A utilities company which settled a former employee’s mesothelioma claim for £250,000 is entitled to a full indemnity from insurers notwithstanding that the relevant policy only covered six of the 27 years during which the employee was exposed to asbestos, the Court of Appeal has ruled.
The company had compromised its former employee’s claim shortly before his death from mesothelioma. It had been unable to trace documentation relating to insurance cover during the full 27-year period of the man’s employment, between 1961 and 1988, and had therefore sought an indemnity from insurers who had extended standard employer’s liability cover during the final six years of that period.
The insurers did not dispute that the settlement arrived at was a reasonable one. However it argued that, as the employee had been exposed to asbestos with the same degree of frequency and intensity throughout his employment, its liability should be reduced pro-rata to reflect the fact that it had only provided cover during less than a quarter of the 27-year employment period.
It was also submitted that the company should be treated as having been ‘self-insured’ during the period not covered by the relevant policy or that, if a full indemnity was payable, the company should be required to pay a contribution in respect of the 21 years not covered by the policy, resulting in the same financial outcome.
Allowing the company’s appeal against a first instance decision that the insurers were entitled to a pro-rata reduction, the court stated: “Once it is accepted that exposure during any policy period met the causal requirement for the employer’s liability to the victim, for which the employer was potentially entitled to indemnity from the insurer under the terms of the relevant policies, to withhold part of that indemnity from the employer on account of its conduct in other years would be to deprive the employer of insurance coverage for which it paid.”
The court concluded: “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. It might not be surprising if a company could not trace details of all policies which it, or any predecessor company, may have held several decades earlier.”