mesothelioma insurance claims

 mesothelioma insurance claims

mesothelioma insurance claims

mesothelioma insurance claims

mesothelioma insurance claims

I. Summary

Following recent dicta from the Supreme Court, employers may be entitled to seek a full indemnity from employers liability insurance (“EL”) underwriters in respect of employers’ payments to employees with mesothelioma, whether those payments have been made in the past or may be made in the future, and regardless of the length of time the underwriter insured the employer. There are therefore, a number of urgent steps that employers should take:

Employers should as a matter of urgency:

• check their EL policies to see if there are any policy terms which address rights and obligations based on the length of time the underwriter insured the employer;
• if employers do not have polices to hand, they should contact their brokers, failing which their underwriters, to obtain copies;
• if the underwriters are unknown, the insurers’ regulator and trade bodies have put processes in place to enable employers and employees to identify EL underwriters; and
• consider the prospects for seeking a further or full indemnity, and consider the economics of joining with other employers to seek indemnities, as explained in section IV below.

II. How do employers currently stand?

Employers across a range of industries – in particular, those with assets which have required work on fire retardant materials in the last 50 years, such as in the construction, chemicals and manufacturing sectors – have faced and continue to face substantial liabilities from mesothelioma-related claims from current or former employees.

The latency period for mesothelioma, from exposure to asbestos to the onset of the disease, can be some 40 years or so.  Mesothelioma deaths continue to increase in Great Britain: from 153 in 1968 to 2,321 in 2009.  Some predictions are that annual deaths will increase to a peak of over 2,000 in about 2016 before declining.  The disease involves painful, debilitating and distressing symptoms, and usually proves fatal.  Damages awards in respect of mesothelioma (“Mesothelioma Damages”) can be substantial – often in six-figures.

In relation to employer’s liabilities, putting EL cover to one side for a moment, the current state of the law can be summarised as follows:

• if an employee only had one employer, and that employer alone negligently exposed the employee to asbestos fibres with the outcome that there was a material increase in the risk that the employee would develop mesothelioma (“Mesothelioma Increase Risk”), then that employer will be wholly liable in respect of the resulting mesothelioma;
• if an employee had more than one employer, but only one of those employers negligently caused Mesothelioma Increase Risk (the “Relevant Employer”), then that Relevant Employer will be wholly liable in respect of the resulting mesothelioma;
• however, if an employee had more than one employer, and more than one Relevant Employer, then any and all of the Relevant Employers will be jointly and severally liable in respect of the resulting mesothelioma
• the period or periods during which an employee was exposed to asbestos by all Relevant Employers is referred to below as the “Exposure Period”
• the period during which any one Relevant Employer caused Mesothelioma Increase Risk is referred to below as the “Liability Period”, which could be a small or large proportion of the Exposure Period.

In other words, it is possible for only one Relevant Employer to be liable for all of the Mesothelioma Damages: liability in respect of any Liability Period creates liability for 100% of the Mesothelioma Damages relating to 100% the Exposure Period.

The rule as to the joint and several liability for Mesothelioma Damages was developed in the cases of Fairchild and Barker and codified by the Compensation Act 2006, section 3 (the “Fairchild/Barker Rule”).

The position in relation to EL cover was considered in the recent case of BAI (Run Off) Limited (In Scheme of Arrangement) v Durham.  The Supreme Court ruled on two questions as to allocating liability to indemnify a Relevant Employer to the employer’s insurers on cover at the time of either:

• the negligent exposure of the employee to asbestos; or
• the onset of the employee’s mesothelioma
  • In the case of certain EL policies which were worded to indemnify the employer against liability in respect of injury or disease “sustained” or “contracted” during the period of cover, was the “trigger” point for cover either
    • the exposure to asbestos: or
    • the onset of the disease? (the “Trigger Issue”)
  • In relation to certain EL policies, does the Fairchild/Barker Rule apply when determining whether an employee “sustained” or “contracted” mesothelioma during a particular policy period? (the “Exposure Issue”).

