Durham v BAI (Run Off) Ltd [2008] EWHC 2692 (QB)

[2008] EWHC 2692 (QB)Case Nos. HQ06X02919, HQ07X01388, HQ07X03187, HQ07X00744, HQ07X01800, HQ07X02055
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21 November 2008
Before
MR JUSTICE BURTON
Between
DurhamClaimantBAI (Run Off) LtdDefendant
EMPLOYERS’ LIABILITY POLICY “TRIGGER” LITIGATION Durham -v- BAI (Run Off) Limited (In Scheme of Arrangement)("Lead Case 1") Fleming & Eddleston -v- Independent Insurance Company Limited (In Provisional Liquidation)("Lead Case 2") Edwards -v- Excess Insurance Company Limited ("Lead Case 3") Thomas Bates & Son Limited -v- BAI (Run Off) Limited (In Scheme of Arrangement)("Lead Case 4") Akzo Nobel UK Limited & Amec PLC -v- Excess Insurance Company Limited ("Lead Case 5") Municipal Mutual Insurance Limited -v- Zurich Insurance Company and Others ("Lead Case 6")
Hearing Hearing dates: 3rd, 4th, 5th, 6th, 9th, 10th, 11th, 12th, 13th, 16th, 17th, 18th, 19th, 20th, 23rd, 24th, 25th, 26th & 30th June 2008, 1st, 2nd, 3rd, 4th, 7th, 8th, 9th, 10th, 11th, 14th, 15th, 16th, 17th, 21st, 22nd, 23rd, 24th, 25th, 28th, 29th, 30th & 31st July 2008
Lead Case 1
Colin Wynter QC & Alison McCormick (instructed by Irwin Mitchell) for the Claimant
Roger Stewart QC & Stephen Robins (instructed by DLA Piper UK LLP) for the Defendant
Lead Case 2
Colin Wynter QC & Tim Smith (instructed by John Pickering & Partners) for the Claimant
Roger Stewart QC & Stephen Robins (instructed by DLA Piper UK LLP) for the Defendant
Lead Case 3
Colin Wynter QC & Andrew Burns (instructed by Thompsons) for the Claimant
Colin Edelman QC, David Platt & Peter Houghton (instructed by Plexus Law) for the Defendant
Lead Case 4
Edward Bartley Jones QC & Dr Digby Jess (instructed by Burd Ward) for the Claimant
Roger Stewart QC & Stephen Robins (instructed by DLA Piper UK LLP) for the Defendant
Lead Case 5
Colin Wynter QC & Richard Harrison (instructed by Reed Smith and Berrymans Lace Mawer) for the Claimants
Colin Edelman QC, David Platt & Peter Houghton (instructed by Plexus Law) for the Defendant
Lead Case 6
Howard Palmer QC, Andrew Miller & Sonia Nolten (instructed by Watmores) for the Claimant
Jeremy Stuart-Smith QC, Leigh-Ann Mulcahy & Clare Dixon (instructed by Buller Jeffries)
for the First Defendant
Lawrence West QC & A. John Williams (instructed by Plexus Law) for the Second Defendant (instructed by Kennedys) for the Third Defendant (instructed by DLA Piper UK LLP) for the Fourth Defendant (instructed by Kennedys) for the Fifth Defendant (instructed by Milton Keynes District Council) for the Sixth Defendant (instructed by Sparling, Benham & Brough) for the Seventh Defendant (instructed by Berrymans Lace Mawer) for the Eighth and Eleventh Defendants (instructed by Morgan Cole) for the Ninth Defendant (instructed by Weightmans) for the Tenth Defendant.
Judgment
[1]This has been the collective hearing of six actions, together called the “Trigger Litigation”, since the dispute relates to identifying the ‘trigger’ under various insurance policies. The result has considerable consequences for several thousand people, and will have a continuing impact for many years. The six consolidated actions have emerged by way of specimen proceedings in which the issues can be resolved. They relate to cases where employees have suffered and died from mesothelioma resulting from inhalation of asbestos fibres during employment, and they, or the employers liable to them, seek to recover from the employers’ insurers. The issue in the actions is (by reference to nine specimen insurance wordings) whether the insurers liable to meet the claims are those who insured the employers at the time the employees inhaled the asbestos fibres – the time of exposure, of inhalation or ingestion (“date of inhalation”) – or those (if any) who insured the employer (if the employer were still in business) up to forty or more years later, when the tumour develops (“date of tumour”).[2]In the six actions which I shall describe, the parties are(i) employees (seeking to recover direct from insurers, under the Third Party (Rights Against Insurers) Act 1930 as amended (“TPRIA”)),(ii) still solvent employers, including Local Authorities (who have paid out claims to employees and are fearful of having to pay out more) and(iii) insurers, four of whom take the date of tumour position, and one, Zurich, which takes the date of inhalation position.[3]In the six actions, some are claimants and some defendants, but I shall call those who take the date of inhalation position Claimants, and those who take the date of tumour position Defendants. As will appear, I have had seven leading and thirteen junior Counsel in front of me, instructed by fourteen firms of solicitors, of whom DLA Piper have acted ably as lead solicitors. Enormous amounts of time and money have been saved, both by the fact that the actions have been heard together, but even more by the extraordinary degree of co-operation between the parties, under the leadership of those lead solicitors, and the morass of documents has been slimmed down to manageable proportions. The hearing was concluded in two calendar months. As a result of the quantity and quality of the legal submissions, with each party inevitably adopting a slightly different standpoint, I have had the benefit of exhaustive argument: the submissions, including the discrete arguments relating to the issue of estoppel which, in the event, only arose in the sixth action, were contained in three bundles of written opening submissions and the equivalent of more than one bundle of closing submissions, supplemented orally by 9½ days of oral opening and 8½ days in closing. None of the submissions was duplicated, and much was adopted without repetition by others on the same side. In those circumstances, in this judgment I shall not always identify individually the source of those submissions, but I have taken them all into account.[4]The issue between the parties is differently expressed by each side. The Claimants submit that the insurance policy wordings must be construed, as they had prior to 2006 always been construed, namely so that the insurance company (or companies) should respond which covered the employers when the asbestos fibres were inhaled by the employees which led to their subsequent death. The Defendants submit that the wording should not provide cover where no injury or disease was present during the period of insurance.[5]The actions were necessary in the light of the approach of the four insurance company Defendants, all of whom are in run-off and/or subject to an insolvent scheme of arrangement (in the case of BAI) or provisional liquidation (in the case of Independent), to the Employers’ Liability (“EL”) policy wordings pursuant to which the claims are made. For the first time, after forty years, these four insurance company Defendants have, since 2006, declined to pay out on EL policies in force at the date of inhalation to mesothelioma sufferers, and/or to employers liable to them, in the light of a decision of the Court of Appeal in Bolton MBC v Municipal Mutual Insurance Ltd(“Bolton”) [2006] 1 WLR 1492relating to the wording of a Public Liability (“PL”) policy. Prior to 2006 and Bolton, on the evidence before me, neither they nor any other EL insurance company had ever done anything other than pay out to mesothelioma sufferers by reference to the date of inhalation.[6]Even though insurers may be insolvent (as are BAI and Independent), if the liability of those insurers can be established by the relevant Claimants, then such Claimants can recover from the fund established under the Financial Services Compensation Scheme (“FSCS”) pursuant to the Financial Services and Markets Act 2000, 100% of their claims if and to the extent that the claims relate to the period subsequent to 1972 (when, as will be seen, EL insurance became compulsory pursuant to the Employers’ Liability (Compulsory Insurance) Act 1969 (ELCIA) and 90% of claims antedating ELCIA. However the establishment of the liability of an insolvent insurer under the TPRIA is a condition precedent to recovery under the Scheme. The Employee Claimants, or those in their position, whose claims will be resolved by these specimen proceedings, must therefore succeed in these proceedings against the relevant Insurance Defendants in order to claim under the FSCS.[7]There is also a compensation scheme for those suffering from mesothelioma caused in employment (‘occupational sufferers’) under the Pneumoconiosis etc (Workers Compensation) Act 1979. By this Scheme (as amended) a claimant must show that any relevant employer in the previous 20 years (but subject, in the case of mesothelioma, to exemption in respect of the last 15 of those years) has ceased to carry on business, and that a claimant has not brought any action or compromised any claim for damages. This Scheme has been gradually made easier to qualify for, by successive amendments, and a new Scheme has recently extended such benefits to non-occupational sufferers by the Child Maintenance and Other Payments Act 2008. However the relatively small payments (very small indeed for dependants) paid under such Scheme bear no relationship whatever to the value of the claims.[8]As a result therefore of the interpretation of their EL policies by these four insurance companies to accord with the interpretation of a PL policy with different but similar wording by the Court of Appeal in Bolton, those employees (or solvent employers who have paid out those employees), whose claims would have been met (by these insurers and/or under the FSCS) under policies in existence at the time of inhalation, are likely to find themselves in what has been called a ‘black hole’; because they cannot look to a policy in place at the date of tumour. Either: i) there is no insurer in place at the date of tumour because the employer has gone out of business and/or has changed the nature of its business and is no longer insured (e.g. Thomas Bates & Son Ltd (“Bates”), the Claimant in the fourth action); this is a very frequent situation because so many companies who were in businesses, such as shipbuilding and construction, in which asbestos was heavily used, have ceased to trade; or ii) the employer, by whom the employee was employed at the time of inhalation, is still in business and is still insured, but has now, very many years later, insurance in place which, because of changes in wording and/or of insurers, no longer has a wording which, however interpreted, would respond to a claim by an ex-employee who has now developed a tumour.[9]It is common ground that there is only a one in a million chance, which translates to a one in 10,000 lifetime risk, that mesothelioma is caused otherwise than by exposure to asbestos, and such exposure is almost always in an occupational setting, when EL insurance is relevant. The figures disclose some 2000 deaths a year in this country from mesothelioma in recent years. It is estimated that figures will remain at that level or higher until peaking in 2011-2015, and then, as the years of intensive exposure to asbestos up to the 1970s recede, the figures are expected to dwindle, down to the year 2040. Of the insurance company Defendants, BAI (Run-Off) Ltd (formerly The Builders’ Accident Insurance Ltd (“BAI”)) has rejected 284 mesothelioma claims since Bolton, Independent Insurance Co Ltd (“Independent”) 41 such claims, Excess Insurance Co Ltd (“Excess”) 151 and Municipal Mutual Insurance Ltd (“MMI”) 169. The average claim, by way of unsatisfied judgment against an employer, is between £125,000 and £175,000. Some claimants may be able to recover, in whole or in part, against solvent employers or by reference to other insurance policies. Estimates have ranged between 8% (Excess), 12% (those claimants who are represented by the Trade Union Unite) and 11% (BAI) as being the proportion which will or may remain uncompensated if they do not succeed in these proceedings; but, of course, insofar as that recovery is made by employees against solvent employers, such as Bates, and Akzo Nobel UK Ltd (“Akzo”, formerly Courtaulds) and Amec plc (formerly Matthew Hall) – the Claimants in the fifth action – those very employers did pay insurance premiums, in the case of Bates for over 50 years to BAI, throughout the period, in the expectation of being covered by insurance in respect of such claims, and Bates has made it plain that there is no guarantee it can go on meeting uninsured claims.

