Zurich Insurance Plc UK Branch v International Energy Group Ltd

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Neuberger,Lord Sumption,Lord Reed,Lord Clarke,Lord Mance,Lord Carnwath,Lord Hodge
Judgment Date20 May 2015
Neutral Citation[2015] UKSC 33
Date20 May 2015

[2015] UKSC 33

THE SUPREME COURT

Easter Term

On appeal from: [2013] EWCA Civ 39

before

Lord Neuberger, President

Lord Mance

Lord Clarke

Lord Sumption

Lord Reed

Lord Carnwath

Lord Hodge

Zurich Insurance PLC UK Branch
(Appellant)
and
International Energy Group Limited
(Respondent)

Appellant

Colin Edelman QC Leigh-Ann Mulcahy QC

Jamie Smith

(Instructed by DWF LLP)

Respondent

Antonio Bueno QC Patrick Limb QC Joshua Munro

(Instructed by Simpson and Marwick Solicitors LLP)

Intervener (Association of British Insurers)

Michael Kent QC

(Instructed by Keoghs LLP)

Intervener (Asbestos Victim Support Group Forum UK)

David Allan QC Simon Kilvington

(Instructed by Irwin Mitchell LLP and Slater and Gordon (UK) LLP)

Lord Mance
Introduction
1

It is the role of the common law to adapt to meet new circumstances and challenges. Mesothelioma has been and is a tragedy for individuals and families. It is caused by exposure to the inhalation of asbestos dust, and has a gestation period measured typically in decades. The more fibres inhaled, the greater the risk of contracting mesothelioma. But, beyond that, its specific causation is highly uncertain: see Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 19, Durham v BAI (Run off) Ltd [2012] UKSC 14, [2012] 1 WLR 867, para 6. It was thought it might be caused by a single fibre, but Lord Phillips' annex to his judgment in Sienkiewicz, part A, paras 10–11, notes that the process of causation may involve (different) fibres acting in a way which gives rise to a series of as many as six or seven genetic alterations, ending with a malignant cell in the pleura. In any event, the evidential uncertainties about its causation led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 to create a special common law rule, operating within what may be called the Fairchild enclave, to govern liability between victims and those who in breach of duty had exposed them to asbestos dust. Following the House's decision in Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572, this special rule was fortified by the Compensation Act 2006. Unsurprisingly, the courts are still working out the implications. Courts which have embarked on it have had to focus on disputes gradually shifting from (a) the position between victims and those responsible for their exposure, on which substantial authority now exists under English law, to (b) the position between persons so responsible and their insurers. This appeal and the conclusions I reach on it are concerned exclusively with situations falling within the special rule.

2

The appeal, brought by Zurich Insurance plc ("Zurich") as appellant against International Energy Group Ltd ("IEG") as respondent, raises points under both (a) and (b). The issues under (a) are subject to Guernsey law, and there is a difference between the English and Guernsey statute law. The parties are however agreed that Guernsey common law is to be treated as identical with English common law on this appeal.

3

According to the special rule recognised by the House of Lords, a person contracting mesothelioma, after being exposed to significant quantities of asbestos dust originating from different sources over the same or different periods, can sue any person who was (negligently or in breach of duty) responsible for any such source of exposure, although unable to show which exposure in probability actually led or contributed to the disease: Fairchild and Barker. This rule applies even if the only potential sources consist in the ambient environmental exposure which the population generally experiences and some other negligently created source which only increases this ambient exposure by a small percentage — 18% in the case so holding: Sienkiewicz.

4

The special rule confers a right of suit on victims of mesothelioma by reference to each significant exposure, rather than any probability that the particular exposure relied upon led or contributed to the disease. As formulated in Fairchild, it left open the damages recoverable from a person responsible for an exposure. In Barker the House of Lords held that a person responsible was liable not for the whole damages attributable to the mesothelioma, but only in proportion to his own contribution to the overall exposure, probably measured by the duration and intensity of the particular exposure for which he was responsible. This proportionate recovery applied whether the other sources were tortious, non-tortious, by natural causes or by the victim him or herself.