In short, the Court ruled as follows:

The Trigger Issue

• Mesothelioma is “sustained” or “contracted” at the moment the employee is exposed to asbestos.
• The insurers on cover at the time of exposure, rather than the insurers on cover at the onset of the disease or subsequently, are liable to indemnify the employer.

The Exposure Issue

• The purpose of the EL policies was to insure the employers against liability to their employees
• Whether a disease can be said to be “sustained” or “contracted” during the EL policy period must be interpreted sufficiently flexibly to give effect to the Fairchild/Barker Rule.

III. The broader consequences of the judgment

As explained above, any one Liability Period can make a Relevant Employer liable in respect of 100% of the Mesothelioma Damages relating to 100% of the Exposure Period.

However, insurers of Relevant Employers during Liability Periods (“Relevant Insurers”) have taken the position that any one Relevant Insurer can only be liable pro rata for the period of time during which that Relevant Insurer insured the Relevant Employer during the Liability Period (the “Time on Risk Argument”).  For example:

• Employer X employed Employee Y;
• the Liability Period as between X and Y was 10 years
• Relevant Insurer A insured X for 5 years of the Liability Period (ie half the time) - Relevant Insurer B insured X for the other 5 years
• The Mesothelioma Damages are £100,000; X is liable for this amount to Y; and
• Based on the Time on Risk Argument, A and B are liable for £50,000 each to X.

The Time on Risk Argument raises no issues for employers provided that all Relevant Insurers are able to pay.  However, during the lengthy time periods involved in mesothelioma onset and claims development, a number of EL insurers from the 1960s through to the 1990s have become insolvent or may now be at risk of becoming insolvent.  This has left, and may yet leave, Relevant Employers having to bear substantial and unforeseen levels of Mesothelioma Damages themselves (“Net Settlement”).  For example:

• If, say Relevant Insurer B in the above example were insolvent, Relevant Insurer A would continue to accept liability for only £50,000 of the Mesothelioma Damages; and
• X would have to pay the other £50,000 itself

We are aware that a number of Relevant Employers have reached substantial settlements for Mesothelioma Damages to which certain Relevant Insurers have contributed pro rata as per the Time on Risk Argument but, in respect of the balance beyond the pro rata, left the Relevant Employers having to make Net Settlements.

Employers who have paid, or who have yet to resolve, claims for Mesothelioma Damages, need to consider the merits of challenging the Time on Risk Argument.  The essence of the challenge is that, in respect of Mesothelioma Damages:

• the principle or substance of the Fairchild/Barker Rule should apply to Relevant Insurers commensurately with the application of such rule to those Relevant Employers whom the Relevant Insurers insured; or, in other words
• a Relevant Employer can and must be fully indemnified by any or all of its Relevant Insurers (the “Fairchild Insurance Argument”)

IV. What should employers do next?

Resolving the Time on Risk and Fairchild Insurance Arguments raise questions of insurance policy terms and construction.  The Summary above deals with what employers should do.  In particular, a Relevant Employer who has made a Net Settlement should assess the prospects for seeking a further or full indemnity from:

• its Relevant Insurer; and/or
• other Relevant Employers and their Relevant Insurers.

That the Fairchild Insurance Argument can be successfully deployed can be readily inferred from the leading judgment of Lord Mance in Durham v BAI.  In respect of the policies in issue in Durham, Lord Mance stated (emphasis added):

“The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured …

Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers’ liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.”

A number of Relevant Employers may take the view that while they may have the legal issues on their side, it is not cost-effective to pursue the Fairchild Insurance Argument.  Given the number of Mesothelioma Damages claims and awards, and the number and range of businesses affected by them, Relevant Employers should consider the principles of economies of scale (or perhaps ‘safety in numbers’), and the deployment of the processes for pursuing multi-claimant litigation allowed in the Civil Procedure Rules.

العنوان : mesothelioma insurance claims
الوصف :  mesothelioma insurance claims mesothelioma insurance claims mesothelioma insurance claims mesothelioma insurance claims I. Summary Follo...
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