Supreme Court backs “broad equitable approach” to insurers’ liability in mesothelioma cases

Supreme Court

Lord Mance: “principled solution” must be found

Insurers liable to pay compensation to mesothelioma victims have rights to pro rata contributions from other insurers and/or employers covering some of the time of exposure, the Supreme Court has ruled.

Lord Mance, who led the majority, decided that a “broad equitable approach” should be taken and contributions from insurers should take into account differing lengths of exposure to asbestos.

“The court is faced with an unprecedented situation, arising from its own decisions affecting both tort and insurance law,” Lord Mance said. “A principled solution must be found, even if it involves striking new ground.”

Three justices agreed with his arguments – Lords Clarke, Carnwath and Hodge. Lord Sumption came to a similar conclusion, but by a different route – one that was preferred by Lords Neuberger and Reed.

The court heard in Zurich Insurance plc v International Energy Group [2015] UKSC 33 that the case arose from the situation in Guernsey, which has no equivalent of the Compensation Act 2006. Under the Act employers are liable in full.

A worker on the island, exposed to asbestos dust from 1961 to 1988, sued his former employer after he contracted mesothelioma. IEG was successor in title to the employer. Among the employer’s liability insurers was Midland Assurance, from 1982 to 1988.

As successor to Midland’s liabilities, Zurich argued that it was only liable to meet just over 22% of IEG’s loss, based on the fact that Midland was insurer for that proportion of the overall exposure time.

However, Zurich was ordered to pay 100% of both the compensation and defence costs by the Court of Appeal. Zurich appealed to the Supreme Court.

The justices agreed that, because the 2006 Act does not apply in Guernsey, Zurich was not required to cover the full loss but only the period that Midland was liability insurer.

However, they did not restrict themselves to the case before them, and went on to rule on what the outcome would have been the same on the mainland, where the Act did apply.

Lord Mance argued that a “broad equitable approach” should be taken and contribution between insurers covering liability on the basis of exposure “should take account of differing lengths of insured exposure”.

He went on: “In my opinion, therefore, Zurich is entitled to look to IEG to make a contribution based on the proportionate part of the overall risk in respect of which it did not place insurance with Zurich, and in respect of which Zurich does not recover contribution from any other insurer.”

Lord Mance ruled that Zurich was also entitled to a contribution from another liability insurer, Excess.

However, he dismissed Zurich’s appeal on defence costs, where no equitable right to contributions existed.

David Pugh, a partner at Keoghs, acted for the Association of British Insurers, which intervened and agreed with Zurich’s arguments.

Mr Pugh described the Supreme Court decision as “very positive for insurers” who could “continue to seek contributions from solvent policyholders in mesothelioma claims”.

He went on: “There will be minimal disruption to insurers’ existing claims handling practice – including the principle of pay and be paid.

“The preservation of claimant compensation heads off any need for parliamentary intervention, which is always uncertain of outcome.”


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