5

The United Kingdom Parliament reacted immediately, reversing the House's ruling that recovery should be proportionate by the Compensation Act 2006. This Act preserves all other aspects of the special rule, as is apparent from section 3(1) and (2):

"Mesothelioma: damages

(1) This section applies where —

(a) a person ('the responsible person') has negligently or in breach of statutory duty caused or permitted another person ('the victim') to be exposed to asbestos,

(b) the victim has contracted mesothelioma as a result of exposure to asbestos,

(c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure mentioned in paragraph (a) or another exposure which caused the victim to become ill, and

(d) the responsible person is liable in tort, by virtue of the exposure mentioned in paragraph (a), in connection with damage caused to the victim by the disease (whether by reason of having materially increased a risk or for any other reason).

(2) The responsible person shall be liable —

(a) in respect of the whole of the damage caused to the victim by the disease (irrespective of whether the victim was also exposed to asbestos —

(i) other than by the responsible person, whether or not in circumstances in which another person has liability in tort, or

(ii) by the responsible person in circumstances in which he has no liability in tort), and

(b) jointly and severally with any other responsible person."

6

Industry guidelines for apportioning and handling employers' liability mesothelioma claims were developed in October 2003, taking account of the Financial Services Compensation Scheme ("FSCS") available under the Policyholders Protection Act 1975 and the Financial Services and Markets Act 2000 in relation to insolvent insurers. These guidelines were also reflected in the Industrial Disease Claims Working Party handling guidelines issued in 2006, which were themselves revised in 2008 following the expansion of the FSCS by the Compensation Act 2006 (Contribution for Mesothelioma Claims) Regulations 2006 (SI 2006/3259). Lord Sumption has described some of the features of the guidelines, which, it appears, achieved general acceptance in the industry, by the FSCS and by reinsurers, before the decision of the Court of Appeal in the present case on 6 February 2013 appeared to undermine their application. Most recently, after consultations going back to 2010 and to meet the possibility that a mesothelioma victim might be unable to identify any solvent employer with an identifiable insurer, the Mesothelioma Act 2014 has established an insurance industry fund to pay out in such a case a sum fixed by schedule initially at about 80% but since a Ministerial announcement on 10 February 2015 at 100% of the average damages recovery which a victim of the particular victim's age would be expected to recover in a civil claim.

7

In Durham v BAI (Run-Off) Ltd [2012] UKSC 14, [2012] 1 WLR 867 (the " Trigger" litigation), the Supreme Court held that, where an employer is insured against liability for a disease suffered by an employee which has been caused during the insurance period, the necessary causal requirement or link is satisfied in the case of mesothelioma by the employer's negligent exposure of the victim during such period to asbestos (and so to the risk of suffering mesothelioma), with the result that the insurer must indemnify the employer against the liability so incurred.

8

Guernsey has not passed any equivalent of the United Kingdom's Compensation Act 2006. The first main question on this appeal is whether, apart from that Act, the proportionate recovery rule in Barker still exists at common law. Guernsey common law is, as stated, to be taken to be the same as English common law. IEG's case is that Barker has "become past history" after the 2006 Act and in the light of the Supreme Court's decision in the Trigger litigation.

9

The second main question concerns the position where the person responsible for exposing a mesothelioma victim has the benefit of liability insurance covering only part of the period for which he exposed the victim. If in such a case the person responsible incurs an expense or liability which is not proportionate, must an insurer who has covered only part of the whole exposure period bear the whole expense or liability? Before the Supreme Court, the parties and interveners accepted that such an insurer must, at least in the first instance, answer for the whole expense or liability, but Lord Sumption's judgment on this appeal raises for consideration whether they were correct to do so. Assuming they were, the further question arises whether such an insurer is in any way entitled to recoup himself proportionately, and if so from whom, when during the remaining period of exposure the employer chose either to insure with other insurers or not to insure at all or no identifiable insurer can now be shown to have covered the employer. If Barker no longer represents the common law, this question arises directly on this appeal. Zurich submits that it anyway also arises in respect of defence costs incurred by or on behalf of a person responsible for a particular exposure, where the overall exposure is greater. Most obviously, it is a...

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