II. The Six Actions

[10]Action 1 (the “Durham/Fern” Action). Mr Screach was employed by G & C Whittle Ltd (“Whittle”) from 1963 to 1968, which is when he was exposed to asbestos fibres. He experienced symptoms in March 2003 and was diagnosed with mesothelioma in April 2003. He died in November 2003. BAI provided EL insurance, on the basis of the now disputed wording, at the date of inhalation, i.e. throughout the exposure period (in fact from 1957 to 1975). Whittle was wound up and dissolved (though it has been restored to the Register for the purposes of a claim under the TPRIA). There is no policy which responds at date of tumour. Mr Screach’s unpaid judgment is £92,500. BAI went into provisional liquidation in 1998, and entered a Scheme of Arrangement, in July 2002, paying out 5p in the £1. After preliminarily dealing with the claim in 2004, BAI rejected it, relying on Bolton, in August 2006. The Claimant is Mr Screach’s daughter (Mrs Durham (formerly Fern)). Colin Wynter QC, leading Miss Alison McCormick, acts for the Claimant in Action 1. He leads Tim Smith in Action 2, Andrew Burns in Action 3 and Richard Harrison in Action 5: I shall collectively refer to them as the “Wynter Team”. BAI is represented by Roger Stewart QC, leading Stephen Robins (where appropriate, the “Stewart Team”).[11]Action 2 (“Fleming”). Mr Eddleston was employed by Premier Construction Co Ltd (“Premier”) from 1974 to 1994, and was exposed to asbestos fibres from 1974 to 1982. His symptoms were present in November 1995; he was diagnosed with mesothelioma in March 1996 and he died in July 1996. Independent (formerly Federated Employers’ Insurance Association Ltd (“Federated”) until 1982, and then Allstate until 1987) provided EL cover to Premier in the relevant wording from 1978 to 1983. Premier was dissolved in 2005. There is no policy which would respond at date of tumour. The unsatisfied judgment is £105,827.93. Independent went into provisional liquidation in June 2001. Independent rejected the claim in reliance upon Bolton in November 2006. The Claimants are Mr Eddleston’s personal representative (Mrs Fleming) and his widow Mrs Eddleston. The Wynter Team represents the Claimant. Independent is represented by the Stewart Team.[12]Action 3 (“Edwards”). Mr O’Farrell was employed by Humphreys & Glasgow Ltd (“HG”) from about 1964 to 1967, which is when he was exposed to asbestos fibres. His symptoms were in 2001. He was diagnosed with mesothelioma in 2003 and died on 17 October 2003. Excess provided EL cover to HG in the relevant wording during that period (it insured HG for 70 years from 1922). HG was liquidated in 1988. There is no policy which would respond at date of tumour. The Claimant’s unsatisfied judgment, including costs, is approximately £152,000. Excess ceased to write EL insurance in 1991, and in 1994 entered into run-off of its insurance business under the management of Downlands Liability Management Ltd (“Downlands”). Downlands rejected the claim in October 2006, relying on Bolton. The Claimant is Mr O’Farrell’s daughter (Mrs Edwards). The Claimant is represented by the Wynter Team. Excess is represented by Colin Edelman QC leading David Platt and Peter Houghton (the “Edelman Team”).[13]Action 4 (“Bates”). Bates carried on business as a construction company from 1927 to 1993, primarily employing its workforce directly, rather than using sub-contracted labour. In 1973 it employed 1250 employees. Since 1993, when it closed down its construction business, it has carried on business primarily as a property company, developing and managing a commercial property portfolio, and has had no need to maintain its EL insurance covering its construction workers. The particular case of concern is that of an ex-employee called Mr Dahele, who was employed by Bates and exposed to asbestos fibres between 1975 and 1977: he experienced symptoms in July 2005, was diagnosed in November 2005, and died in about May 2007. Judgment was entered against Bates in favour of Mr Dahele in September 2006 in a sum inclusive of costs of £543,900.50, which sum has been satisfied in full by Bates. BAI provided EL cover to Bates by reference to the relevant wording during that period, and indeed provided EL cover to Bates from 1944 to 1994. BAI in August 2006 rejected cover in respect of Mr Dahele. But in addition of course Bates has a wider concern, in relation to ongoing claims against it from other employees in respect of the period of thirty or so years prior to 1984 when, in circumstances to which I will refer, its EL wording was changed by BAI. Prior to the Bolton decision, BAI provided an indemnity to Bates against five mesothelioma claims in respect of exposure to asbestos fibres in periods of employment spanning the period 1960 to 1975, but, as with Mr Dahele, it has now denied further cover. Bates has been represented by Edward Bartley Jones QC leading Dr Digby Jess, BAI by the Stewart Team.[14]Action 5 (“Akzo/Amec”). Excess provided EL cover in the relevant wording to the Courtaulds Group between 1937 and 1972, and to the Matthew Hall Group between 1939 and 1972, in the relevant wording. According to Excess’s records, the first mesothelioma claim by Courtaulds, which is recorded as having been notified in 1988, was settled in 1995, and the first by Matthew Hall was notified in 1983; and more than 100 claims were made by the two groups against Excess, all of which were duly settled, insofar as resolved prior to Bolton. In respect of mesothelioma claims which were still open at that time and claims received since, all have been declined by Excess, being a total of 22 claims in respect of Akzo and 33 claims in respect of Amec. The Wynter Team represents both Akzo and Amec, and the Edelman Team Excess.[15]Action 6 (“MMI/Zurich”). MMI was a mutual insurer dedicated to the provision of insurance to local authorities and similar bodies, incorporated as a company limited by guarantee in 1903. By the late 1980s it provided all the EL and PL insurance of 86% of local authorities, and some of almost all of the rest. Ten of such local authorities (“the Local Authorities”) are now joined as Defendants in this action. Local authorities were exempt from the compulsory insurance provisions of ELCIA, but were given by MMI, in a one-off notice in 1971/2, assurance that they would be given no lesser cover than non-exempt insureds. As will appear, there were three very similar relevant EL wordings since 1949, of which the second (approximately 1958 to 1974) and the third (approximately 1974 to 1992) really feature in these proceedings. The Eleventh Defendant, insured since prior to 1958, has cover under all three wordings (but only seeks indemnity in respect of the second and third, as it has no known exposure under the first), the Fourth, Fifth, Eighth and Ninth Defendants seek indemnity under the second and third wordings, the Seventh Defendant under the second wording only, and the Second, Third, Sixth and Tenth Defendants under the third wording only. MMI ceased to underwrite new insurance business, or to renew insurance already written, as from 30 September 1992, and, by an Agreement dated 9 March 1993 (the “Asset Purchase Agreement”) it transferred its assets and ongoing business to Zurich Insurance Co (“Zurich”) for a sum which included a commission on renewed business up to a maximum of £60m. Zurich effectively inherited the goodwill and the business opportunities of all ongoing insurance business and renewals thereafter, and managed the run-off business in respect of insurance placed prior to 30 September 1992 on MMI’s behalf for a management charge of £16m (netted against the £60m). Those who renewed or transferred their business from MMI to Zurich obtained insurance on the basis of materially the same cover and policy wordings as they had had with MMI (Zurich setting up effectively a new division called Zurich Municipal for such purpose). Of the MMI insureds, some went elsewhere for their new business, but the vast majority stayed loyal. There were some whose insurance expired in September/October 1992 who went elsewhere to other insurance companies for a time, and then transferred to Zurich Municipal (e.g. the Second and Fourth Defendants): some who renewed with Zurich prior to April 1993, such as the Seventh and Eighth Defendants: some whose insurance expired in or after April 1993 and then renewed with Zurich Municipal, such as the Fifth, Sixth and Ninth Defendants: and some, e.g. the Third, Tenth and Eleventh Defendants, who seamlessly transferred mid-term (“mid-term transfers”) from MMI to Zurich Municipal. Zurich Municipal kept the old MMI (third) wording (with immaterial alterations) as its “First Select policy” until 1998, when, in circumstances to which I shall refer, there was a change of wording. MMI entered a Scheme of Arrangement in January 1994. MMI, or after April 1993 Zurich on behalf of MMI, met all claims made in respect of mesothelioma exposure at all times until after (or, in at least one case, shortly before, but obviously anticipating) the decision in Bolton. Since Bolton, as set out in paragraph 5 above, MMI has (as a result of instruction to their managers Zurich) declined all mesothelioma claims, totalling to date 199. Zurich, who might be liable in respect of some claimants under the wording of their pre-1998 policy if the Defendants’ contentions in these proceedings are correct, has been joined by MMI as Defendant in the sixth action, as have ten representative Local Authorities, all of whose claims upon MMI in respect of claims against them by employees suffering from mesothelioma have been to date, and continuing, refused. There is a schedule, helpfully prepared by the Local Authorities, in which one example of an employee claimant has been included in respect of each of the ten Local Authorities. The claims of those ten employees, insofar as quantified by a judgment against the relevant Local Authority, or compromised by settlement, total over £1m. The aim of Zurich and the Local Authorities is the same as that of the Claimants in the first five actions, namely to achieve a judgment which declares that MMI is liable under its wordings to pay out relevant claimants (or in this case reimburse the relevant Local Authority employers) by reference to cover as at the date of inhalation. There are also, as referred to in paragraph 3 above, separate arguments of estoppel, which now arise only in Action 6 (there were similar issues raised by Akzo and Amec in Action 5 which are no longer pursued, and with which I do not need to deal, save as to costs). MMI is represented by Howard Palmer QC, leading Andrew Miller and Sonia Nolten, the Local Authorities by Lawrence West QC, leading A John Williams, and Zurich by Jeremy Stuart-Smith QC leading Ms Leigh-Ann Mulcahy and Ms Clare Dixon.

