(Re)Insurance Weekly Update 18 - 2015

Author:Mr Nigel Brook
Profession:Clyde & Co

Welcome to the eighteenth edition of Clyde & Co's (Re)insurance and litigation caselaw weekly updates for 2015

This Week's Caselaw

Zurich v International Energy Group

Supreme Court holds that an insurer must cover a mesothelioma claim in full (even if the total period of exposure was longer than the policy period), but a contribution can be claimed from other insurers/the insured


The earlier decisions in this case were reported in Weekly Updates 3/12 and 5/13. The background to the case is as follows:

The claimant, a solvent Guernsey company, employed Mr Carré for 27 years. Mr Carré was exposed to asbestos dust during the whole of his employment with the claimant and he contracted mesothelioma. The claimant took out insurance with the defendant insurer for 6 of those 27 years. Other than a two year period when another insurer was on risk, the claimant did not have any other insurance cover during the remaining period of Mr Carré's employment (compulsory employers' liability insurance only having come into force in Guernsey in 1993). The claimant reached a settlement with Mr Carré shortly before his death and sort to recover the full amount of that payment from the defendant. The defendant argued that it was only required to pay an amount proportionate to the relationship between the policy period and the total period of Mr Carré's exposure by the claimant (ie 6/27ths).

At first instance, the insurer won (the judge emphasising that the Compensation Act 2006 which had reversed the decision of Barker v Corus did not apply in Guernsey (broadly, Barker had held that an employer was only liable for his proportion of loss where more than one employer had exposed an employee to asbestos)). The Court of Appeal allowed the appeal from that decision, the majority having found that (following the Trigger Litigation case reported in Weekly Update 12/12) mesothelioma had been "sustained" during the period of the policy issued by the defendant (because mesothelioma requires a "weak" or "broad" causal link for the disease to be caused during a policy period) and that the insurer was therefore liable in full (regardless of the fact that exposure during the other 21 years was also an effective cause of the disease).

The Supreme Court has now unanimously allowed the appeal from that decision. It did so on the basis that Barker does continue to represent the common law position in Guernsey. Of more general interest though is the court's discussion of what the position would have been had the 2006 Act applied ie the position where an insurer has insured an employer for part only of the period of exposure (a situation not dealt with under the 2006 Act, which is only concerned with the employer's liability to its employee).

There was a split in opinion on this issue. The majority (Lord Mance, Lord Clarke, Lord Carnwath and Lord Hodge) held that the insurer must meet the whole of the employer's liability to the employee. However, they held that the insurer would then have the right to seek proportionate contributions not just from the other insurer which provided liability cover to the employer in a separate period, but also from the employer in respect of the period when no other insurance cover was in place.

This was an approach which was described by Lord Hodge as "radical". That was because it involved a departure from normal principles. However, Lord Mance said that the court would be "abrogating its role to achieve a just solution...if it does not adapt and develop conventional principles to meet an unconventional, indeed unique, challenge".

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