In International Energy Group Limited v Zurich Insurance PLC UK Branch24 the Court of Appeal considered the issue of whether the employer’s liability insurer (the defendant) was liable to indemnify its insured25 (the claimant) who had paid out damages for mesothelioma contracted by a former employee in Guernsey. The employee had worked for the insured for 27 years and the insured settled the claim for £250,000 plus costs on the basis that its employee had been negligently exposed to asbestos throughout his 27 years of employment. The employers’ liability contract between the insurer and the insured had been in place only for the last 6 years of that period of employment. The primary issue before Cooke J at first instance was whether the insured was entitled to an indemnity from the insurer for its full outlay in respect of its employee’s claim, or whether it was entitled only to a contribution, i.e. the proportion of its outlay corresponding to the proportion which the policy period of 6 years bore to the whole period of 27 years of the employee’s exposure. Cooke J decided that the insured was entitled only to the contribution. The insured appealed. Owing to the timing of the initial trial, Cooke J himself had not had the benefit of being able to consider Durham v BAI (Run Off) Ltd26 in which the Supreme Court had considered the cases of Barker v Corus UK Ltd27 and Fairchild v Glenhaven Funeral Services Ltd28 and had held that no new form of liability had been recognised in Fairchild for the increase of a risk of mesothelioma through wrongful exposure to asbestos, but rather that wrongful exposure to asbestos in the course of employment in certain circumstances would meet the necessary causal requirement for the victim to be entitled to hold the employer responsible in law for his illness. The Supreme Court had decided that, in turn, for the purposes of the insurance contract:
“liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient ‘weak’ or ‘broad’ causal link for the disease to be regarded as ‘caused’ within the insurance period.”29
The Court of Appeal, therefore, held that the insured was entitled to a full indemnity both for its damages and costs on a proper construction of the contract and allowed the insured’s appeal.