III. The policy wordings in issue

[16]I shall be referring below to the detailed wordings of the policies in issue before me, but at this stage I shall refer only to the nub of the nine policies particularly in the spotlight (BAI first wording (1953-1974) and second wording (1974-approx 1983), Independent (Federated) (I shall describe it as the Independent policy) 1972-1987, Excess’s three wordings between the late forties and 1976 and MMI, to the dates of whose three wordings I have already referred in paragraph 15 above). These are: i) BAI (first and second wordings):
“Injury sustained or disease contracted” during the insurance period. ii) Independent: “During the period of insurance … shall sustain bodily injury or disease”. iii) Excess: (The relevant part of all three wordings - late 1940s through to 1976): “During the period (of indemnity) shall sustain [any] personal injury by accident or disease” (the word any appears in one out of the three versions). iv) MMI: • First wording: during the period of insurance “shall sustain any personal injury by accident or disease”. • Second wording: during the period of insurance “shall sustain any bodily injury or disease”. • Third wording: “bodily injury or disease … suffered … when such injury or disease … is sustained or contracted during the currency of this Policy”
. The issue in general terms in these actions can thus be seen to be the meaning of those wordings, which can, in general terms, be addressed by reference to the meaning of the words sustaining injury or contracting disease during the policy period. The nine policy wordings are more thoroughly discussed throughout this Judgment, and appear in fuller form in an Annex to it. IV. The history of asbestos and mesothelioma.[17]Asbestos was, it seems, considered to be a miracle material, which came into massive use industrially towards the end of the nineteenth century. It was known to the Greeks, from whose language the word – meaning inextinguishable – is derived: its primary benefit is its ability to withstand heat, hence both to prevent fire and to create insulation. It is a rock derived from the earth by mining, and three principal forms of asbestos have been identified in industrial use: crocidolite or blue asbestos, amosite or brown asbestos, and chrysotile or white asbestos (which may be contaminated by a fourth form, tremolite).[18]Very substantial asbestos companies were established throughout the industrialised world, and asbestos was very substantially used in construction, in shipbuilding, in wartime equipment and, until very recently, in the brake linings of cars. It was mined especially in Russia and in South Africa: it was amongst South African miners, it seems, that the early concerns about the effects of asbestos dust and fibres began to be noted in the early part of the twentieth century.[19]The first appreciation of the danger caused by breathing in asbestos was by reference to the fibrosis which became called asbestosis, first addressed, it seems, by a Dr Cooke, who published in the British Medical Journal in 1924. The seminal work which fully revealed the dangers and consequences of asbestos in this country was that of Merewether & Price, whose “Report on Effects of Asbestos Dust in the Lungs and Dust Suppression in the Asbestos Industry” (HMSO 1930) particularly emphasised the dose relationship, noting that the risk of developing asbestosis increased with increasing length of employment and increasing concentration of dust to which the various workers were exposed, and also reported a five-year delay in its onset.[20]There were immediate consequences in this country of that Report. So far as regulating systems of work is concerned, the Asbestos Regulations 1931 imposed considerable restraint on the industrial use of asbestos, and these have been followed by ever more stringent Regulations in 1969, 1983, 1987, 2002 and 2006, the cumulative result of which has been much reduced exposure of workers to asbestos since the early 1980s. The other consequence of the Merewether & Price Report in 1930 was the Asbestos Industry (Asbestos) Scheme 1931 (“the Asbestos Scheme”), passed pursuant to the provisions of the Workmen’s Compensation (Silicosis and Asbestosis) Act 1930, dealing with compensation for those disabled by asbestosis, to which I will refer further below.[21]There is a difference in toxicity between the three kinds of asbestos to which I refer in paragraph 17 above: blue asbestos is at least fifty times as toxic as white and brown at least twenty times (subject to the white being more toxic if contaminated).[22]Asbestosis was thus perceived as the consequence of the inhalation of the dust, and it was a serious disease from which many employees in the relevant industries suffered: although, as referred to above, it appears to have been early appreciated that there could be a time lag of up to five years after material inhalation, it was a relatively “short-tail” disease. There was then no appreciation of the existence of mesothelioma which is, as I shall describe, the consequence of the malignancy of the mesothelial cells in the pleura surrounding the lungs.[23]Dr Moore-Gillon, one of the three world-renowned respiratory consultants who have given expert evidence in this case, points to the first indirect reference to mesothelioma as being “cancer of the … pleura” in a 1955 work by Dr Donald Hunter (the Diseases of Occupation 1955). The reality is, as will appear, that mesothelioma can take 40 years or more to manifest itself, by which time many, if not all, of the employees who in the early part of the twentieth century worked in asbestos industries, and were at risk of mesothelioma, would have contracted asbestosis and died of that or other diseases before any mesothelioma developed or was revealed. A Dr Wagner and colleagues described 33 cases of mesothelioma, identifying a history of exposure to crocidolite in 32 of them, in a paper in May 1960, published in the British Journal of Industrial Medicine, by reference to miners in South Africa.[24]Mesothelioma was really only brought to public attention by the seminal work of Newhouse and Thompson in 1965 British Journal of Industrial Medicine p261, which emphasised that mesothelioma was not simply contracted by those who had high levels of exposure, but indeed also by family members from clothing brought home for the wash. It was, it seems, the Sunday Times, picking up on the Newhouse and Thompson Report and the publicity it received, which really brought to the attention of the wider public the “killer dust disease”, by its prominent story in the edition of 31 October 1965.[25]Notwithstanding that for some time thereafter mesothelioma was, it seems, thought to be a development, or aspect, of asbestosis even by those dealing with insurance claims in relation to it, it is a quite separate disease. In early days, when employees were working in surroundings heavily impregnated with asbestos fibres, a proportion as much as 15% of employees could ultimately suffer mesothelioma. The cohorts subsequently looked at suggest that the realistic percentage is that 2-3% of those exposed forty years or so ago ultimately develop mesothelioma. As I have indicated, it is a much longer-tailed disease than asbestosis, and, as asbestosis reduced with the proscription of working with asbestos, and life expectancy increased, more people survived long enough to have symptoms and die of mesothelioma, with the frequent result that there was no onset until after retirement.[26]Approximately 9,000 people have died of mesothelioma in the UK up to 2003. There appear to have been very few if any mesothelioma claims on insurers prior to 1976, indeed few disease claims of any kind before the 1970s, at least so far as can be recollected by the senior citizen amongst our insurance witnesses, Dr Eaglestone, now aged nearly 92, and full of knowledge and experience as a result of working in the insurance industry between 1934 and 1976 for Zurich and then Federated, and the author of a number of important texts between the 1960s and 1990s. He was called by Independent (by video link) as a factual witness, for the benefit of all parties, but was manifestly both expert and wise.[27]The mesothelium is the membrane forming the lining of various body cavities, including particularly, but, for our purposes, only, the pleura, the wall of the lung. It consists of mesothelial cells. There are two layers of membrane on the outside of the lung, the visceral pleura (and visceral mesothelium) which is on the inside covering the lung, and the parietal pleura (and parietal mesothelium), which is on the outside covering the ribcage. Each pleura is the thickness of the skin of an inflated balloon, and there is a very thin layer of pleural fluid between them, which lubricates the movement of the lungs during respiration. Mesothelioma is a malignant tumour consisting of malignant mesothelial cells. I shall deal further below with the aetiology of mesothelioma, but it is, as set out in paragraph 9 above, accepted that it is rarely if ever ascribed to any other origin than the inhalation of asbestos fibres.[28]Although there have been occasional recorded deaths from mesothelioma as early as (but no earlier than) ten years after exposure to asbestos, the normal period is between forty to fifty years from exposure to diagnosability: the word diagnosability has been adopted by reference to the manifestation of symptoms, to allow for the possibility that some sufferers are slower than others to report their symptoms and thus achieve diagnosis. Those symptoms are increasing breathlessness, consequent upon pleural diffusion (build-up of pleural fluid), and the growth of the mesothelioma restricting the expansion of the lungs. In practice it is only possible to refer to manifestation by reference to such symptoms, because, unlike most, if not all, other cancers, where there is a spherical growth within the body, which is sooner or later identified by a scan or an x-ray, the mesothelioma grows by creeping expansion along the pleura, rather like a fungus, and is only rarely revealed, by a biopsy or CT scan, short of post mortem examination.[29]Mesothelioma is almost invariably fatal, and, whereas there is normally the forty years or so from exposure to diagnosability, the average period of time from diagnosability to death is, as can be illustrated by the history of the Claimants in these cases referred to above, on average fourteen months, sometimes as much as 20-24 months, very rarely more, and sometimes as little as six months.[30]I should at this stage mention two matters of common ground between the parties, but, as will appear, there is much that has been common ground on the medical front, not least the unknowability and indescribability of much of the pathogenesis of mesothelioma. This common ground has been achieved with the assistance of five internationally recognised and very experienced expert witnesses; three of them respiratory consultants, Dr Rudd and Dr Moore-Gillon, who have between them given evidence in most if not all of the cases, reported and unreported, involving mesothelioma in recent years (including Fairchild v Glenhaven Funeral Services Ltd and Others (“Fairchild”) [2003] 1 AC 32, the significant decision of the House of Lords, and Bolton), and Professor Geddes, whose pioneering work is recognised by both Drs Rudd and Moore-Gillon to the extent that both of them base their own theories upon his crucial paper of as long ago as 1979, “The Natural History of Lung Cancer: a Review based on Rates of Tumour Growth” published in Volume 73 of the British Journal of Diseases of the Chest (“The Geddes Article”); and two of them renowned biochemists, Professor Phillips of the Institute of Cancer Research and Professor Heintz of the Vermont Cancer Centre. Such biochemistry evidence is, so far as I know, a new feature in asbestosis/ mesothelioma litigation.[31]The two matters of common ground to which I refer are as follows: i) In Fairchild the House of Lords decided that, where an employee had been exposed by different defendants during different periods of employment to inhalation of asbestos dust, and it could not be shown which defendant’s wrongdoing was to blame, the increase of the risk of contracting the disease was held sufficient to satisfy the causal requirements for each employer’s liability for the consequent mesothelioma. At an early stage of thinking about mesothelioma, it was believed that it could be caused by a single fibre – this single fibre theory was described by Lord Bingham in his speech at paragraph 7 in Fairchild. Such theory is however now discredited, and is indeed rejected as a possibility by all five of the experts before me. It is the exposure to quantities of asbestos fibres which is causative of mesothelioma, and the risk increases with the dosage. Lord Rodger’s “alternative explanation … that the greater the number of asbestos fibres taken into the body, the greater are the chances that one of them will trigger a malignant transformation” (para 122 of Fairchild) is now fully accepted. ii) As will be seen, the conclusion in Fairchild as to liability of multiple employers was consistent with the practice which had in fact already been adopted by EL insurers, when faced with a claim by an employee with mesothelioma by reference to exposure to asbestos over a lengthy period, either with different employers or, indeed, with the same employer but with different successive insurers. This practice was the sharing out of such a claim between insurers proportionately, by reference to “time on risk”. It was, as will be seen, however, also part of such informal claims-handling arrangements between insurers, that an insurer on risk in respect of the ten years immediately prior to manifestation/diagnosability was excluded from such sharing arrangements, upon the basis that the last ten years could not be causative. This practice arose as a result of Bryce v Swan Hunter Group plc (“Bryce”) [1987] 2 Lloyd’s Law Rep 426, in which Dr Rudd gave expert evidence to that effect, which was accepted by Phillips J (as he then was), so as to exclude one of the defendant employers. It is derived from an epidemiological study of mesothelioma mortality in a large cohort of American insulation workers published in 1982 by Peto and Others, in Vol 45 of the British Journal of Cancer. It is thus common ground that asbestos fibres in the body cannot be causative of mesothelioma during the last ten years immediately prior to death: the process has started before that; indeed, save in the very exceptional cases where death occurs ten years after exposure, probably long, long before that.[32]I have referred in paragraph 28 above to the difficulty of examination, inspection, or diagnosis of a mesothelioma prior to the manifestation of symptoms. In the case of normal lung cancers, which were the subject matter of the Geddes Article, it is accepted that such a tumour is of diagnosable size when it reaches the quantum of 10 9 cells, i.e. a billion cells. It seemed to be common ground before me that a similar principle could be applied to mesothelioma, namely that such a tumour, not otherwise detected or, normally, detectable, would be initiating symptoms such as to render it diagnosable when it reaches a size of between 10 9 and 10 12 cells. V. A history of Employers’ Liability.[33]The starting point for our purposes is the Employers’ Liability Act 1880 (“ELA 1880”), which created a statutory framework for the common law claim by an employee against his or her employer. It provided for “where … personal injury is caused to a workman” (s1), and then that (s4) “an action for the recovery under this Act of compensation for an injury shall not be maintainable unless notice that injury has been sustained is given within 6 weeks, and the action is commenced within 6 months from the occurrence of the accident causing the injury or in case of death within 12 months from the time of death”. Inevitably, because the claim is for negligence, it must be shown that the employer has caused the injury, and so the sustaining of the injury for the purpose of s4 can only be by reference to an injury which has been so caused. By virtue of the short time limit for the statutory claim and the various common law defences to the tortious claim, which survived through to 1948, recovery against an employer in negligence was rendered extremely difficult. Since the defences of common employment and contributory negligence meant that the employee could not recover at all, either if he or she had contributed at all to the accident, or if the accident was caused by a fellow employee, common law tortious claims were very rare.