The Supreme Court handed down judgment in the Employers’ Liability Policy Trigger Litigation on 28 March 2012. The appeals of the run-off insurers on the construction of “disease contracted” were dismissed and the appeals of the insureds and Zurich against the construction of “sustaining injury” were allowed. The result is that employers’ liability policies which are written on a “sustained” or “contracted” basis will, in mesothelioma cases, respond by reference to the date of exposure rather than the date of the tumour. The Court was divided on a subsidiary question of causation as to the application of the “special rule” in Fairchild. Lord Phillips would have held that none of the policies responded but the majority was firmly against his view.
Jeremy Stuart-Smith QC, Leigh-Ann Mulcahy QC and Clare Dixon were instructed by Zurich Insurance Company and Roger Stewart QC by BAI Ltd and Independent Insurance Co Ltd.
The “Trigger Litigation” involved nine appeals arising out of six separate test cases which were brought in order to determine the correct interpretation for employers’ liability policies which indemnify against liability for injury or disease “sustained” or “contracted” during the policy period rather than the more common form of wording indemnifying against liability for injury “caused” during the policy period.
In each case employees have died from mesothelioma resulting from the inhalation of asbestos fibres during employment and the employees’ personal representatives, or the employers liable to them, sought to recover from the employers’ insurers under policies of employers’ liability insurance.
The term “trigger” refers to the circumstance that triggers the liability of the insurer to indemnify its insured within any policy period. It is the temporal ingredient which attaches the ultimate liability of the employer to the policy period in question. The choice for the Court was whether the trigger should be the time of exposure (i.e. when the employee inhaled the asbestos) or the date of the tumour some three to four decades later.
At first instance, Burton J. (in November 2008) held that each of the policies responded on an exposure basis. The Court of Appeal (in October 2010) held by a majority that policies with a “sustained” wording responded at the date of the tumour (which on the basis of an unappealed finding of Burton J was at angiogenesis, some 5 years or so prior to diagnosability), whereas policies with a “contracted” wording responded as at exposure. Both sides appealed to the Supreme Court.
The main issues in and arising out of the Supreme Court’s decision were as follows:
- The proper approach to the construction of the policies and, in particular, to the words “disease contracted” and “injury sustained”.
- Whether the special rule in Fairchild v Glenhaven Funeral Services Ltd  1 AC 32 meant that it could be proved that mesothelioma was caused or initiated in a particular policy period.
In construing the policies, Lord Mance (who gave the leading judgment) considered a number of factors both within and outside the policy wording itself.
First, he stated that it was necessary to avoid over-concentration on the meaning of single words or phrases viewed in isolation and, instead, to look at the contract more broadly. Crucially, in Trigger, each of the policies had features which tied the period of cover to the employees and their activities during that policy period. For example the premium payable was calculated by reference to the wages payable to the employees employed during the policy period. The fact of this link made it improbable that the insurance policies were intended to pick up liabilities which could be attributed to employment and activities undertaken decades before.
Second, he considered historical legal and practitioner texts, as well as marketing material produced by one of the insurers. These all supported the notion that the scope of cover can or should be read as being in respect of current as opposed to long past employment and activities.
Third, he considered the practical implication of the rival constructions of the policies. He drew upon the recent decision of the Supreme Court in Rainy Sky SA v Kookmin Bank  1 WLR 2900 in which the Supreme Court stated that, where possible, the interpretation which is the most consistent with business common sense should be adopted. So, for example, if the policies required both the employment and the sustaining of injury during the policy period then the cohort of people able to recover would be very limited – confined to those whose tumour manifested itself whilst they were still employed by the same employer which had tortiously exposed them to asbestos some forty years before. By contrast, if the policies responded on an exposure basis then the disease would be “sustained” at the same time as the person was employed.
In coming to his conclusions as to causation, Lord Mance held that evidence of market participants’ understanding of the words used is inadmissible in the absence of binding usage.
Applying these principals the Court had no difficulty in treating the word “contracted” as looking at the initiating or causative factor of a disease rather than to its development or manifestation.
The word “sustained” caused more difficulty. However, Lord Mance found that whilst it initially appeared to refer to the development or manifestation of an injury or disease the only approach which was consistent with the nature and underlying purpose of the insurances was one which looked to the initiation or causation of the accident or disease which injured the employee. Therefore, the disease 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 subsequently.
It was common ground that it is impossible to prove on the balance of probability as a matter of scientific fact precisely when mesothelioma is initiated and whether or not any particular inhalation of asbestos (apart from the ten years preceding diagnosability which do not) played any or no part in the development. Accordingly, the Justices had to consider whether a policy which is construed to respond to the initiation or causation of a disease would respond by reference to the date of inhalation of asbestos in a policy period.
The majority held that, following Fairchild, Barker v Corus UK Limited  2 AC 572 and Sienkiewicz v Grief (UK) Ltd  2 AC 229, legal responsibility was imposed upon an employer for the mesothelioma suffered by his employee based on a weak or broad view of the causal link required to ground the liability for mesothelioma. The link was the exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the occurrence of the disease. This also provided a foundation for a finding that, for the purpose of the policies, exposure to asbestos created a sufficient link for the mesothelioma to be regarded as “caused” during the policy period.
Lord Phillips disagreed. He held that whilst the special rule of causation laid down in Fairchild was sufficient to make an employer liable to his employee upon proof of tortious exposure to asbestos it was not a sufficient basis for an employer to establish that the mesothelioma of his employee was initiated in any particular policy year. As he appeared to accept, if correct, his view would mean that no policies (whether based on a “causation”, “sustained” or “contracted” wording) would respond in cases of mesothelioma. This, he considered, was a matter for Parliament.
Implications for Public Liability Insurance
Employers’ liability insurance was distinguished from public liability (“PL”) insurance by reason of their different backgrounds, terms and purposes. The Court of Appeal decision in Bolton MBC v MMI  1 WLR 1492 (which held that “injury occurring” policies trigger at the date of tumour, that date being - at the earliest - the date of the first malignant cell some 10 years or so before diagnosability) still governs PL, the Supreme Court expressing no opinion on the correctness of that judgment in the PL context.
Click here for a link to the Judgment.