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Bolton Metropolitan Borough Council v Municipal Mutual Insurance and Commercial Union Assurance, Court of Appeal, 6th February 2006

15 February 2006
The issues

Mesothelioma – Exposure to Asbestos – At what time actionable injury occurred – insurance policy – waiver by election – late notification of claim

The facts

Mr Green had worked on building sites as an employee of W Lee & Sons, an electrical contractor. One of the sites he worked on was a teacher training college being built by Bolton Metropolitan Borough Council. Between 1960 and 1963 while he worked on site he inhaled asbestos dust. He was later employed between 1965 and 1970 by Carnaud Metalbox Engineering Plc and after 1973 when he also inhaled asbestos dust. In August or September 1990 he went to his doctor with breathing difficulties and chest pains. In January 1991 he was diagnosed as suffering from mesothelioma. Mr Green died in November 1991.

In 1994 his widow began proceedings against Bolton and against Carnaud Metalbox Engineering Plc. Those Defendants settled the action by each paying half of £160,000.00. Bolton sought to recover the amount it had paid and its costs from its public liability insurers on risk at the time when it incurred its liability to Mr Green. Bolton argued that the liability was incurred in 1980 when the mesothelioma occurred and that relevant insurers were Municipal Mutual Insurance. MMI denied liability and said that if any insurer was liable it was Bolton’s insurer at the time when Mr Green was exposed to the inhalation of dust. That insurer was the Commercial Union. The Commercial Union denied that it was liable firstly because the mesothelioma had not occurred during the currency of its cover and secondly because the local authority had not notified them of a claim against it in accordance with policy wording. The Judge found that Municipal Mutual was liable to indemnify the local authority for both reasons argued by the Commercial Union.

Municipal Mutual appealed.

The decision

MMI had argued that the injury had to be an accidental injury which had occurred during the currency of the policy and arisen out of the exercise of the function of the local authority. They had argued that MMI were liable for an injury arising out of the exercise of its functions during the currency of the policy. This was an impossible argument however. If it had been the intention of the parties that any injury for which Bolton was liable had to arise from Bolton’s activities during the currency of the policy, the phrase “during the currency of the policy” would have been written at the end of the sentence and not in the middle”. It was highly unlikely that the parties would have had any such intention since Bolton would then potentially be their own insurer for any injury that occurred in a different year from the year in which they were exercising the functions which gave rise to their liability.

MMI argued that accidental injury for the purposes of the policy was the insult to the person’s bodily integrity which occurred on first being exposed to asbestos fibres. The injury occurred at the point when the bodies natural defence mechanisms were operating to destroy or neutralise the fibres as soon as they were inhaled. This argument was inconsistent both with principle and authority. It was inconsistent with principle because the contract between the parties was an agreement to indemnify against liability. It could not be right that at the stage of initial exposure there could be a liability on the part of Bolton in respect of which they could be required to be indemnified under any public liability insurance policy. The Claimant could not have sued for personal injury at that stage because he had suffered no injury at that stage.

There was a long line of first instance authorities that established a pattern to the effect that actionable injury did not occur on exposure or on initial bodily changes that were happening at that time but only at a much later date; whether that was when a malignant tumour was first created or when identifiable symptoms first occurred did not matter for the purposes of this case. The injury could not be equated with the “insult” received by the body when exposure first occurred.

It followed that when Bolton’s liability to Mr Green arose there was no other insurance applicable to Bolton’s claim. It followed therefore that Bolton had no claim against Commercial Union.

Although strictly not necessary to the decision the issue of the failure on the part of the Claimant to give immediate notice to the Second Defendant was considered. The Judge had concluded that the Second Defendant’s conduct once they were made aware of the claim indicated that they were electing not to refuse indemnity on the grounds of late notification but instead were refusing indemnity on the grounds that the policy did not cover the liability. The doctrine of election applied only when the insurer was faced with inconsistent (mutually exclusive) causes of action. A passage in Spencer Bower on Estoppel by representation to the effect that if an insurer rejected the claim on specific grounds but chose not to take the point that the insured had committed a breach of a procedural condition, then that might amount to a waiver by election was wrong and the passage in Clarke’s Law of Insurance Contracts contained the correct approach namely “if an insurer rejects the claim altogether on another ground such as lack of cover, the insurer does not thereby waive the possibility of pleading a breach of condition at a later stage, if that breach occurred prior to the rejection of the claim”.

The Judge at first instance had awarded 75% of the Commercial Union’s costs to be paid by Bolton. The Judge had erred in principle in requiring the local authority to pay these costs. Bolton would recover from MMI their costs of proceeding against MMI but would not recover their own costs of proceeding against the Commercial Union from either MMI or Commercial Union. MMI would not be entitled to recover any of their costs against any party. Since the Commercial Union had been brought in as a result of MMI’s arguments, MMI should in the first instance pay the Commercial Union’s costs but in order to reflect the fact that Bolton lost on the condition precedent point, it would be just to order that MMI could recover a small proportion of the Commercial Union’s costs from Bolton, that proportion being 20% to be set off against MMI’s liability for Bolton’s own costs of the proceedings against MMI.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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