Supreme Court gives judgment in the Employers’ Liability Insurance Policy Trigger appeals

In a landmark judgment this morning, the Supreme Court has given judgment in the Employers’ Liability Insurance Policy ‘Trigger’ appeals, resolving the dispute in favour of those arguing that the policies in question entitle employers to an indemnity against claims by mesothelioma victims exposed to asbestos during the period of insurance. 

Devereux fielded four counsel in three different legal teams, representing insurers, employers and employees respectively. Colin Edelman QC appeared for one of the lead insurers whilst Colin Wynter QC spearheaded the appeals of employees claiming the benefit of policies held by insolvent companies. Richard Harrison represented the two largest solvent employers involved in the appeals and Andrew Burns was instructed by Unite the Union on the side of the claimant employees.

Insurers had argued that when the insuring clause of a policy stipulated either that an injury must be "sustained” or that a disease must be "contracted” by employees during the period of insurance, the relevant ‘trigger’ under the policies is not the exposure to asbestos, but the development, many years later, of mesothelioma. The Supreme Court held that although 'injury' or 'disease' was not suffered until mesothelioma developed, such policies should be construed as responding to mesothelioma claims caused by exposure to asbestos during the period of insurance. The Court (Lord Phillips dissenting) went on to hold that the parties seeking indemnities were able to prove sufficient causation for the purposes of the policies by relying on the principles established in Fairchild v Glenhaven.

Judgment follows a two week hearing in December 2011 during which the Supreme Court considered the proper contractual construction of insuring clauses used in employers’ liability policies issued over the course of the last six decades of the 20th century.

Lord Mance, giving the leading judgment, held that “to resolve these questions it is necessary to avoid over-concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly”.  Applying the principle expounded by the Supreme Court in Rainy Sky [2011] 1 WLR 2900, that “where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense”,   he held that the policies in question were “apt to cover employers’ liability for long-tail diseases which initiate during, but only manifest themselves years after, the original policy period”. Lord Mance found that this conclusion was supported by an overall consideration of the individual policy wordings, which demonstrated an underlying focus of the insurance cover on the employees and activities current during the insurance period. Moreover, the cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, if “sustained” was construed to mean “developed” or “manifested”.

Insurers, reinsurers, employers and employee claimants will now be taking stock of the implications of the judgment in relation not only to mesothelioma claims but also for other long tail disease claims.   

Whilst a significant authority on the construction of employers’ liability policies, the result is also of very personal significance for large numbers of mesothelioma claimants.  Over 2000 people die from mesothelioma each year and Unite the Union estimates that about 1 in 8 of those have insurance wordings which mean that they will benefit from this ruling.

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