the Judge is also relevant to legacy insurers. It was made clear that the equitable approach reached in Fairchild for assessing contribution via time on risk was based on 'natural justice'. The Judge stated that a change in this approach would result in an "increase in the cost and time taken to settle right of contribution between insurers", which would be an undesirable outcome.