Phillips v Syndicate 992 (Gunner)
| Jurisdiction | England & Wales |
| Judge | Eady J |
| Judgment Date | 14 May 2003 |
| Neutral Citation | [2003] EWHC 1084 (QB) |
| Date | 14 May 2003 |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ02X03796 |
[2003] EWHC 1084 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Eady
Case No: HQ02X03796
Frank Burton Q.C. (instructed by Field Fisher Waterhouse) for the Claimant
Charles Feeny (instructed by Jacksons) for the Defendants
Hearing dates : 30 April and 1 May 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Claimant is the widow and executrix of the estate of the late Arthur Phillips. She sues under the Third Parties (Rights against Insurers) Act 1930 for the outstanding balance of £56,375, plus interest, in respect of a judgment for £205,000 entered by consent against a company called Kinkia Limited on 10 October 2002.
The judgment represents the value of the claim against Kinkia Limited arising out of its admitted negligence during the periods of her late husband's employment with that company. It seems that he was employed between 1955 and October 1957 and then again, for a second period, between October 1959 and 1970. Throughout those periods the deceased was exposed to asbestos dust and he subsequently contracted malignant mesothelioma. It is common ground that the Defendants were the insurers of Kinkia Limited during part only of Mr Phillips' employment (i.e. between October 1959 and 18 November 1968). This is the reason why they are refusing to pay the balance of the judgment debt. It is their contention they are only liable as insurers for a proportion of the damages corresponding to the proportion which their period of insurance bears to the total period of Mr Phillips' employment with Kinkia Limited.
There is no dispute that the Claimant in these proceedings can be in no better position, by reason of the 1930 Act, than that of Kinkia under the relevant insurance contract. The court's task, therefore, is to determine what rights Kinkia would have had under the insurance contract had it been seeking an indemnity.
In so far as it is relevant, the history of Kinkia Limited may be briefly summarised as follows. It was incorporated on 23 November 1955, having the name Thermac Insulation Limited and it went into voluntary liquidation on 26 May 1972. It was during the period of liquidation that the name was changed to Kinkia Limited on 12 February 1979. The company was dissolved on 29 April 1979.
Mr Rodney Nelson-Jones is the solicitor acting for the Claimant in the present proceedings, and he has given evidence before me to the effect that he organised the restoration of the company to the Register in February 1981 purely for the purpose of its being sued (on behalf of other claimants). Mr Nelson-Jones explained that he is a specialist in asbestos-related disease claims and has some 25 years experience in that field. For the past 20 years, he told me, this type of work has represented about 90% of his practice. His best estimate was that he had conducted at least 250 mesothelioma cases in the course of that time.
What is unique about this case, as Mr Nelson-Jones confirmed, is that in his experience mesothelioma cases had in the past been settled on a full liability basis. No claimant has suffered a shortfall in the amount of compensation for any comparable reason to that now put forward. He has not previously encountered any situation in which an insurer sought to reduce liability on a proportionate basis.
I have been grateful to counsel for their full and clear submissions. The trial has essentially turned on arguments of law and construction, there being very little in dispute on the factual evidence.
One of the matters on which the parties are agreed is that I should proceed on the basis that the terms governing the contract or contracts of insurance over the relevant period correspond to those in a sample employer's liability policy appearing in the bundle. It is accepted that I need to determine the rights of the parties, having regard to the terms of the 1930 Act, in the light of those contractual provisions. Naturally, during the period with which I am concerned (i.e. 1959 to 1968) people in the insurance industry had very little (if any) experience of "long tail" claims, in general, or claims relating to mesothelioma in particular. Moreover, at that time no one was familiar with the concept of "divisible" and "indivisible" diseases or of the contrast which is drawn, in this respect, between asbestosis on the one hand and mesothelioma on the other. That is a relatively recent development.
As one would expect, therefore, the language of the contract does not take account of these matters and is geared to the experience of the insurance community at the relevant time. As was observed in the American case of Keene Corporation v. Insurance Company of America, 667 Federal Reporter, 2d Series, 1034, 1041, "… the insurance companies failed to develop policy language that would directly address the full complexity entailed by asbestos—related diseases".
It is the Defendants' case that they are entitled to withhold 27.5% of the sum due under the judgment, either because of the express terms of condition 6 of the relevant employer's liability policy or because of a term to be implied in the contract by reason of custom and practice (or possibly to give business efficacy).
It is accepted that the wording of condition 6 represents a standard "rateable proportion" clause as used in employer's liability policies at the relevant time:
"If at the time any claim arises under this policy there be any other insurance covering the same liability the Underwriters shall not be liable to pay or contribute more than their due proportion of any such claim and costs and expenses in connection therewith".
Mr Burton Q.C., on behalf of the Claimant, submits that the meaning and purpose of this condition are plain and unequivocal. It is designed to provide for the possibility of reduced payment in a case of double insurance. That is to say, it caters for the situation in which there are subsisting at the same time two or more policies covering the same risk; its wording is not apt to cover circumstances where there have been successive policies of insurance – covering different periods and thus different risks.
The only example of double insurance that was given, in an employer's liability context, was somewhat quaint. It was simply that there might be cover for injuries to domestic servants deriving from such a policy which were also covered by the employer's ordinary household policy.
Mr Burton submits that there is no evidence of any relevant custom or practice, being effective to qualify or undermine the meaning of condition 6, or that of the basic provision for indemnity cover, whether at the material time or indeed later. Neither, he argues, is it necessary for business efficacy to imply any term providing for "rateable proportion" by reference to successive policies. I shall return to these points shortly.
The nub of the Defendants' case is that Mr Phillips' periods of employment with Kinkia do not match precisely the period of their cover. He was employed for periods preceding and subsequent to that nine year span. The claim against Kinkia was framed on the basis that his exposure to asbestos over the whole of the span of his employment made a material contribution to the risk of incurring mesothelioma. No doubt the claim could have been confined, so as to correspond exactly with the period of the Defendants' cover. It could hardly be suggested that his exposure over that nine years did not make a "material contribution" (so as to enable the Claimant to establish liability in accordance with the principles expounded in Fairchild v. Glenhaven Funeral Services Limited [2002] 3 WLR 89). It would be more surprising if the Defendants, in the face of such a pleading, were to deny liability on the basis that there had been other periods of exposure which had also made a material contribution. (It may be that they could seek a contribution from any identifiable and extant insurer who had been on risk for any such period – placing reliance upon general legal principles. But that is a separate matter.)
Mr Feeny, appearing for the Defendants, said that if the claim had been confined so as neatly to correspond with their period of cover up...
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