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Stephen Baker
Stephen Baker,
DIRECTOR
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Is your employers' liability insurer refusing to provide a full indemnity?
16 May 2014

Mesothelioma and asbestos related claims are, and will continue to be for years to come, at the forefront of the litigation landscape.

Policy decisions and balancing the scales of justice to assist victims of asbestos exposure have put employers’ liability insurers under a burden that they rally hard to mitigate.

Court decisions such as Fairchild –v- Glenhaven and the Compensation Act 2006 have had the effect of placing liability for the whole of the damage caused to a victim of mesothelioma at the door of any one entity involved in the negligent exposure of the victim to asbestos. That entity can seek a contribution from any other entity similarly liable (such as other employers of the victim who were negligent) and this is usually on a pro-rata basis for the length of exposure each entity was responsible for. This works effectively in relation to successive employers of the victim responsible for exposure. It also works well for one employer with a number of different insurers covering the whole of the period of exposure bearing the risk.

However, insurers are now routinely seeking an “equitable contribution” from their insured for any periods the insured cannot demonstrate who it had insurance with. The argument goes that the insured should be treated as self insured for that period where insurance details cannot be traced and therefore should pay an equitable contribution so that the insurer only pays for the years it was on risk. Insurers are running this argument because the wording of the insurance policies from decades ago at the time of exposure usually means that they are contractually bound to provide a full indemnity to the insured even though the business may have subjected the employee to exposure for years when the insurer was not on risk as well as for the period where it was on risk.

The Court of Appeal has rejected the equitable contribution argument in the case of International Energy Group Ltd -v- Zurich Insurance Plc UK Branch. The court recognised that to regard an employer as “self-insuring” in respect of any period for which it was unable to find details of any coverage which might have been issued could itself produce injustice. Businesses might not be able to trace details of all employers’ liability insurance policies that they or any predecessor businesses may have held many years before. Businesses are in only a slightly better position than an individual mesothelioma claimant would be in tracking down insurance for missing years using the Employers’ Liability Tracing Office (“ELTO”), which is not always successful in tracing missing insurers.

Despite the Court of Appeal rejecting the argument made by the insurer for an equitable contribution for a proportion of the damages in mesothelioma claims from the insurer’s solvent insured when no other insurer has been identified, the advice on one pro insurer law firm’s website says “For the time being, insurers are advised to continue paying on a time on risk basis where there is a solvent insured for part of the period of exposure." The insurer’s appeal to the Supreme Court is due to be heard in July 2014.

For further information, please contact our Dispute Resolution Team on 0118 952 7206 or submit an enquiry.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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