[34]The position was transformed by the passage of the Workmen’s Compensation Acts (collectively “WCA”), successively in 1897, 1900, 1906 and 1925. The 1897 Act provided for the liability of employers to workmen for their injuries in respect of “personal injury by accident arising out of and in the course of the employment” (s1). It is not in substitution for the common law/ELA claim, but an alternative to it, and negligence did not require to be proved. This was a considerable advance, but there were many limitations and restrictions, at least in the 1897 Act: i) By s1(2)(a) the workman had to be disabled for a period of at least two weeks from earning full wages at the work at which he was employed: this was amended down to one week in s1(2)(a) of the 1906 Act, and further reduced to three days in the same section of the 1925 Act. ii) Notice of the accident was required to be given as soon as practicable after the happening of it, and the claim for compensation with respect to such accident had to be made within six months of the occurrence of the accident causing the injury, or in the case of death within six months of the time of death (s2(1) of the 1897 Act). There was some kind of provision for flexibility in this regard, at any rate with regard to the giving of the notice, in that section: but the position was made clearer in s2(1)(a) and (b) of the 1906 Act, that there could in fact be an extension of the six-month period (and by implication the notice) in appropriate cases. An example of an extension of eighteen months can be seen in Coulson v Southmore Colliery Co (“Coulson”) [1915] 2 LJ QB 508. iii) The claim was limited to a “personal injury by accident”, but this was liberally interpreted by the courts so as to include personal injury by disease which was itself caused by accident, such as in Brintons Ltd v Turvey [1905] AC 230 (infection by anthrax caused by “the accidental alighting of a bacillus from infected wool onto a part of the diseased person”). This was followed under the 1906 Act in Innes v Kynoch [1919] AC 765. But this principle did not apply to a disease which was not contracted by an accident, but rather by a gradual process (see Williams v Guest, Keen & Nettlefolds (“Williams”) [1926] 1 KB 497 and, as late as 1948, Roberts v Dorothea Slate Quarries Co Ltd (“Roberts”) [1948] 2 All ER 201 HL). The significance of this is that compensation for a disease of such kind caused by the employment could not be recovered at all under the 1897 Act, and not unless it fell within a limited number of scheduled diseases, to which I will refer below, even once disease was in part brought within the WCA by the 1906 Act. iv) The notice required under s2(2) of the 1897 Act was to “state in ordinary language the cause of the injury and the date at which it was sustained”: in s2(2) of the 1906 Act the latter words were changed to “the date at which the accident happened”. v) As I have said, a limited right of recovery under the WCA in respect of diseases caused by a claimant’s employment was introduced in the 1906 Act (s8), and re-enacted in the 1925 Act (s43): because of the similarity of these provisions I shall refer only to s8 of the 1906 Act in describing the structure. I have already indicated that this structure was only applicable to certain diseases, as specified in the Third Schedule, six items in both the 1906 Act and the 1925 Act: it is worth noting that, although there were, I believe, some additions to this list, asbestosis was never added. The disease, if in the Third Schedule, in respect of which the claimant or his dependants were entitled to seek recovery, was one “due to the nature of any employment in which the workman was employed at any time within the twelve months previous to the date of … disablement … whether under one or more employers” (s8(1)), whereupon he was entitled to compensation “as if the disease … were a personal injury by accident arising out of and in the course of that employment”, but with certain modifications from the procedure adopted in respect of injuries. It is to be noted that it was the type or nature of the employment which was significant: the employee would not need to show that his disability was caused by an act of the employer, but simply by reference to the nature of the employment which that employer was carrying on at the relevant time. vi) By s8(1)(c) the compensation was to be recoverable from the employer “who last employed the workman during the said twelve months in the employment to the nature of which the disease was due”. If the employee had not therefore been employed by anyone during those twelve months, then, even in respect of a claim when an extension would otherwise have been granted, as per the case of Coulson referred to above, the employee could not recover against anyone. The employee was obliged to furnish that last employer with information as to his or her previous employers in that twelve months, with a sanction for such failure that the employer could then escape liability if he disproved causation. Armed with that information, the immediate target employer could then seek recovery or contribution. By s8(1)(c)(ii) if the target employer alleged that the disease was in fact contracted whilst the workman was in the employment of another employer within that twelve-month period, then he could seek to offload his liability to that employer in its entirety or, by s8(1)(c)(iii), if the disease is of such a nature as to be contracted by a gradual process, then the target employer could claim contribution against any other employers who, within that twelve-month period, employed the workman in employment to the nature of which the disease was due. Subject therefore to the employer’s rights under those subsections, the last relevant employer, provided it was within the twelve months immediately prior to the date of disablement, was liable, irrespective of actual responsibility. The fact that the claim over is, notwithstanding the absence of express words to that effect in s8(C)(ii), limited to one against another relevant employer within the 12 months is clear from Eaton v George Wimpey & Co Ltd [1938] 1 KB 353. vii) S8(1) provides how the existence of the disability is established, namely in one of the following ways, where:
“(i) the certifying surgeon appointed under the Factory and Workshop Act 1901 for the district in which a workman was employed certifies that the workman is suffering from a disease mentioned in the Third Schedule to this Act and is thereby disabled from earning full wages at the work at which he was employed; or (ii) a workman is, in pursuance of any special rules or regulations made under the Factory and Workshop Act 1901, suspended from his usual employment on account of having contracted any such disease; or (iii) the death of a workman is caused by any such disease.” viii) S8(1)(a) provides that, for the purpose of deeming the disease or suspension to be a “personal injury by accident”, so as to bring this limited number of diseases within the remit of legislation which previously only applied to personal injuries by accident, “the disablement or suspension shall be treated as the happening of the accident”
. By s8(4):
“For the purposes of this section, the date of disablement shall be such date as the certifying surgeon certifies as the date on which the disablement commenced, or, if he is unable to certify such a date, the date on which the certificate is given: Provided that … (b) where a workman dies without having obtained a certificate of disablement … it shall be the date of death.”
[35]S47 of the 1925 Act gave the power to the Secretary of State to establish schemes which could “provide for the payment of compensation by the employers of workmen in any specified industry or process or group of industries or processes involving exposure to silica dust”: this was extended by the 1930 Act, to which I have referred in paragraph 20 above, to industries involving exposure to asbestos dust, and this led to the Asbestos Industry (Asbestosis) Scheme 1931. This applied the notice and six-month period, subject to extension, as in the WCA, to a new compensation scheme, and the structure was the same, by reference to certificates etc, and the automatic liability of the last employer of the workman in the relevant processes, except that, instead of the employee only being able to claim against his last employer in the last twelve months, he or she had a right to go back five years (s5 of the Scheme) - perhaps for the reason that it was by then known that asbestosis could take at least that amount of time to occur or become manifest - and with a similar provision for the target employer to be able to claim over against previous employers who had employed the workman in the relevant processes, again extended to five years (s8(2)).[36]In 1945 to 1948 there was a plethora of statutory reforms. The WCA were repealed in 1948. So far as the common law was concerned, the defences of common employment and contributory negligence as a bar were abolished. There was thus only the one route, that at common law, which was made much more straightforward, free of issues such as any restriction to scheduled diseases – though there were opportunities, which were taken, for insurers to exclude liability for specified diseases, such as asbestosis, as can be seen, for example, from Cape plc v Iron Trades Insurers Employers Association Ltd (“Cape v Iron Trades”) [2004] Lloyd’s Rep IR 75.[37]ELCIA, referred to in paragraph 6 above, which came into force in January 1972, made it compulsory for (non-exempt) employers to take out EL insurance, which meant, inter alia, that insurers no longer had the right to exempt any disease from insurance cover. Limited licence was given by paragraph 2 of the Employers’ Liability (Compulsory Insurance) General Regulations 1971 (the “1971 Regulations”) in respect of the kind of exclusions which insurers had traditionally incorporated in EL policies, such as the right to avoid for breaches of duty by the insured to take reasonable care to protect its employees against the risk of bodily injury or disease in the course of its employment, whereby, although such exclusions could no longer allow the insurer not to pay out the claim, the insurer could, by a term of the policy, require the insured to repay to it any claims it had paid out to the employee in circumstances in which the insurer could otherwise have avoided (Regulation 2(2)).[38]There was some pre-history in relation to compulsory insurance, in that there was at least provision, made in s8(7) of the 1906 WCA, for the possibility of the Secretary of State requiring particular employers to insure, but it does not seem that any such power was ever taken up, and the only, limited, compulsory insurance there was was under the Workmen’s Compensation (Coal Mines) Act 1934.[39]ELCIA was passed as a result of a massive public outcry when claims on behalf of employees in a Glasgow firm, who died in a fire caused by the negligence of their employers, failed because the employer’s insurance was avoided, and a Private Members Bill resulted, which was eventually taken up in a great rush by the Government. It seems from literature at the time that, in fact, 70%, or possibly 90%, of employers did in fact have at least some EL insurance, but the existence of 100% compulsory EL insurance must have given an additional impetus to the making of common law claims for negligence by employees against employers, coupled with the ever increasing numbers of statutory requirements on employers, breaches of which could either found a cause of action, or inform a claim in negligence.[40]Alongside these developments was the easing of the law relating to limitation. Prior to the Law Reform (Limitation of Actions etc) Act 1954 (“the 1954 Act”) personal injury claims were, like all other claims, subject to an (absolute) six-year bar, save that, strangely, by s21 of the Limitation Act 1939, there was a special limitation period of one year for causes of action against public authorities, which must have given some comfort to the customers of MMI. By the 1954 Act, which abolished that special provision in relation to public authorities, so that claims against them fell in line with all others, the limitation period in respect of personal injury claims came down from six years to three years, imposing a real difficulty in the way of claimants in respect of industrial diseases which did not manifest within three years.[41]The stringent nature of the 1954 Act remained in place until after the decision of the House of Lords in Cartledge v E Jopling & Sons Ltd (“Cartledge”) [1963] AC 758, in which an employee who inhaled noxious dust over a period of years, eventually suffering from pneumoconiosis, was held to have suffered substantial injury, sufficient for the injury to be actionable before it could be discovered by any means known to medical science. With obvious reluctance, the House of Lords found that his claim was statute barred, and that no extension was possible, although their Lordships knew that a change of the law would imminently result. There followed the extensions, first in the Limitation Act 1963, then in the 1975 Act, and finally in the consolidating Act in 1980. By virtue of the flexibility and allowances now made in the statutes, there is no basis (or almost none: see Arnold v CEGB [1988] 1 AC 228 where the cause of action accrued before 4 June 1954) upon which a diligent prosecution of a claim for compensation in respect of a long-tail disease resulting from negligence forty or fifty years before manifestation of symptoms would now face any limitation problem.[42]It is against this historical background that mesothelioma claims started to be brought in the late 1970s and 1980s, and there is no doubt that the courts have particularly strained to do justice in mesothelioma claims, where those who have suffered what is accepted to be a particularly nasty death have faced the prospect of no, or inadequate, compensation, either for themselves or their dependants. The difficulty was that of proof, not that the claimant had contracted mesothelioma as a result of asbestos fibres, but, in relation to those many employees who worked over a lengthy period for different employers all within the same industry, as to which employer (and, in due course therefore, which insurer) was responsible or, given the difficulties of proof, whether any of them could be shown to be liable on the balance of probabilities. The special Act and Scheme in 1979, referred to in paragraph 7 above, was of course extra-judicial and, in any event, as there referred to, has provided inadequate compensation.[43]In the three cases which went to the House of Lords in Fairchild in 2002, the Court of Appeal had dismissed the claim in each case, on the basis of failure by each claimant to establish causation against any of the defendants. Lord Hoffmann articulated the question of principle in paragraphs 61 to 63 of his speech at 74:
“61. What are the significant features of the present case? First, we are dealing with a duty specifically intended to protect employees against being unnecessarily exposed to the risk of (among other things) a particular disease. Secondly, the duty is one intended to create a civil right to compensation for injury relevantly connected with its breach. Thirdly, it is established that the greater the exposure to asbestos, the greater the risk of contracting that disease. Fourthly, except in the case in which there has been only one significant exposure to asbestos, medical science cannot prove whose asbestos is more likely than not to have produced the cell mutation which caused the disease. Fifthly, the employee has contracted the disease against which he should have been protected. 62. In these circumstances, a rule requiring proof of a link between the defendant’s asbestos and the claimant’s disease would, with the arbitrary exception of single-employer cases, empty the duty of content …To say, for example, that the cause of Mr Matthews’s cancer was his significant exposure to asbestos during two employments over a period of eight years, without being able to identify the day upon which he inhaled the fatal fibre, is a meaningful causal statement. The medical evidence shows that it is the only kind of causal statement about the disease which, in the present state of knowledge, a scientist would regard as possible. There is no a priori reason, no rule of logic which prevents the law from treating it as sufficient to satisfy the causal requirements of the law of negligence. The question is whether your Lordships think such a rule would be just and reasonable and whether the class of cases to which it applies can be sufficiently clearly defined. 63. So the question of principle is this: in cases which exhibit the five features I have mentioned, which rule would be more in accordance with justice and the policy of common law and statute to protect employees against the risk of contracting asbestos-related diseases? One which makes an employer in breach of his duty liable for the employee’s injury because he created a significant risk to his health, despite the fact that the physical cause of the injury may have been created by someone else? Or a rule which means that, unless he was subjected to risk by the breach of duty of a single employer, the employee can never have a remedy? My Lords, as between the employer in breach of duty and the employee who has lost his life in consequence of a period of exposure to risk to which that employer has contributed, I think it would be both inconsistent with the policy of the law imposing the duty and morally wrong for your Lordships to impose causal requirements which exclude liability.”
[44]Lord Bingham, in paragraph 33 of his speech, at 67, said as follows:
“The crux of cases such as the present, if the appellants’ argument is upheld, is that an employer may be held liable for damage he has not caused. The risk is the greater where all the employers potentially liable are not before the court. This is so on the facts of each of the three appeals before the House, and is always likely to be so, given the long latency of this condition and the likelier that some employers potentially liable will have gone out of business or disappeared during that period. It can properly be said to be unjust to impose liability on a party who has not been shown, even on a balance of probabilities, to have caused the damage complained of. On the other hand, there is a strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so, when the harm can only have been caused by breach of that duty and when science does not permit the victim accurately to attribute, as between several employers, the precise responsibility for the harm he has suffered. I am of the opinion that such injustice as may be involved in imposing liability on a duty-breaking employer in these circumstances is heavily outweighed by the injustice of denying redress to a victim.”
