Controversial court decision on liability insurance policies

22/02/2011

By Jonathan Herbert, Legal Executive Associate in Chemical Poisoning & Asbestos.

This article considers the possible impact of the recent decision on asbestos exposure upon residents of Kent.

Asbestos use in Kent

Although asbestos is now effectively banned as industrial material, it was previously used heavily by industries in Kent. British Uralite was based in Higham just outside Gravesend, Turner & Newell had premises in Erith and it was also used at Chatham Dockyard and the British Rail works at Ashford. These businesses employed many thousands of people between them.

Asbestos and the insurance industry

The peculiar feature of asbestos diseases is that symptoms often appear several decades after the exposure. The present extent of asbestos related diseases was largely unforeseen at the height of its use by industry. This has resulted in the insurance industry sustaining huge losses in meeting compensation claims arising from asbestos exposure.

With a view to limiting their losses, insurers have regularly taken cases to court with a view to making it more difficult to claim compensation or to limit the extent of the compensation payable. One of these stances is the interpretation of liability insurance policies. Some insurers have argued that liability will not arise under the policy if the disease did not in effect manifest itself during the lifetime of the policy. The significance of this is that by the time the disease gives rise to symptoms, the employer is often no longer trading and the policy long since expired.

Late last year, the Court of Appeal gave judgment in a number of cases concerning the interpretation of employers’ liability policies. There was not full agreement between the judges. Two of the three Court of Appeal judges did not agree that “sustained” meant “caused”. This ruling as it stands will mean that many former employees will not be able to succeed with claims. However, if the wording of the policy used the word contracted (instead of sustained) claims can still be made.

Current situation

The position remains uncertain as a further appeal to the Supreme Court is expected. However, this does not mean that claimants will be entirely uncompensated. Substantial compensation can be obtained using a statutory compensation scheme, although any amounts recovered under this scheme are likely to be much less that what a civil claim might secure.