Mesothelioma employers liability ‘trigger’ case causes concern for insurers
However the important test case is now likely to go to the Supreme Court, as the judgement was reached only on a majority basis with the Court of Appeal failing to reach consensus on most of the main issues, according to QBE’s Claims Briefing November 2010.
The judgement followed initial proceedings issued against four insurers in run-off who had suspended payment of mesothelioma claims following the Court of Appeal’s ruling in Bolton v MMI and Commercial Union.
The Court of Appeal in Bolton had concluded that public liability policies written on an ‘occurrence’ basis engaged when mesothelioma manifested itself, as opposed to the date of negligent exposure some years before.
The insurers’ policy wordings referred to disease and bodily injury ‘contracted’ or ‘sustained’ during the period of cover. They argued that these had the same meaning as ‘occurred’ and that the decision in Bolton applied equally well to EL policies, which meant that their policies did not respond until much later.
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At first instance the court concluded that the insurers’ EL policies should respond to mesothelioma claims on a traditional ‘causation’ basis. In other words their policies engaged at the date of negligent exposure. The insurers then appealed.
The Court of Appeal, in the case of Durham v BAI (Run Off) Ltd and others, has now concluded that where the wording used is ‘contracted’, the policy in force responds at the time of negligent exposure.
However, where the wording used is ‘sustained’, the policy in force when the disease starts to develop (manifests) responds.
Policies incepted after the Employers Liability Compulsory Insurance Act 1969, which came into force in January 1972, respond if the disease is caused during the life of the policy regardless of the wording.
However, with the judgement reached on a majority basis only, and the Court of Appeal failing to reach consensus on most of the main issues, “no clear guidance has emerged and permission has been granted to the losing parties to appeal to the Supreme Court,” QBE explained.
In the meantime some victims of mesothelioma and their families may go uncompensated, it added.
“The Court of Appeal has not brought the clarity to this issue that many commentators hoped for and a further appeal now seems inevitable. If the Supreme Court does not alter the Court of Appeal’s findings, insurers who held risks more recently are likely to be faced with additional liabilities that their underwriters could not have allowed for in setting premiums. A smaller number of insurers are likely to be faced with a larger proportion of the claims,” the insurer warned.
In other news the Forum of Insurance Lawyers (FOIL) in the UK has raised concerns over the court’s approach to fraudulent claims.
In response to the Law Commission’s consultation on the Eleventh Programme of Law Reform, FOIL’s president, Dan Cutts, has written a letter to the chairman of the commission. According to QBE it cites the £1.9 billion a year that general insurance fraud is estimated to cost the UK insurance industry and the £350 million a year estimated to come from organised motor fraud alone.
FOIL has suggested that the Civil Procedure Rules be amended to give judges a far greater range of sanctions with the power to strike out any time and to extend the grounds for strike out to include not just fraudulent claims but any claims tainted by fraud or by conduct in support of other fraudulent claims.
“Many insurers have expressed their frustration at the perceived lack of firmness by the judiciary in tackling the serious and growing problem of insurance fraud. FOIL’s comments to the Law Commission are likely to be welcomed by most if not all insurers who will hope that the commission takes some positive action in response,” said QBE in its Claims Briefing November 2010.