[45]Both public policy and justice thus led the House of Lords in Fairchild to find a way round their own earlier decision in Wilsher v Essex Area Health Authority [1988] AC 1074, disapproving what had appeared to be central dicta of Lord Bridge at 1090, and distinguishing the decision on the basis that, in Fairchild, a single noxious agent, the asbestos dust, was involved.[46]It was not only Lord Hoffmann who set out the special features in the case, but Lord Bingham was even more careful to underline, at paragraph 2, and re-emphasise at paragraph 34, of his speech, that the conclusion which the House was reaching was limited to the special features of the case:
“2. The essential question underlying the appeals may be accurately expressed in this way. If (1) C was employed at different times and for differing periods by both A and B, and (2) A and B were both subject to a duty to take reasonable care or to take all practicable measures to prevent C inhaling asbestos dust because of the known risk that asbestos dust (if inhaled) might cause mesothelioma, and (3) both A and B were in breach of that duty in relation to C during the periods of C’s employment by each of them with the result that during both periods C inhaled excessive quantities of asbestos dust, and (4) C is found to be suffering from mesothelioma, and (5) any cause of C’s mesothelioma other than the inhalation of asbestos dust at work may be effectively discounted, but (6) C cannot (because of the current limits of human science) prove, on the balance of probabilities, that his mesothelioma was a result of his inhaling asbestos dust during his employment by A or during his employment by B or during his employment by A and B taken together, is C entitled to recover damages against either A or B or against both A and B? … 34. To the question posed in paragraph 2 of this opinion, I would answer that, where conditions (1) – (6) are satisfied, C is entitled to recover against both A and B. That conclusion is in my opinion consistent with principle, and also with authority, (properly understood). Where those conditions are satisfied, it seems to me just and in accordance with common sense to treat the conduct of A and B in exposing C to a risk to which he should not have been exposed as making a material contribution to the contracting by C of a condition against which it was duty of A and B to protect him.”
[47]There was thus the beginning of almost a special mesothelioma jurisprudence. In such circumstances, the conclusion was reached by the House which is most succinctly articulated in the speech of Lord Nicholls at paragraph 42:
“So long as it was not insignificant, each employer’s wrongful exposure of its employee to asbestos dust, and, hence to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection. This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established.”
[48]Lord Rodger held, in his speech at paragraph 168, that:
“by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.”
[49]Each employer is thus liable in respect of having exposed the claimant to asbestos fibres by virtue of the material increase of the risk, but of course in Fairchild that risk had materialised.[50]The next question that arose in this new mesothelioma jurisprudence was raised by the three cases which went to the House of Lords in Barker v Corus UK Ltd (“Barker”) [2006] 2 AC 572. In two of these cases, claims were made against the remaining solvent ex-employers, out of a number of employers who had employed the now-deceased employees and exposed them to asbestos. In the third case, the deceased had been exposed to asbestos during three periods in his working life, first while working for a company which had since become insolvent, secondly while working for the defendant, and thirdly while self-employed, where no employer could be responsible.[51]The consequences of Fairchild had to be considered, namely as to whether, particularly in this last circumstance, no employer defendant was to be found liable, or whether all were to be found liable for the full amount of the claim, or whether there was to be apportionment and, if so, whether that apportionment should allow for, and then subtract, the self-employed period.[52]The majority of the House of Lords, Lord Rodger dissenting, found in favour of apportionment of liability, so that each culpable employer was severally and only liable for its proportion of the total period at risk, with the period for which the employee alone was responsible being included in that total, thus reducing the employers’ liability. The majority did not follow or accept an argument, run by Mr Stuart-Smith QC for the three defendants, that an equitable principle of apportionment should be applied, but concluded (per Lord Hoffmann at paragraph 48), notwithstanding and despite the decision of the House of Lords in Gregg v Scott [2005] 2 AC 176 that a claim for damages for clinical negligence could not be based simply on an increase in risk, that “the Fairchild exception treats the risk of contracting mesothelioma as the damage … [but] only when the disease has actually been contracted.”[53]There was some dispute before me, particularly by Mr Stewart QC, as to the ratio of Barker, given that there were five separate speeches, but I conclude that that short passage at paragraph 48 was indeed the view of the majority: i) Lord Hoffmann asked the question, at paragraph 2 of his speech on p580:
“What is the extent of liability? Is any defendant who is liable under the [Fairchild] exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable. Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease - a risk which is known to have materialised”
. He continues:
“35. Consistency of approach would suggest that if the basis of liability is the wrongful creation of a risk or chance of causing the disease, the damage which the defendant should be regarded as having caused is the creation of such a risk or chance. If that is the right way to characterise the damage, then it does not matter that the disease as such would be indivisible damage … 36. Treating the creation of the risk as the damage caused by the defendant would involve having to quantify the likelihood that the damage (which is known to have materialised) was caused by that particular defendant. It will then be possible to determine the share of the damage which should be attributable to him.” “35. Consistency of approach would suggest that if the basis of liability is the wrongful creation of a risk or chance of causing the disease, the damage which the defendant should be regarded as having caused is the creation of such a risk or chance. If that is the right way to characterise the damage, then it does not matter that the disease as such would be indivisible damage … Then at paragraph 40: “So far I have been concerned to demonstrate that characterising the damage as the risk of contracting mesothelioma would be in accordance with the basis upon which liability is imposed and would not be inconsistent with the concept of damage in the law of tort. In the end, however, the important question is whether such a characterisation would be fair. The Fairchild exception was created because the alternative of leaving the claimant with no remedy was thought to be unfair … 43. In my opinion, the attribution of liability according to the relative degree of contribution to the chance of the disease being contracted would smooth the roughness of the justice which a rule of joint and several liability creates …”
I return to paragraph 48 and Lord Hoffmann’s conclusion:
“Although the Fairchild exception treats the risk of contracting mesothelioma as the damage, it applies only when the disease has actually been contracted … It applies only when the claimant has contracted the disease against which he should have been protected. And in cases outside the exception as in Gregg v Scott … a risk of damage or loss of a chance is not damage upon which an action can be founded. But when the damage is apportioned among the persons responsible for the exposure to asbestos which created the risk, it is known that those exposures were together sufficient to cause the disease.” ii) Lord Scott at paragraph 50 was in “complete agreement both with [Lord Hoffmann’s] conclusions and with his reasons”
. He adds at paragraph 61:
“If the Fairchild principle were based upon the fiction that each Fairchild defendant had actually caused the eventual outcome, the analogy with tortfeasors each of whom had contributed to an indivisible outcome would be very close. But Fairchild liability is not based on that fiction. It is based on the fact that each negligent defendant has wrongfully subjected the victim to a period of exposure to an injurious agent and has thereby, during that period, subjected the victim to a material risk that he or she will contract disease associated with that agent. Each successive period of exposure has subjected the victim to a further degree of risk. If, in the event, the victim does not contract the disease, no claim can be made for the trauma of being subjected to the risk: see Gregg v Scott … But if the victim does contract the disease the risk has materialised … 62. I would, therefore, hold that the extent of the liability of each defendant in a Fairchild type of case, where it cannot be shown which defendant’s breach of duty caused the damage, but where each defendant, in breach of duty, has exposed the claimant to a significant risk of the eventual damage, should be liability commensurate with the degree of risk for which that defendant was responsible.” iii) Lord Walker is “in full agreement with Lord Hoffmann’s reasons” at paragraph 103, and reiterates the position in his own words at paragraph 113. iv) It is right that, while agreeing with the majority decision, Baroness Hale expressly agrees with Lord Rodger at paragraph 120 that “the damage which is the ‘gist’ of these actions is the mesothelioma and its physical and financial consequences. It is not the risk of contracting of mesothelioma.”
That is not the majority view, as set out above. But that means that the majority was 3-2 supporting the reasoning in paragraph 48 of Lord Hoffman’s speech.[54]The effect of the House of Lords’ decision in Barker was immediately overturned by Parliament in the Compensation Act 2006, which Act was on the statute book in less than three months after the decision of the House of Lords. It is a prime example, this time a statutory one, of the existence of what I have called the mesothelioma jurisprudence, because s3 of the Act is specific and only relates to mesothelioma:
“3. 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.” (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). (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.”
[55]This meant that any one solvent employer would be responsible in full for the entirety of the claimant’s claim, once it was found that the employee had been tortiously exposed to asbestos during his employment by that employer, whatever may be the position in relation to the balance of any period or periods of exposure (subject to the employer’s right to claim a contribution – s3(3)).[56]The last aspect of mesothelioma jurisprudence to which reference needs to be made is to the new special Practice Direction, supplementing the Civil Procedure Rules, Rule 3.1, Practice Direction 3D: Mesothelioma Claims. Supervised in the Royal Courts of Justice by Senior Master Whitaker, but now radiating out to all circuits, this is a special fast track procedure, prescribing a special method of starting proceedings for either a “Living Mesothelioma Claim” or a “Fatal Mesothelioma Claim”, as appropriate, setting down a very speedy procedure, particularly where, as will be almost always the case, the claimant is, if still alive, left with “severely limited life expectancy”, and providing for standard interim payments of £50,000 – which would of course be dependent upon there being a solvent employer and/or insurer in place. This has been called the “fast track” procedure.[57]Finally I should refer, in this brief resumé of relevant aspects of employers’ liability, to the House of Lords decision in Rothwell v Chemical and Insulating Co Ltd (“Rothwell”) [2008] 1 AC 28, in which four cases were taken to the House of Lords where claimants had developed, not mesothelioma, but pleural plaques, being symptomless fibrous thickening of the pleural membrane, as a result of exposure to asbestos by the relevant defendant. No reference was made in argument or in the speeches either to Fairchild or, in particular¸ to Barker. The conclusion of their Lordships was that (I quote the headnote):
“since the pleural plaques had caused no symptoms and did not increase susceptibility to other asbestos-related diseases or shorten life expectancy, their mere presence in the claimant’s lungs did not constitute injury capable of giving rise to a claim for damages in tort; that although the development of pleural plaques was proof that the claimant’s lungs had been penetrated by asbestos fibres which could independently cause other fatal diseases, neither the risk of developing those other diseases nor anxiety about the possibility of that risk materialising could amount to damage for the purposes of creating a cause of action in tort.”
[58]I have been shown by Mr Bartley Jones QC a draft bill, introduced into the Scottish Parliament in June of this year, whose purpose is to reverse in Scotland the decision that asymptomatic pleural plaques do not give rise to a cause of action. There is presently no similar move in the Westminster Parliament.

