The Supreme Court has reversed the ruling of the Court of Appeal in respect of insurers' liability in mesothelioma claims in the case of Zurich Insurance PLC UK Branch (Appellant) -v- International Energy Group Limited (Respondent)  UKSC 33.
It was held that, although insurers will have to answer in the first instance for 100% of the compensation awarded against an employer to a claimant who has contracted mesothelioma, the insurer will then have an equitable right to claim pro-rata contributions from any other insurers who provided cover during the period the claimant was exposed to asbestos, or the employer in respect of any missing periods of insurance.
The past position in mesothelioma claims
In Fairchild v Glenhaven Funeral Services Ltd  UKHL 22 the House of Lords held that an employee who had been negligently exposed to asbestos by multiple employers, but was unable to prove which period of exposure caused the mesothelioma, could recover against any one of them.
In 2006 the scope of Fairchild was limited by the 2006 case, Barker v Corus  UKHL 20, where the House of Lords held that where there had been successive negligent exposures to asbestos in the course of employment, liability should be apportioned between the employers.
Unfortunately, the ruling in Barker lengthened the litigation process and, as a result, many claimants experienced long delays before receiving any compensation. Parliament intervened to redress this issue and passed section 3 of the Compensation Act 2006.
Section 3 of the 2006 Act applies to the UK only (it does not apply to Guernsey) and established 100% joint and several liability in cases where a person has contracted mesothelioma as a result of being either negligently or in breach of a statutory duty, exposed to asbestos.
Therefore, under the 2006 Act, if an employee contracts mesothelioma following negligent exposure to asbestos in the course of their employment with multiple employers, they can claim 100% of their compensation from any employer, and then that employer may seek contributions from the other responsible employers.
The facts in IEG v Zurich
Mr Carré was resident in Guernsey and employed by Guernsey Gas Light Co Ltd (GGLC) for 27 years from 1961 to 1988. During his employment Mr Carré was consistently and negligently exposed to asbestos and unfortunately, Mr Carré subsequently died from mesothelioma in 2009.
Prior to his death Mr Carré sued IEG (GGLC's successor) and recovered £250,000 plus costs in compensation.
However, GGLC had the benefit of an employer's liability insurance policy with Zurich for the last six years of Mr Carré's employment and, following the settlement of the claim, IEG sought an indemnity from Zurich.
The issue in dispute was whether IEG were entitled to a full indemnity from Zurich for all of its outlay in relation to Mr Carré's claim or whether IEG were only entitled to a contribution from Zurich in respect of the proportion of Mr Carré's exposure that Zurich insured, being 6 out of 27 years.
In 2012 the Commercial Court held that IEG was entitled to a full indemnity in respect of its defence costs but only a partial indemnity in respect of the compensation, based on the six years of Mr Carré's 27 year employment during which Zurich were the insurer.
Following an appeal by IEG and cross appeal by Zurich, in 2013, the Court of Appeal held that Zurich was liable to indemnify IEG for all of the damages in respect of Mr Carré's claim which included IEG's defence costs.
Zurich appealed to the Supreme Court.
The decision of the Supreme Court
The Supreme Court held that in Guernsey the common law rule in Barker continues to apply (as the 2006 Act does not apply) and, accordingly, Zurich were only liable to contribute a proportion of IEG's outlay in respect of the period they were the insurer.
However, the Supreme Court held that, if the same facts were heard in the UK (where the 2006 Act does apply) then Zurich would be responsible for 100% of the loss in the first instance with an equitable right to a contribution, on a pro-rata basis, from any other insurers who had policies in place during the period of exposure and, in respect of any period where there is no such insurer, from IEG itself.
The Supreme Court also held that in either the UK or in Guernsey the defence costs are treated the same and IEG are entitled to a full indemnity from Zurich. The reason for this being that the defence costs would have been incurred whatever the period of exposure and were incurred with the insurer's consent in defending the claim.
The Judgment also states that had IEG been insolvent it is probable that Mr Carré would have been able to obtain 100% of his compensation from Zurich.
Impact for insurers and employers
Both insurers and employers will need to be aware of the difference in approach for Guernsey and UK based claims:
Guernsey Based Claims
- insurers will only be liable for contributions in respect of the proportion of exposure that they insured.
- employers will be liable for any missing periods of insurance.
UK Based Claims
- insurers will be answerable in the first instance for 100% of an employer's outlay and then will have to seek contributions, where possible, from any other insurers and employers.
- insurers will also be on risk for 100% of damages where there are no other solvent insurers or employers to contribute.
- employers also need to be aware that they may have to contribute for any missing periods of insurance.
In either jurisdiction insurers will be liable for the employer's defence costs in dealing with a mesothelioma claim.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.