Asbestos And Mesothelioma—The UK Supreme Court's Decision In The Employers' Liability Insurance "Trigger" Litigation
In a judgment handed down on 28 March 2012, the UK Supreme Court decided that the trigger for liability under standard employers' liability policy forms is exposure to asbestos and not the onset of mesothelioma.
Facts And Background To The Appeals
The judgment concerns appeals from the Court of Appeal regarding the interpretation of insuring clauses in nine sample employers' liability ("EL") insurance wordings in use in the UK since the 1940s. The appellants and respondents are, or were, EL insurers, employers or estates of employees who have died of mesothelioma.
The core issue before the UK courts was the meaning in the sample wordings of the phrases to "sustain injury" and to "contract disease" for the purpose of determining the date of attachment of claims for damages for mesothelioma. Relying on the Court of Appeal decision in Bolton Metropolitan Borough Council v Municipal Mutual Insurance  EWCA Civ 50, insurers argued that liability under these policies attached on the date of onset of disease. Employers and employees' representatives argued that liability attached when the employee was exposed to asbestos during a relevant policy period.
Whilst the judge at first instance had decided that all EL policies should be construed as being triggered by employees' exposure to asbestos, the Court of Appeal, in its decision of 8 October 2010, considered itself bound by its earlier decision in the Bolton case. It found that the formulation "sustain injury" denoted the onset of disease but that the wording "contract disease" denoted asbestos exposure. The Court of Appeal, accordingly, conducted a minute analysis of the variations of policy wordings of the EL policies at issue to produce a range of different coverage results, upholding the decision of the Court at first instance for some of the EL policies (mainly those containing the "contracted" wording) and allowing the appeals for the other EL policies (mainly those with "sustained" wordings).
In addition to the above core issue, the Supreme Court also considered a second problem. EL policies cover an employer's liability for an employee's work-related injury or disease. EL policies therefore respond when it can be shown that the employer is liable to the employee for a breach of duty that caused the employee's injury or illness. For that it must be proved on the balance of probabilities that the defendant's act has been the proximate cause of the claimant's injury or illness. For mesothelioma, due to its long period of latency—several decades may pass between the exposure to asbestos and the onset of the disease—and the unpredictability of its pathogenesis, it is accepted that such proof is difficult and often impossible to furnish.
To overcome this specific problem, the House of Lords developed an exception to the above general rule in the decisions in Fairchild v Glenhaven Funeral Services Ltd  UKHL 22 and Barker v Corus UK Ltd  UKHL 20-modified by section 3 of the Compensation Act 2006-for cases of mesothelioma, where a specific defendant's negligence or breach of duty may only have caused the claimant's mesothelioma but which cannot actually be proved on the balance of probabilities (the ‘special rule'). The rule as modified states that each person who, in breach of duty, exposed a victim of mesothelioma to asbestos, thereby materially increasing the risk that the victim would develop the disease, is jointly and severally liable for the disease.
The second issue before the Supreme Court was thus whether the EL policies responded under the ‘special rule' in Fairchild and Barker and to determine whether the employer's liability for mesothelioma under the ‘special rule' can be seen as a sufficient causal link with the onset of mesothelioma under the terms of the policies.
On the core issue, the Court decided that, under the terms of all EL policies at issue, mesothelioma is "sustained" or "contracted" at the moment when the employee is wrongfully exposed to asbestos. Lord Mance, delivering the Court's main judgment, stated that a broad view should be taken in the construction of the policy wordings, rather than to confine the task to specific phrases and words in isolation. A policy should be read in its entirety, taking into account its commercial background. He therefore had no difficulty in finding that mesothelioma "may properly be said to have been ‘sustained' by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later."
One of the reasons given by the Court was that the risks the insurers agreed to insure when the policies were taken out were closely linked to the risks connected with the actual employments and work undertaken during that policy period. The Court therefore found it "improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment activities." The Court also did not consider it should follow the Bolton decision because that decision related to a public liability policy, the commercial purpose of which was different from that of an EL policy. Furthermore, the Court construed the Employers' Liability (Compulsory Insurance) Act 1969, which it considered a useful tool for the construction of policy wordings, to require employers to take out EL policies on an exposure basis.
In the light of the above construction of the EL policies, the court went on to consider the second issue—whether and how the policies respond within the ‘special rule' in Fairchild and Barker. It found that, under the ‘special rule', a "weak" or "broad" causal link between the employer's negligence and the employee's mesothelioma is accepted. This needs to be taken into account when construing the policies in order to determine whether mesothelioma was "caused" within the policy period. The Court further stated that it was the purpose of the EL policies to insure the employers against their liability to their employees. If that liability can be established (by virtue of the ‘special rule'), the policies ought to pay. Consequently, the Court decided that the negligent exposure of an employee to asbestos during his employment constitutes a sufficient causal link with the later development of mesothelioma in order to trigger the engagement of the EL policies.
Although the legal explanations and theories discussed are not always very clear, the decision of the Supreme Court produces a fair result. Other outcomes would have been difficult to reconcile with the overall commercial purpose of EL policies—to provide coverage for the effects of employers' negligence during an employee's employment, giving rise to the employee's injury or illness.
It is further unlikely that the Supreme Court's decision will lead to a general departure from the established rules of proof and causation for negligence. Lord Mance, in his judgment, expressly states that the ‘special rule' only applies in situations "when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so." Whilst other situations are therefore conceivable in which scientific knowledge may not be capable of providing a proximate causal link between breach of duty and a claimant's injury, there seems to be a clear intention that the exception "should not be allowed to swallow up the rule" (Lord Hoffman in Barker v Corus UK Ltd  UKHL 20).Indeed, this position of the Supreme Court was demonstrated graphically two weeks before when it dismissed the appeals of veteran servicemen claiming damages for injuries allegedly sustained by exposure to radiation from atmospheric nuclear tests conducted by the UK in the 1950s—Ministry of Defence v AB and others  UKSC 9.