VI. A history of EL Insurance

[59]The actual “trigger” for an insurer’s liability under EL insurance is, of course, the liability of the employer to the employee, until the establishment and ascertainment of which there is no right of indemnity by the employer against the insurance company: see Post Office v Norwich Union [1967] 2 QB 363 and Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957. In issue in this case has been what might be called a or the secondary trigger, namely, the question, once the employer is liable to the employee, as to what trigger or key unlocks a relevant period of cover, in the light of the relevant insurance wording. Put another way, EL insurance gives indemnity against liability for compensation for bodily injury or disease suffered by a person under a contract of service arising out of and/or in the course of the employee’s employment by the employer, but what is the temporal limitation? What is the key, the entrée, to an individual period of policy cover?[60]There are at least five kinds of liability insurance trigger relevant to EL insurance. i) Occurrence or event – date of breach of duty. ii) Causation/exposure. iii) Occurrence of loss/damage (relatively recently coming to be called “injury in fact”). iv) Manifestation/diagnosis/notice. (i) to (iv) above are from time to time collectively known or referred to as “events occurring” as compared or contrasted with: v) Claims made.[61]The essence of EL insurance has always been described in the literature, the articles and the text books and commentaries, as being causation. Mr Derek Howie, another very experienced insurance practitioner since 1965, employed successively by Iron Trades Employers Insurance Association (“Iron Trades”), Midland Assurance Ltd (“Midland”), Eagle Star and Zurich, who was called before me by Zurich as a witness of fact, gave the description in 1996 at a seminar of the Association of British Insurers (“ABI”) that “the causation trigger has been the bedrock on which EL insurance has been built over five decades”. Of course, in order to establish liability on the employer, the injury must have arisen out of employment, and to that extent been caused by the employer. From time to time over more than two decades between the 1970s and the 1990s there was more or less desultory discussion about a possible wholesale changeover in EL insurance to a ‘claims made’basis, but this never eventuated.[62]Prior to 1948, for reasons referred to in paragraphs 33 to 36 above, the main thrust of EL insurance was the coverage of WCA and related liabilities. This meant only scheduled diseases (not asbestosis, at least until the 1931 Scheme) and almost entirely short-tail liabilities, with the only long-tail possibility if the s2 extension (as in Coulson) applied, and even then that would mean that the employee would have to have continued in employment, or at least not been out of employment, for the twelve months prior to his claim (see paragraph 34(ii) above).[63]In 1906, the Accident Offices Association (“AOA”), in order to regulate rates and prices, introduced a tariff wording for its insurer members and thereafter, until 1969, when the tariff was abolished, there was a tariff wording for those insurers who were tariff insurers, and non-tariff insurers were left to use their own wordings, although naturally many of them were similar or identical to the tariff wording. Mutual insurers, such as MMI, were not members of the tariff nor, for example, was Excess, which emerged from and/or had associations with, Lloyd’s, or BAI.[64]It seems clear that the introduction of the tariff in 1906 coincided with the new WCA regime (including s8 relating to disease) introduced by the 1906 Act, to which I refer in paragraph 34 above. The only policy we have in the papers before me which antedates 1906 is a Midland policy, to which I shall return later, and whose wording (for obvious reasons excluding any reference to disease) provided cover if “any workman shall sustain any personal injury by accident for which the assured shall be liable to pay compensation under common law or the Employers Liability Act 1880, or the Workmen’s Compensation Acts 1897 and 1900”.[65]The two earliest policies in evidence after 1906 are a Tariff policy dated 1908 and a BAI policy dated 1907. As set out in paragraph 33 above, the provision in s1(1) of the 1906 Act related to “personal injury by accident arising out of and in the course of employment [being] caused”; and I have referred at paragraph 34(iv) above to the change in the notice provision in the 1897 Act from the date the injury was sustained to the date it happened in the 1906 Act. The tariff wording provided (using sustained wording):
“If at any time during the said period any employee in the Insured’s immediate service shall sustain any personal injury by accident or disease as described in the Third Schedule to the Workmen’s Compensation Act 1906 while engaged in the service of the Insured in work forming part of or process in the business above mentioned, and in case the Insured shall be liable to make compensation for such injury either under the Fatal Accidents Act 1846, the Employer’s Liability Act 1880, the Workmen’s Compensation Act 1906 or at Common Law, the Company shall indemnify the Insured …”
[66]The BAI 1907 wording provided (using happen and suffer) for indemnity:
“against all sums of money which the Assured may become liable to pay under the provisions of the Employers’ Liability Act 1880 or the Workmen’s Compensation Act 1906 in respect of any accident or injury which may happen [during the period of insurance] … or which the Assured may become liable by virtue of the Common Law to pay to any Workman … in respect of personal injuries suffered by such Workmen during such period or periods aforesaid whilst engaged in the service of the Assured.”
[67]Another policy we have from the WCA period is the earliest Excess policy, in force from the 1920s to the early 1940s, which provided (using sustained) for indemnity:
“if at any time during the said period, any employee in the Employers’ immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer … and in case the Employer shall be liable to make compensation for such injury, either under or by virtue of the Common Law, the Fatal Accidents Act 1846, the Employers’ Liability Act 1880, or the Workers Compensation Acts 1925 to 1940, the Company”
. There is a 1907 Midland policy, which also used sustained wording.[68]After 1948 there was of course no further reference to the WCA in the policies. As I have indicated in paragraph 63 above, the tariff continued until 1969, and the wording of the post-1948 tariff policy in the papers is in material terms as follows, providing for an indemnity “if any person under a contract of service … with the Insured shall sustain bodily injury or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the Business”. The policies, the nub of whose wordings in issue in this case I have set out in paragraph 16 above, issued by the four insurer Defendants, are all post-1948.[69]The next material development in relation to EL insurance was, of course, ELCIA, on the statute book in 1969, in the circumstances referred to in paragraph 39 above, but not in force until January 1972. The Act, by s3(1), did not apply to local authorities, which were exempted. They consequently did not need to receive the certificates of insurance required by s4 of the Act, although it seems from the evidence in this case that MMI did, from time to time, whether at the request of local authorities or otherwise, issue such certificates to some of them. The main provision of ELCIA was contained in s1(1):
“Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees and arising out of and in the course of their employment in Great Britain in that business, but except insofar as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain.”
[70]An approved policy meant, by s1(3), “a policy of insurance not subject to any conditions or exceptions prohibited for these purpose by regulations”, and I have referred, in paragraph 37 above, to paragraph 2 of the 1971 Regulations, which prohibited certain exemptions of liability, subject to the preserved right for the insurer to claim over against the employer.[71]It is common ground, by reference to substantial evidence and documentation drawn from many different insurance sources, that there is no evidence of any claim ever having been made upon, or claims paid out under, any EL policy relating to asbestosis or mesothelioma or any similar claim, on any other basis than by reference to the date of inhalation, until Bolton. This practice, as disclosed by the evidence, relates to claims under any EL policy, whatever the wording.[72]These wordings did change from time to time; indeed there did come a time in relation to Insurers in these actions when they changed their “sustained” wordings, which I have set out in paragraph 16 above, to “caused” wordings: i) In relation to Excess, this occurred in or about 1976, when, after a period when it seems that their two main offices were issuing differing versions, one with sustained wording and one with caused wording, thereafter all their policies used caused wording; so that there is no issue raised in these proceedings in respect of any policy after 1976 - though there are no doubt not many employees whose mesothelioma was in fact caused after 1976, given the increasing proscription of the use of asbestos. ii) As to the various successive entities constituting Independent, their witness Mr Summers was only able to say that at some time in the mid 1980s a caused wording started to be used, and the sustained wording ceased. The same point applies in relation to the consequence of that fact as I have made in subparagraph (i) in relation to Excess (only more so, by virtue of the later date). iii) BAI appears to have changed its second wording, set out in paragraph 16 above, being a sustained wording, to a caused wording, in or about 1983. iv) MMI kept its sustained wording right through to the close of its insurance business and on to the transfer to Zurich, referred to in paragraph 15 above, in 1992/3. The Zurich First Select Policy, as there described, retained the sustained wording. It was only with Zurich’s new replacement Select Two wording in 1998 that a caused wording was introduced.[73]It is not simply the fact, significant though that is, that all these insurers continued to assess and pay out mesothelioma claims on the same date of inhalation basis both before and after the change of wordings (until Bolton in the case of Excess, Independent and BAI: still today in the case of Zurich). What is of course now asserted by Excess, Independent and BAI (though not by Zurich) is that this change of wording was of fundamental effect, in the sense that it is only as from 1976 in the case of Excess, and the mid 1980s in the case of the other two, that they have been obliged to pay out on a causation basis, i.e. since the change in wording, and they can now take a different position in relation to the claims put forward by reference to the earlier sustained wording, denying cover, because no injury has been sustained until the tumour has developed. However none of the witnesses who gave evidence from the respective insurance companies at the time of the change of wording appear to have believed that it made any alteration to the meaning or effect of the policy: and in particular no indication, declaration or explanation was given to any policyholder to that effect.[74]Mr Summers of Independent and Mr Goodwin of BAI simply say that they do not know the reason for the move to a different wording, and neither they nor any other BAI or Independent witness give any evidence that the change was drawn to the attention of policyholders as being significant.[75]Dr Eaglestone (referred to in paragraph 26 above) was Deputy General Manager of Federated, retiring in 1976, though obviously continuing to keep closely in touch with the industry: as I shall describe below, he saw no difference between the words sustained or caused so far as their having any effect on disease claims, and did not notice the Independent change of wording.[76]As for Excess, Mr Chipperfield appears, soon after he joined Excess from Zurich as Liability Underwriting Manager, to have reworded the Combined Liability Policy so as to include a causation wording in the EL section of the policy, because he was used to that wording at Zurich. However, although he knew that for a time the two different policy wordings were being issued by their two different offices, he said in evidence, when asked to attempt an explanation, that “the appreciation of the difference between the two wordings … hadn’t struck home particularly”, and he confirmed that there were no discussions at all at the time of the change as to there being any difference between caused and sustained. Mr Dare, an Excess Underwriter at the time, did not have any knowledge as to why the change was taking place, did not think that the change made any difference, was not told that there was any difference, did not tell the brokers that there was any change in the scope of cover, and never had any concerns raised with him by brokers in that regard. As it happens, the expert witness called by the Defendants, Mr Christopher Williams, was employed by Excess between 1976 and 1997 as an Underwriter, and virtually coincided with the change. He confirmed that the change to a caused wording, effective just before his joining Excess in March 1976, “was not viewed as a significant event and attracted little comment from the broker market or elsewhere”.[77]For completeness, when Zurich in 1998 changed their policy wordings as set out in paragraph 72(iv) above, Mr Woof, in a memo he sent as Underwriting Manager to all managers and Underwriters on 28 November 1997, described the amendment from sustained to caused as a “clarification of cover”, and as part of a series of “generally minor” changes. He confirmed in evidence that Zurich’s interpretation of the sustained wording did not change, and indeed Zurich, like other insurers not before the Court, such as Guardian Royal Exchange, remain of that view. Mr Willett of MMI/Zurich also confirmed that no change was intended.[78]It is of course particularly extraordinary in retrospect that no notice was given to policyholders if what then took place, without the insured realising it, was a sea change in the nature of the cover. This would be especially so if, as some of the Claimants assert, it would put employers like Bates, who believed they were fully covered, in breach of the compulsory insurance provisions of ELCIA.[79]It would not be sensible to complete an overview of the history of employers’ liability insurance in relation to diseases without referring to the existence of the claims-handling agreements which started in the 1960s, and became more widespread in the 1980s (see Eady J in Phillips v Syndicate 992 Gunner & Others [2003] EWHC 1084 (QB) at paragraph 26). There appears to have been a shadowy body in existence, even during the WCA period and continuing, called the Employers’ Liability Conference, which is referred to from time to time, but no documents have become available. Another such (undocumented) body referred to is the “Asbestosis Club” of Insurers, which seems to have introduced the approach of sharing asbestosis claims between insurers (those who did not have express exclusions) by reference to the time during the exposure to asbestos when each insurer was on risk, in the 1960s.[80]Mr Clarke, then of Eagle Star, and Mr Howie, then of Midland, relate such sharing arrangements on a ‘time on risk’ basis from the early 1960s. An early bilateral agreement at that time, between Iron Trades and Midland, was not based on ‘time on risk’ but on the basis of last on risk when the claim was made, even though both insured on a causation basis: but Mr Skellett who, as a partner in Barlow, Lyde & Gilbert, carried out work for Excess, described arrangements to share on a ‘time exposed’ basis between Excess and Iron Trades in the 1970s. None of these can be described as official arrangements, and indeed in an article in the Post Magazine & Insurance Monitor (“Post Magazine”) of 30 September 1982 by the assistant claims manager of Eagle Star, Mr Collins, they are there expressly described as unofficial. But such sharing arrangements, particularly in relation to asbestosis claims, were plainly widespread, and a 1973 Iron Trades document “Industrial Injury Claims” describes how:
