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Insurers liable when workers exposed to asbestos, not when symptoms developed, court rules

Insurers' liability for mesothelioma claims under employers' liability (EL) policies is triggered when the employee is negligently exposed to asbestos fibres, not when the disease develops, the Supreme Court has confirmed.02 Apr 2012

The ruling restores the pre-2006 position when insurers routinely paid such claims on an "exposure" basis and will allow employees diagnosed with the asbestos-related cancer (and relatives of those who have died from it) to claim compensation for negligent exposure from their employer's insurers

Mesothelioma currently kills around 3,000 people a year in the UK, reflecting the material's common use up until the 1960s and 1970s. It typically takes 40 years from the date an employee is exposed to asbestos until the first malignant cell develops.

In 2006, the Court of Appeal held in a mesothelioma case that a public liability (PL) insurance policy which covered liability for injury or illness "occurring" during the policy period was not triggered at exposure, but only when the disease developed.

This prompted some EL insurers whose policy wordings referred to "injury sustained" to stop paying mesothelioma claims. They said injury was sustained only when the tumour developed, not when the exposure took place.

A group of test cases was brought challenging the insurers and the issue was finally decided by the Supreme Court on 28 March 2012.

The Supreme Court overturned a previous Court of Appeal ruling that held that cover under policy wordings that referred to injury or disease "contracted" during the policy period was triggered at the time of exposure to asbestos, but cover that referred to injury or disease "sustained" during the policy period was not.

Lord Mance, giving the leading judgment (62-page / 211KB PDF), said it was "necessary to avoid over-concentration on the meaning of single words or phrases viewed in isolation and to look at the insurance contracts more broadly".

This included consideration of the purpose behind the Employers' Liability (Compulsory insurance) Act which, since 1972, has made it compulsory for UK businesses to have EL insurance covering them against liability for injuries or disease sustained by employees during the course of their employment. EL policy wordings written after the Act came into force are deemed to be complaint with the legislation.

If EL insurance only covered injury or disease that developed during the policy period, employees whose symptoms did not materialise until later would not be covered. In order to give proper effect to the legislation, therefore, Lord Mance said EL insurance had to be written on the basis that it covered disease caused during the policy period. Otherwise the protection provided to employees would be incomplete.

Lord Mance concluded: "On this basis, I consider that, although the word “sustained” may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the [Act], is one which looks to the initiation or causation of the accident or disease which injured the employee"

Nick Starling of the Association of British Insurers (ABI) said that the judgment "confirmed what most in the industry have always understood - that the insurer on cover when the claimant was exposed to asbestos should pay the claim, rather than the insurer on cover when the mesothelioma develops".

"We are pleased that the Supreme Court has over-ruled the Court of Appeal's judgment on this point as it ensures that claimants should get the compensation they reasonably expect," he said. "As such, the judgment provides clarity and certainty for both mesothelioma claimants and insurers."

He added that "much needed reforms" should now be introduced to make it easier for mesothelioma sufferers and their families to bring a claim, through either a pre-action protocol or an online portal.