Lloyd's Maritime and Commercial Law Quarterly
ENGLISH INSURANCE LAW
Margaret Hemsworth*
78. BAI (Run Off) Ltd v Durham 1
Employers’ liability insurance—construction of policies—“disease sustained”—whether cover as at causation or at occurrence/manifestation of disease—requirements of Employers’ Liability (Compulsory Insurance) Act 1969
Third-party claimants and insured employers appealed a Court of Appeal decision on the construction of various employers’ liability (EL) policies providing indemnity in terms of disease “sustained” by employees/former employees. The Court of Appeal had concluded that a number of these policies could respond only, if at all, on an occurrence (or manifestation) of disease basis rather than on an exposure/breach of duty or causation basis. The practical result had been to deny indemnity to a group of employers and consequently to former employees in circumstances where those employees had contracted mesothelioma many years after initial inhalation of asbestos fibres during periods of employment long since passed; significantly this was many years after expiry of the employers’ insurance policies.
The insurers constituted a minority in the market; the majority of EL insurers had for many years operated with wording more clearly referenced to cover on a causation basis. A practice had also developed whereby indemnity was made on a “time of exposure” basis. The stance of the appellant insurers changed following the Court of Appeal decision in Bolton MBC v Municipal Mutual Insurance Ltd,2 which, albeit in the context of public liability insurance, had determined that cover in relation to “disease sustained” during an insurance period could relate only to the occurrence or manifestation of disease during that insurance period, whenever earlier caused. As a result of that decision a group of insurers queried whether they were in fact liable.
At first instance Burton J concluded that all the policies responded on a causation/ inhalation basis, with the result that those policies in existence at the times of inhalation of the noxious fibres were engaged to meet the various claims. The Court of Appeal, by a majority, agreed with the trial judge only in relation to those policies with cover referenced by disease “contracted” during a policy period. The first instance conclusion was thus reversed in relation to policies with operative cover referenced to disease “sustained” during insurance periods. For these, cover responded only if the disease
* Senior Lecturer, Plymouth University.
1. [2012] UKSC 14; [2012] 1 WLR 867; [2012] 3 All ER 1161; [2012] 2 All ER (Comm) 1187; [2012] Lloyd’s Rep IR 371; [2012] ICR 574; [2012] 125 BMLR 137 (Lords Phillips, Mance, Kerr, Clarke and Dyson); rvsg in part [2010] EWCA Civ 1096; [2011] 1 All ER 605; [2011] 1 All ER (Comm) 811; [2011] Lloyd’s Rep IR 1; [2011] PIQR P2; affg [2008] EWHC 2692 (QB); [2009] 2 All ER 26; [2009] 1 All ER (Comm) 805; [2009] Lloyd’s Rep IR 295.
2. [2006] EWCA Civ 50; [2006] 1 WLR 1492; [2007] Lloyd’s Rep IR 173.
ENGLISH INSURANCE LAW
57