“We can trace no cases decided by the Court, and most Insurers have accepted a formula based on the length of employment in processes involving exposure to asbestos dust during the particular period of policy cover”
. By 1995 there was a body called the Industrial Diseases Working Party (“IDWP”), consisting of ten major insurers, including Commercial Union, Royal, Zurich, Eagle Star and Iron Trades, who in 1996 agreed “Guidelines for the handling of Disease Claims”. The practice was (pursuant to the understanding gained from Dr Rudd and Bryce, referred to in paragraph 31(ii) above) that no insurer on cover in respect of the ten years immediately prior to diagnosis of mesothelioma was to contribute, but the insurer immediately prior to that was to become the handling insurer, and all insurers on risk before that, in respect of what was described as a period of culpable exposure (that is where there was an insured employer), would then share out the risk with the handling insurer, on a ‘time on risk’ basis. The result is equitable sharing, in respect of what might well be a lengthy period of exposure, of the responsibility of different insurers. Thus there is a satisfactory result by way of sharing the burden.[81]As for identifying which insurers were on cover during the period or periods of exposure, most employers have records, even if they have subsequently gone out of business, but in 1999, a Tracing Code was published – the Code of Practice for Tracing Employers’ Liability Insurance Policies – to track down “missing” insurance details. Figures were given to me that less than 2% of claimants have needed to use the Tracing Code. Once the Tracing Code is operated, 41% of those activating it have been successful – although the figure in respect of tracing prior to 1972, i.e. prior to the days of compulsory insurance, shows the success rate was only 16.2%.[82]It seems apparent that the House of Lords may well have been informed about these sharing arrangements between insurers in Fairchild (both Lord Rodger and Lord Walker referred to the ABI’s 2003 Guidelines for Apportioning and Handling EL mesothelioma claims in paragraphs 88 and 108 of Barker), but in any event the IDWP’s 1996 Guidelines were revamped specifically for mesothelioma post-Fairchild in those 2003 Guidelines, which seem to have been widely adopted by ABI members, and amended again in 2006 and in 2008. Although, so far as employers are concerned, the Compensation Act 2006 has altered the position by making each of them severally liable for the full amount, there is, as set out in paragraph 55 above, provision in the Act for contribution between employers, such that I have no reason to doubt that the sharing arrangement between employers, which became the effect of Fairchild, may well have reflected the Court’s knowledge of the arrangements between insurers, and that the present arrangements between insurers reflect the composite result of Fairchild and the Compensation Act 2006, so far as the insurance consequences are concerned. These arrangements continue, but of course all this has been thrown into doubt by the assertion of these Insurer Defendants that, in the light of Bolton, exposure by reference to ‘time on risk’ is no longer appropriate, at least for those with sustained wordings, and the four Insurer Defendants play no part, as a result, in any continuing claims-handling arrangements. VII. Comparative law and practice.[83]It was common ground that United States law would not assist, because liability for mesothelioma has tended in the United States to fall within PL insurance, by way of claims against third parties such as manufacturers, suppliers etc, since employers’ liability is very undeveloped in the United States, due to the existence of statutory schemes for employee compensation. Within this PL jurisprudence, the US courts have, in order to assist claimants, developed a concept of “triple trigger”, which effectively allows claimants to choose whichever trigger suits them best: see Keene Corporation v Insurance Company of North America (United States Court of Appeal (District of Columbia Circuit) 667F 2d 1034 [1981], where the three triggers are described as inhalation exposure, exposure in residence and manifestation. In our case it would give the Claimants the opportunity to choose either date of inhalation or date of tumour, which would have avoided all this litigation. Further, the judgment of the United States Court of Appeal 6th Circuit in Insurance Co North America v Forty-Eight Insulation Inc [1980] 623 Fed R 2d 1212 recorded at 1222 as the fundamental premise of the decision that “the medical evidence is uncontroverted that “bodily injury” in the form of tissue damage takes place at or shortly after the initial inhalation of asbestos fibers. Thus it requires only a straightforward interpretation of the policy language for us to adopt the exposure theory”. That is of course very much in issue in these proceedings and, by reference to the Court of Appeal decision in Bolton that such was not the case, the starting point of this litigation.[84]In those circumstances, little profitable time could be spent in considering United States jurisprudence. So far as Australian cases are concerned, reference was made to them in the written submissions prepared by the Wynter Team, but it was Mr Edelman QC who spent most time in analysing them in order to show, as he successfully did, that, by virtue of the centrality to those decisions of the Australian Workers Compensation Acts, which still continue in force and are not identical to the pre-1948 UK Acts, those decisions are not of material assistance, for that and for two further reasons: i) Many, if not most, of the decisions were made at a time before the more modern appreciation of mesothelioma, which has been made possible by the work of the three respiratory experts, Drs Rudd, Moore-Gillon and Professor Geddes, who have given evidence before me. ii) The Australian approach to limitation appears to be very different from that of the United Kingdom courts: see in particular Martindalev Burrows (Queensland Supreme Court) [1997] 1 Qd R 243.[85]With Mr Edelman’s help, I have considered the following Australian authorities: Favelle Mort Ltd v Murray (High Court of Australia) [1976] 133 CLR 580, Ansett Transport Industries (Operations) Pty Ltd v Milan Srdic (Federal Court of Australia, Australian Capital Territory) [1983] 66 FLR 41, American Home Assurance v Saunders (New South Wales Court of Appeal) [1987] 11 NSWLR 363, GRE Insurance Ltd v Bristile Ltd (Supreme Court of Western Australia) [1991] 5 WAR 440, Martindale v Burrows (above), Orica Ltd etc v CGU Insurance Ltd (New South Wales Court of Appeal) [2003] NSWCA 331 unreported, Comcare v Etheridge (Federal Court of Australia) [2006] FCAFC 27, and Vero Insurance Ltd v Power Technology Pty Ltd (New South Wales Court of Appeal) [2007] NSWCA 226 unreported. Almost all of them related to mesothelioma – another stretch of mesothelioma jurisprudence, this time Australian. In most of these a result was achieved in which the “external excitement” (per Barwick CJ in Favelle Mort at paragraph 14, in GRE per Nicholson J at 451) of a morbid condition by the asbestos fibres amounted to an injury at date of inhalation and gave the claimant recovery. In Comcare, however, the fact-finding Tribunal had decided there was no injury at date of inhalation, and the Federal Court of Australia did not interfere, concluding (inter alia) that this was an issue of fact not law.[86]I note that of the Australian cases, only one (Orica) was mentioned or cited in Bolton, which antedated both Comcare and Vero. Although reference is made to some of the other cases in Orica itself, plainly Longmore LJ’s attention was not drawn to them, and he did not see in terms the external excitement cases. He concluded, at paragraph 25 of Bolton, that Orica was of no assistance to him, and given that he had, as I have had, the benefit of fresh medical evidence, not simply the view of that medical evidence by the Australian Courts, that is plainly understandable. However in fact in Orica, contrary to Longmore LJ’s understanding as set out in paragraph 25, Mason P at paragraph 63 did not agree with Spigelman CJ, but actually agreed with Santow JA, namely (at paragraph 16) that the inhalation of asbestos fibres was ‘an injury’ because:
“the ingested fibre had here started upon its slow but inevitable physiological process of malignant transformation of the pleura of the employee’s lung, doing so sometime during the course of employment and thus during the period of insurance: that meant ‘injury’ occurred during the period of insurance.”

VIII. PL Insurance

[87]It was common ground between the parties that PL insurance has a quite different history and origin from that of EL insurance, deriving from premises and product cover, and obviously being particularly distinguished by the absence of any employment relationship, or indeed any long term relationship, between the claimant and the insured. Mr Stuart-Smith QC points out that the essentially short-tail nature of PL is borne out by the minute proportion of disease claims that fall to be indemnified by PL policies rather than EL: of the mesothelioma claims notified to the Compensation Recovery Unit, a branch of the Department of Work, and Pensions, between 2002 and 2008, 97% were EL claims and only 2% PL claims.[88]The existence of the WCA regime for nearly 50 years kept EL very distinct from PL, and of course there was in the case of PL no similar route to compulsory insurance, through the 1934 Act to ELCIA. There is no doubt, on the evidence that I have seen from all the papers, that PL insurance was not causation-based. In a 1958 survey of the wording of PL policies in the United Kingdom, published by the Insurance Institute of London, causation wording in PL policies was deprecated since “this is not considered satisfactory because of the difficulty of deciding, in any given set of circumstances, what is the effective cause”. In an employment situation, on the other hand, whatever may have been the subsequent impact of Fairchild, the employer will only have been found liable if the injury or disease has been caused, in the sense of arising in the course of employment.[89]It appears to have been generally accepted in the insurance industry for many years that EL policies had causation wording: see a leading article in the Post Magazine for 1 February 1979, recording that “Employer’s Liability policies [unlike PL policies] cover injury or damage caused during the period of insurance”.[90]There are numerous “occurring” or “happening” wordings in the PL policies referred to in evidence, and John Murray, subsequently an important player on behalf of MMI in the 1992/93 negotiations with Zurich, when a young man, wrote a prize essay, published in 1983 in the Chartered Insurance Institute Journal (Vol 8 No 1 pp52-61) in which he wrote:
“Employers’ Liability policies cover only bodily injury to, and death, disease or illness of, employees of the insured; they do not cover any property damage. Another difference between employers’ liability and public/product liability wordings is the use of ‘caused’ instead of ‘occurring’.”
[91]By the mid-nineties there was considerable debate about the effective trigger of PL insurance, which was sparked by the decision of Sir Haydn Tudor Evans in Jameson v CEGB (“Jameson”) (QBD) 10 March 1995 unreported, where, in a mesothelioma case, but not an insurance case (the issue relating to the terms of a contractual indemnity in respect of “injury occurring”), Sir Haydn found (Dr Rudd having given evidence) that no injury had occurred at date of inhalation. In a minute of the 22 September meeting of the IDWP it was recorded that:
“As traditionally PL is written on an occurrence/happening basis, inevitably there will be disputes over when long-tail industrial diseases occurred/happened … Using mesothelioma as an example, it could be argued that injury occurs when the first cell damage takes place, following which there may be a gap of 10 years or more before mesothelioma is diagnosed.”
In a briefing note of July 1996 by Sedgwick, they considered that “the Jameson decision is an interpretation of an indemnity clause under a non-insurance contract and is not therefore directly applicable to Public and Products Liability policies. It is however an important indication of how courts will interpret such policies”: but concluding that “the Jameson case is not expected to have a major impact on EL insurance because EL policies traditionally apply to injury or disease caused (rather than occurring) during the period of insurance. It is market practice for EL insurers to cover gradually operating disease claims under the policy or policies applying at the time the individual was exposed to the hazard which caused his disease”.[92]A similar discussion of the possible impact of Jameson on PL policies (pointing out that “of course there is a difference between the words of PL and EL policies”) appears in a letter to the ABI from Mr Mayle of Royal and Sun Alliance in April 1996. The debate continued to be addressed, by a body called the “Public Liability Policy Triggers Working Group” of the ABI, which met in 1999 and continuing, until the decision in Bolton eventually resolved the dispute.[93]The relevant (MMI) PL policy in Bolton was as follows, as set out in paragraph 4 of Longmore LJ’s judgment:
“The company agrees to indemnify the insured in respect of all sums which the insured shall become legally liable to pay as compensation arising out of…accidental bodily injury or illness (fatal or otherwise) to any person other than any person employed under a contract of service ... when such injury, illness, loss or damage occurs during the currency of the policy and arises out of the exercise of the functions of a local authority.”
