Following the High Court ruling in RSA Insurance plc v Assicurazoni Generali SpA [2018] EWHC 1237, insurers have two years from judgment or settlement to bring contribution claims in mesothelioma cases. However, this is subject to an appeal which is expected to be heard in February 2019.

Background

The ruling follows a claim brought by Mr Merritt against RSA Insurance plc (RSA) under the Third Parties (Rights Against Insurers Act) 1930. RSA had provided employers' liability insurance to Mr Merritt's former employer, Alick Whittle Limited, a painting and decorating company which dissolved in 1996 (the Company). Mr Merritt claimed that during his employment with the Company between 1975 and 1986, he was exposed to asbestos dust and fibres, resulting in him contracting malignant mesothelioma. Medical evidence concluded that asbestos exposure during Mr Merritt's employment with the Company was causative of the mesothelioma. The Company was accordingly liable for the whole of Mr Merritt's claim and due to the operation of section 3 of the Compensation Act 2006, RSA was liable to the same extent even though it had only provided employers' liability insurance for the final six months of Mr Merritt's ten year employment with the Company.

RSA settled Mr Merritt's claim and associated costs in the sum of £173,741 in January 2011. Following settlement, RSA conducted Employers' Liability Tracing Office (ELTO) searches which revealed that Aviva and Assicurazoni Generali SpA (Generali) had also provided employers' liability insurance for other periods of Mr Merritt's employment with the Company.

RSA then sought an equitable proportionate contribution from both Aviva and Generali in respect of the settlement cost. Aviva agreed RSA's request for contribution and paid a portion attributable to its period of cover. Generali contested RSA's claim for contribution on the grounds that it was statute barred under section 10(1) of the Limitation Act 1980 (the Limitation Act).

The issue

Generali argued that RSA's claim against it was a claim for damages in accordance with section 10 of the Limitation Act. This provides that where under section 1 of the Civil Liability (Contribution) Act 1978 (the 1978 Act)"any person becomes entitled to a right to recover a contribution in respect of any damage from any other person, no action to recover a contribution by virtue of that right shall be brought after the expiration of 2 years from the date on which that right accrued".

Over two years had passed since settlement of the claim by RSA.

In response RSA maintained that the claim was a debt, and did not fall within section 1 (1) of the 1978 Act and the two year rule would not apply. It argued that section 6 (1) of the 1978 Act refers to the liability to the original "victim" or "sufferer of damage" and as Generali was not directly liable to compensate the original victim it was not the target of a statutory contribution claim. Rather, Generali's liability to contribute lay in equity as it was RSA which had provided the indemnity to the victim. Therefore limitation would not expire until six years from the settlement of Mr Merritt's claim.

The issue for the court was, therefore, whether an insurance indemnity claim sounded in debt or damages.

The decision

HHJ Rawlinson reviewed the case law and accepted 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" . As such, the judge concluded that the claim by RSA was within the scope of the 1978 Act and was, therefore, statute barred.

Although not necessary to do so, HHJ Rawlinson rejected Generali's alternative argument that any contribution payable by Generali should be reduced to take into account RSA's failure to pursue contribution claims against other parties such as previous employers. The judge endorsed the practice in mesothelioma cases whereby the proportionate share of a contributing insurer is calculated on a time on risk basis.

Comment

RSA has appealed the decision and the Court of Appeal is expected to hear the appeal in February 2019.

In the meantime, it is important that insurers remain live to the possibility of contribution claims when settling claims. The ELTO was not available to RSA when it was settling Mr Merritt's claim but this resource is now available to insurers. Efforts should be made at an early stage to identify and engage with other insurers using all available resources including insureds, brokers and the ELTO.

Insurers should also have the two year limitation period in mind (pending the appeal at least). Care should be taken over the date from which the two year limitation period runs. That will be the date of judgment or settlement whichever is earlier. It is not the date on which damages are paid.