EL Trigger: fall out?

Supreme Court Main Entrance 03521C press office supplied 146x219The Supreme Court ruling in the employer's liability 'trigger' litigation was a welcome one for local government but a number of issues remain outstanding, writes Henry Bermingham.

In March 2012, the Supreme Court brought an end to MMI’s attempt to avoid liability for mesothelioma caused by historic asbestos exposure. The decision marks a victory for local government and mesothelioma victims.

The justices held that the MMI EL (employers’ liability) policy responds to mesothelioma claims if the claimant was exposed to asbestos during the currency of the policy. This is an endorsement of the historical ‘causation’ approach to policy interpretation.

Background

  • Bolton v MMI (2006) was the start. It was a public liability (PL) case in which the court held that in a mesothelioma claim injury ‘occurs’ when the tumour started to develop – ten years before manifestation of symptoms.
  • MMI’s EL policy was worded in a similar way to the Bolton PL policy. It responded if the injury was ‘sustained’ or ‘contracted’ during the term of the policy. Accordingly, from May 2005 MMI began to decline EL mesothelioma claims.
  • Prior to 2006, MMI had operated its EL policies on the so-called causation basis. That meant the policy would respond if the victim was exposed to asbestos during the currency of the policy. This approach was applied across the market, irrespective of how individual EL policies were worded.
  • Adoption of this new ‘Boltonite’ approach had the effect of shifting responsibility for mesothelioma from MMI to local government.
  • Ten local authorities became involved in the EL Trigger Litigation. All aimed to ensure payment of mesothelioma claims by MMI.

The Supreme Court judgment

The court was eager to emphasise that it should: “avoid overconcentration on the meaning of single words and phrases viewed in isolation and look at the insurance contracts more broadly”.

Adopting that approach the judges were satisfied that the MMI EL policies should respond on a causation basis because of the following:

  • They required employment and injury to happen concurrently.
  • Concurrence would create an anomaly if an employee was exposed to asbestos in year one but by the time the effects manifested themselves he was no longer employed by the policyholder.
  • There was a link between the number of employees in each period of insurance and the premium.
  • If MMI decided not to renew the policy (beyond the local authority’s control), cover for historical liabilities would disappear.
  • Policies containing territorial exclusions would exclude employees who happened to be working abroad when the condition arose.

Accordingly, the court concluded that the policy which should respond was the one in force at the time of exposure.

Unfinished business

For local government, the issue is now clear – MMI is responsible for EL mesothelioma claims. However, in the aftermath of the Supreme Court judgment, a number of matters remain outstanding:

PL claims

Bolton was not overruled. The insurer responsible for a PL mesothelioma claimis the one who was on risk when the mesothelioma ‘occurs’. On the medical evidence available in Bolton, that was ten years before the symptoms became manifest. In ‘trigger’, new medical evidence was considered. The trial judge concluded that the occurrence date was five years before symptoms. This point remains unresolved and leaves open which policy should apply to a PL mesothelioma claim.

Limitation

MMI began to reject EL mesothelioma claims in May 2005. Following the High Court’s judgment in ‘trigger’ (November 2008), MMI began to pay these claims again ‘under protest’. For the local government, this means that there is a cohort of mesothelioma claims settled between May 2005 and November 2008 which remain unpaid. Limitation on an insurance policy runs from settlement of the claimant’s claim. As at June 2012, all cases settled before June 2006 are now limitation barred. Those authorities who settled claims before November 2008 need to urgently review their files and submit claims to MMI.

MMI solvency

Since 1993, MMI has been going through a solvent ‘run-off’ of its liabilities. It has always been anticipated that MMI would have sufficient funds to deal with liabilities on this basis. In the eventuality that MMI ran out of money, a scheme of arrangement was put in place. Following its defeat in the EL Trigger Litigation, there is a greater probability that MMI may not be able to meet its liabilities going forward. If MMI reaches a point at which solvent run-off is no longer possible, then the scheme of arrangement will be triggered. That could mean a ‘claw back’ of sums paid out by MMI to members in settlement of claims since 1993. Bluntly, local government could suffer a very large bill.

Comment

No one foresaw the disaster that is asbestos. This issue will continue to burden both the local government and MMI well after the anticipated peak in mesothelioma claims in 2015. The use of asbestos by local government was not as extensive as in private sector engineering concerns. Hopefully, now that clarity has been restored to the EL policies MMI will have funds to deal with the claims that are now due. That said, a number of local authorities are now maintaining a separate asbestos reserve. Whether an authority needs to do so depends on whether there was significant use of asbestos by the authority and a historic asbestos claims profile.

Henry Bermingham is a Partner at Berrymans Lace Mawer. He can be contacted on 0121 643 8777 or by email.