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Trigger unhappy?

25 October 2010
The issues

Policy interpretation – Bolton v MMI – Mesothelioma – Whether exposure or onset triggered cover.

The decision

The Court of Appeal have now given its decision in the “trigger litigation”, in a complicated and lengthy Judgment. The complication of the subject matter is bad enough, but the position is yet more complicated by the fact that there was disagreement within the Court itself. One of the Lords Justices, Lord Justice Ricks, was sufficiently concerned by the lack of consensus that he added a 7 paragraph addendum responding to the other Judgments.

The litigation itself was a group of test cases brought by four insurers and concerning the liability of each to make payments in respect of historic employer liability policies. Local Authorities are particularly affected since one of the four insurers was Municipal Mutual. The other three were Builders Accident, Independent, and Excess. The question for the Court of Appeal was a question of policy interpretation, dependant on a factual medical question. Was it the tortious exposure to asbestos, which had caused the mesothelioma, which had to occur in the relevant policy year, or was it the onset of mesothelioma itself which had to occur in the relevant policy year?

Until Bolton v MMI in 2006, insurers as a matter of practice had met all mesothelioma claims arising under their EL policies on the basis that the policy in force at the date of inhalation or exposure was the relevant policy. That practice stopped with the decision of Bolton. In the Bolton case, it was decided that a mesothelioma victim sustained injury when the tumour began to develop, which could be anything up to 10 years before the manifestation of symptoms. Particular problems arose with MMI’s policy wordings, of which there were three from 1948 onwards. The second of those policies operated between 1958 and 1974 and the third between 1974 and the demise of MMI in 1993. On the basis of the wording, the Court of Appeal felt that only the second wording covered mesothelioma when it was sustained in accordance with the Bolton principle. The effect is that there is no cover for a modern mesothelioma claim. The wording of the third policy provided cover only where the disease was “contracted” within the policy year. The Court of Appeal took the view that in that situation the wording referred to the time when the employee was exposed to asbestos or quite simply breathed in the fibres. The all important terminological distinction is between “occurred” or “sustained” and “contracted” or “caused”.

The essence of the issue was neatly described by Lady Justice Smith. Was the Court to construe policies in the light of the factual matrix that had existed at the time of the contract and was therefore in the contacting party’s minds or in the light of knowledge that we have now, many years later. She argued strongly – and convincingly – for the former. If the sustained wording, she argued, was used in a policy taken out in the 21st Century, then the current medical understanding of the aetiology of mesothelioma would be a relevant and important part of the factual matrix of the contract. Because the factual matrix would have included an understanding that the injury did not occur until many years after exposure, the use of the “sustained” wording would have indicated that the parties intended that cover should be provided in respect of the policy year in which the injury actually developed, which might be many years after exposure. But if the policy was taken out in the middle years of the 20th Century, that modern understanding, she argued, was irrelevant. None of the businessmen, she said, whether insurers or employers who used asbestos products could possibly have been taken to have in mind that kind of knowledge, which the medical experts have provided in this case and in the Bolton case.

For Lord Justice Stanley Burnton however, the practice of insurers of accepting a liability before the Bolton decision was irrelevant to the interpretation of their policies. Their practice was explicable, he believed, by their understanding of the aetiology of mesothelioma. There was not however, he argued, a strong and moral imperative to find the insurers liable as there was to hold the employers liable. The insurers were not the tort feasors. With regard to exposure to asbestos, mesothelioma was “caused” for the purposes of policies by that exposure during that year and the fact that the disease did not develop for some years afterwards did not break that chain of causation. However, employees did not “sustain” an injury or “suffer” an injury within the meaning of the policies when they were exposed to asbestos.

Lord Justice Ricks was of the same view. The use of the word “sustained” in the policy meant that the policy which responded was the one in force when the tumour began to develop. “Sustaining injury” meant the suffering of the injury. An injury was “sustained” when it was suffered or when it occurred or was inflicted upon someone. On that basis, “sustained” wording would render the same result as the Court arrived at in the case of “occurring” wording in Bolton. The sustaining injury wording looked to the injury rather than the cause of the injury, which was the development of mesothelioma and not the exposure. Lord Justice Ricks accepted that his interpretation would be in conflict of the commercial purposes of EL insurance. As with Lord Justice Stanley Burnton, he agreed that “contracted” on the other hand, referred to the causal origins of the disease, i.e. the exposure.

The result has been decried by APIL as leaving potential Claimants without proper recourse. Local Authorities will now need to look to funding claims before 1974 from their own resources – no small matter at all. It will be interesting to see when and if the Supreme Court intervenes.

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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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