Who should pay for asbestos injury?
Many headlines and reports were written about an asbestos decision made in The Court of Appeal on 8 October 2010.
The case was called the employers’ liability “trigger litigation.”
The issue was whether an insurance company should pay compensation for the employer found liable for the injury based on the time the injured person was exposed to asbestos, or the date when the injury starts to become apparent, for example when a tumour actually starts to develop. That is a very important question for the insurer, and very important for those injured by exposure to asbestos.
The decision made is that liability depends on the wording of the insurance contract. before this decision insurers agreed to pay on the basis of which company provided insurance at the time of asbestos exposure. The words in question within employers’ liability insurance contracts are “contracted” and “sustained.”
I have explained elsewhere how insurance works. The insurer has taken a premium to cover a particular risk, and wants to close its book on the risk. The problem thrown up by asbestos exposure is the long period of time which passes before injury becomes obvious. This case dealt with mesothelioma, a cancer which may not show itself for forty years after exposure to asbestos. Asbestos was not known to be a safety hazard when many insurance policies were written, so when compensation claims crop up many years later insurers will ask themselves, should we be the ones who pay.
The Court decision explained here does not apply to everyone claiming compensation for injury from asbestos. It may affect a case if the employing company is no longer with us, and certain insurers with unhelpful contracts provided employers’ liability insurance cover at the time of asbestos exposure.
The decision is about the meaning of words in insurance contracts which were drawn up many years ago. Someone injured through asbestos exposure brings a case against the company or companies which have negligently allowed that exposure, and the company looks to their employers’ liability insurer to pay the compensation. If the employer company exists you have not got a problem, but if the company no longer exists, and its insurer can be found, you may face a squabble between the insurers.
The insurance companies are arguing about which policy should pay compensation to those injured by asbestos exposure. They might well squabble as asbestos cases are expected to keep coming for many years.
The most sensible report was in the Solicitors Journal where one of the solicitors involved described the case as “hugely disappointing.” The parties had waited for almost a year after the Court of Appeal hearing for a “very confusing” judgment.
He said both sides had been given leave to appeal to the Supreme Court, and the appeal judges had indicated that this should be expedited.
“The disappointment is that this does not provide us with finality, which is what everyone was hoping for,” he said.
He said that, while not agreeing on everything, two of the three Judges had agreed if the wording used in an insurance policy to describe injury was “sustained”, the policy which responded was the one in force when the tumour started to develop.
Where the wording used was “contracted”, the relevant policy was the one in place at the time of exposure to asbestos.
“Before this test was introduced, the words ‘sustained’ and ‘contracted’ were interpreted to mean the same thing and the employers’ liability insurance responded to the exposure date,” the solicitor said.
“Most insurers used a mixture of words through their history. Where an insurer started with ‘sustained’ and went on to ‘contracted’ then it will have a black hole in its cover.
“Some insurers will see their liabilities increase because others, who have a black hole, will no longer contribute to the pot.”
It is the lack of certainty which is the problem. In my experience those clients who might die from their asbestos exposure are given great comfort by the knowledge they can leave some financial security behind. I suspect this may not be possible in all cases, or it will at least be delayed.
The decision is likely to be appealed to the Supreme Court so more wait and see I am afraid.
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