28 October, 2010
A couple of weeks ago we reported on the decision of the Court of Appeal in the Trigger Litigation arising out the dispute as to which Insurer should respond to an Employers' Liability (EL) claim against an insured for compensation arising out of exposure to asbestos dust leading to the Claimant contracting mesothelioma. (see Court of Appeal rules in EL Policy Trigger Litigation 11 Oct 2010).
What was clear from the case was that there was a real divergence of opinion between the 3 Judges and that in each case a careful reading of the relevant policy documents is going to be necessary.
Any Defendant is going to be faced with uncertainty until, hopefully, the Supreme Court, rules and clarifies matters, and this could take a further year or more. Until then the position that insurers are going to take remains unclear.
Because the Court of Appeal ruled that policies based on contracted wording respond on an exposure to asbestos basis and policies based on an sustained wording respond on the basis of the insurer on cover when the person develops the disease, this has particular implications for Local Authorities insured with MMI until that company ceased to write business in 1992.
The MMI policy wording was, pre 1974 on a sustained basis. It was only post 1974 that it was on a contracted basis. So for pre 1974 policies the policy wording is such that the policy will only respond if the illness develops in the body during the period of cover, ie the disease needs to have developed before 1974. Essentially this therefore leaves an authority without cover for pre 1974 exposure of its employees to asbestos. No policy written now, when the disease is going to be diagnosed, will provide for previous exposure, and that has been the case since at least 2006 when the Bolton v MMI decision was handed down. Local Authorities in this situation clearly need to make provision for any claims that may fall into this period.
Post 1974 the wording of MMI polices changed to a contracted basis so there should be no problem with cover from then.
However, to add to the problems, MMI have indicated that where they have provided cover over a period that spans 1974, so the 2 policy wordings of both a sustained and contracted basis apply at the various times, and exposure to asbestos has occurred in both periods, they will only provide a pro rata indemnity. So if an employee worked for an authority for 5 years either side of 1974, during which time he was exposed to asbestos dust, MMI would provide an indemnity for only half of the damages and costs awarded.
Indeed they have gone further and have indicated that they will equally apportion out any time when the insured had cover from any other insurer who's policy wording means that they will not respond.
Clearly this leaves considerable gaps in potential cover and the only safe course of action at this stage must be to make sure that adequate internal provision has been made to cover those potential liabilities. This will be doubly frustrating at a time when cuts are having to be made in local authority expenditure.