[94]MMI was then, as now, represented by Mr Palmer QC – but he was then submitting, in almost 180o reverse to what he argued before me, that, in relation to mesothelioma, the injury “occurred” at the date of inhalation (when Commercial Union, not MMI, were on cover), not at date of tumour. MMI lost.[95]The Court of Appeal in Bolton made it clear that its decision was only in the context of construing a PL policy:
“3. At the outset of his address, Mr Harvey for [Commercial Union] drew attention to the fact that the contest in the present case was not a contest between employers’ liability insurers (since Bolton never employed Mr Green) but between public liability insurers and, to this extent, was an unusual dispute. The significance of this observation was said to be that, while employers’ liability insurers usually offered cover in respect of “injuries caused during the period of insurance”, and would thus, at any rate arguably, offer cover at the time when an employee was exposed to the inhalation of asbestos fibres, public liability insurers usually offered cover in respect of “injuries occurring during the period of insurance”
. This, Mr Harvey submitted, was significantly different wording, which meant that, in the case of asbestos-related diseases which only eventuated a long time after initial exposure, it was the insurer at risk at the time the disease began who had to indemnify Bolton in respect of their liability, not the insurer at risk at the time of exposure.”[96]The precise words used by Mr Harvey QC, as quoted by Longmore LJ, are strictly accurate, namely that employers’ liability insurers usually offered cover in respect of injuries caused. That is indeed the usual wording for EL policies. Senior and experienced insurers such as Mr Howie and Mr Helmore, the Claimants’ insurance expert, had neither of them prior to Bolton ever come across the sustained wording in EL policies, leaving aside the question of its interpretation. Even now before me there has only been evidence in the papers of a very few exceptional EL policies, almost always in combined liability policies or (in the case of one or two Royal policies) in a liability policy without separate EL and PL sections, in which ‘occurring’ or ‘happening’ wordings (the normal wording in PL policies) have been used in an EL setting.[97]The only other reference to employers’ liability insurance by Longmore LJ, if only to set it on one side, is when, having referred to the US Triple Trigger theory and the case of Keene, to which I have made reference in paragraph 83 above, he says (at paragraph 24) “I am far from saying that what has been called this ... triple trigger theory may not be held, on some future occasion, to be appropriate for employers’ liability policies in general, depending upon the precise words used. But, as far as public liability policies are concerned with the specific wording used in the present cases, I see no need for the English courts to adopt the multiple trigger theory.”[98]What MMI did not tell the Court of Appeal at the time is that they intended, if they lost, to argue that sustainedinjury in EL policies should be interpreted in the Bolton way, as importing date of tumour, ie as if it were a PL wording: such that MMI would actually do better by losing in Bolton, if they were then able to escape liability on the sustained wording in their much more burdensome EL policies – to the extent, as it now turns out, of at least £85m, being the current reserve in respect of policies predating the 1992/93 MMI/Zurich transfer.[99]There were significant features in Bolton: i) As set out in paragraph 94 above, Bolton was a decision as to which of two insurers was liable: and if Mr Palmer QC on behalf of MMI had satisfied Judge Kershaw QC and/or the Court of Appeal that the injury occurred at date of inhalation and not at date of tumour, then it would have been Commercial Union which would have met Bolton’s liability to Mr Green. Neither Mr Green nor Bolton, which, as it happens, was represented by Mr Bartley Jones QC and Dr Jess, who now represent Bates as Claimants in this action, was going to fall into any black hole. The dispute was effectively as to which insurer was to be liable (a sub-issue as to notice is not relevant for this purpose). ii) Although both Drs Rudd and Moore-Gillon gave evidence, which was plainly of great persuasive effect with regard to when and whether injury occurred, Judge Kershaw and the Court of Appeal in Bolton did not need to fix the date of tumour – the date of the injury in fact: it was enough to say that injury did not occur at the date of inhalation. Once it occurred sometime later, the date was not significant, because it would, on any basis, land in MMI’s lap. Evidence that the date of tumour occurred at 10 years ± 1 (or so) prior to (i.e. extrapolating backwards from) diagnosability/symptoms, was sufficient, and no particular policy year needed to be identified. Thus:
“12. It is furthermore important to note that there may be a long time lapse not only between exposure and the first formation of a malignant cell but that there may be a similarly lengthy lapse of time between first malignancy and the onset of noticeable symptoms such as breathlessness. In the present case it is thought that malignancy did not occur until 1980 and a further 10 years elapsed before Mr Green became symptomatic. Since MMI were on cover after 1979, there is no distinction for the purposes of this appeal between the onset of malignancy and the onset of symptoms or, indeed, between the onset of symptoms and diagnosis of the disease.”
Judge Kershaw refers at paragraph 21 of his judgment in the Manchester Mercantile Court of 28 May 2005 [2006] Lloyd’s Rep IR 15 to Dr Moore-Gillon’s evidence that “so far as Mr Green is concerned, the escape of a cell from normal cellular control mechanism probably occurred within a margin of one year either side of 1980”, and thereafter referred to “1979-1981” as the date of tumour, but, for the reason described by Longmore LJ, no further decision needed to be made.[100]As to what the basis of the decision in Bolton was, there has been considerable dispute between the parties, and my analysis of the lead judgment of Longmore LJ (with which Auld and Hallett LJJ agreed) is as follows: i) He concluded that, in the case of mesothelioma resulting from the original inhalation of asbestos fibres, no injury occurred at the date of inhalation:
“15. ... Mr Green could not have sued for personal injury at that stage because he had suffered no injury at that stage. The indemnity which Bolton are seeking is an indemnity against their liability for their share in the sum of £160,000, which was ultimately paid to Mrs Green. Mr Green could not conceivably have recovered £160,000 (or £80,000 as Bolton’s portion was ultimately agreed to be) in the early 1960s when he was first exposed to asbestos and his body was, at that time, successfully dealing with the fibres which he was inhaling. He was at that stage a well man, not suffering from any injury at all.”
In paragraph 17 he cited, and in paragraph 18 approved, the judgment of Sir Haydn Tudor Evans in Jameson, referred to in paragraph 91 above, although that was plainly a decision on fact, namely that the “damage or injury occurred many years after the deceased had finished working”. ii) If (though he does not put it this way in terms) there was injury, then there was no actionable injury, at date of inhalation, and actionability at that stage is required; thus:
“14. ... Mr Palmer categorised “accidental injury”, for the purposes of the policy, as “insult” to a person’s bodily integrity, which occurred effectively on first being exposed to asbestos fibres... He relied on the miniscule changes which ... preceded the genetic changes which gave rise, at a later date, to the existence of cancerous cells; in other words injury occurred at the point when the body’s natural defence mechanisms were operating to destroy or neutralise the fibres as soon as they were inhaled. This was the time when, according to MMI, accidental injury occurred. 15. This argument is, in my judgment, inconsistent both with principle and authority. It is inconsistent with principle because the contract between the parties is an agreement to indemnify against liability. It cannot be right that, at the stage of initial exposure or initial bodily reaction to such exposure, there could be a liability on the part of Bolton in respect of which they could require to be indemnified under any public liability insurance policy ... 16. As far as authority is concerned, it is well accepted in the general law that words such as “injury” or “damage” in indemnity agreements do not include injury or damage which will happen in the future ... 18. ... actionable injury does not occur on exposure or on initial bodily changes happening on that time but only at a much later date; whether that it is when a malignant tumour is first created or when identifiable symptoms first occur does not matter for the purposes of this case ... injury cannot be equated to the “insult” received by the body when exposure first occurs.”
[101]The authorities cited by Longmore LJ for this are as follows: first Promet Engineering (Singapore) Pte Ltd v Sturge(The Nukila) [1997] 2 Lloyd’s Rep 146 CA, and, secondly, a number of first instance limitation decisions, all of them in the asbestos-related area, only the first two of which feature the evidence of Dr Rudd, and all of which Longmore LJ approved – Keenen v Miller Insulation and Engineering Ltd QBD Piers Ashworth QC 8 December 1987 unreported, Guidera v NEI Projects (India) Ltd McCullough J QBD 17 November 1988 unreported, and McCaul v Elias Wild McNeill J QBD 14 September 1989 unreported.[102]The aftermath of the Court of Appeal decision in Bolton was the change of position by these four insurers (though it seems not by other insurers) in respect of their EL wordings, and their refusal, as from the summer of 2006 (although it does appear that MMI’s enthusiasm caused them to jump the gun by rejecting at least one claim, by the London Borough of Southwark, as early as 10 May 2005, even before the judgment of Judge Kershaw), to meet mesothelioma claims based upon date of exposure, contrary to their practice of the previous 25 to 40 years. IX. The pathogenesis of mesothelioma.[103]It is common ground that causation is established: namely that mesothelioma is caused by the inhalation of asbestos fibres – indeed any other cause is all but ruled out – and that asbestos fibre is a complete carcinogen, i.e that no other agent or co-agent is required to cause the eventual malignancy. Although some potential analysis has been made of people who may at various stages in their life be more or less susceptible to the development of mesothelioma from such fibres – there may be some genetic susceptibility and, for example, it seems that those who smoke may be more susceptible - the experts were agreed that, at the end of the day, it is a matter of chance who ends up in the 3% referred to in paragraph 25 above, as opposed to the 97%: the real question is dose relationship.[104]It is difficult to track the course of things from original inhalation through to manifestation of symptoms of mesothelioma up to 40 or 50 years later, both because of that passage of time and because: i) the process is what is called “multi-stage” and, as will be seen, asbestos fibres can be involved in at least one but possibly all of such stages, and ii) as described in paragraph 28 above, unlike a normal cancer of spherical or similar shape, mesothelioma grows along the surface of the lungs, and only becomes diagnosable when the symptoms of impaired breathing permit of a diagnosis; which symptoms, as I have said in paragraph 29 above, typically only arise some fourteen months before death, by which time nothing can prevent the fatality.[105]However Dr Rudd, with the assent of the other experts, gave a very clear diagrammatical overview of at least the start of the slow journey between inhalation and tumour. Most inhaled asbestos fibres are caught in the layers of mucus lining the airways, and are eliminated by the act of cilia moving the mucus up the airways, eventually to be swallowed or expectorated. However, fibres will survive the journey down the trachea and the bronchi, and will enter the lungs. It is possible that one of more fibres may pass relatively quickly through the lungs and reach the pleura shortly after inhalation, but it may take many, many years for that same journey. The crocidolite fibres in particular are shaped like needles and they can penetrate the alveolar regions within the lungs and may reach the pleura. The likelihood is that many thousands if not millions of such fibres will remain in the lung among the alveoli, where the body’s defence mechanism will start to take care of them.[106]Some can become coated with protein (becoming “asbestos bodies”) and may be coughed out. Some will attract the attention of macrophages, which are scavenger cells, which disable, destroy or engulf the fibres. If the macrophages are unsuccessful, for example only in part engulfing the fibres, then chemicals are released which can attract neutrophils by what is called an inflammatory response, and the neutrophils can themselves engulf the fibres. There is a continuous process of destruction of the fibres or clearance of them from the lungs, but some fibres remain there, indeed until death (the amosite (brown asbestos) have a half life of 20 years, the crocidolite (blue asbestos) 7 years, and the chrysotile (white asbestos) a few months). None of this results in or constitutes any symptoms, so far as effect on the person is concerned, and all of it involves the natural reaction of the body in defence to the numerous foreign bodies which we are inhaling.[107]Once one or more fibres are in the pleura, there may then be an effect on the mesothelial cells. They may cause cell death or senescence or interfere with cell division (mitosis), they may impair the defence against malignancy, they may cause inactivation of tumour suppressor genes, or stimulate the growth and proliferation of proto-oncogenes, which lead on to oncogenes - genes which, when mutated, actively promote carcinogenesis. In particular they may inhibit a vital part of the body defences, the so-called natural killer cells, which are programmed to identify and destroy malignant cells. These are a special type of lymphocyte, which attack mesothelial cells hundreds of times a day.[108]But this is all a very long process, and may well never occur in the individual case. The mesothelial cells, like all cells in the body, are constantly dividing: Dr Rudd told us that there are 10 trillion cells in the human body and 50 billion are replicated every day. Cell division, or mitosis, by which the cell divides, duplicates its chromosomes and passes on a complete set to each of its “daughters”, is the norm; but there can be mutations – again Dr Rudd told us that incorrect copying can take place in one in a million cell divisions and thus possibly 5,000 times per day in the human body, or every 17 seconds. The body’s repair mechanisms are quick to correct and abort the mutations, but even if there are mutations there are four possible consequences. The incorrect copy may be unable to survive, and die; the mutation can make no difference; the mutation can positively improve the cell – hence evolution: or the mutated cell can survive and can itself divide, passing on the genetic alterations, eventually after very many generations and with further mutations creating a malignant cell.[109]There will or may be thousands of mutations, only one of which may have any deleterious effect on successive mitosis. But, the experts gave evidence that there are six or seven genetic alterations which are required, not necessarily occurring in the same or any particular order, which, when they are all in place, can lead to a malignant cell. The characteristics of a malignant cell are(i) self sufficiency in growth signals(ii) insensitivity to growth-inhibitory signals(iii) evasion of programmed cell death (apoptosis)(iv) limitless replicative potential(v) the ability to invade tissues and to metastasise i.e. to transfer to other parts of the body(vi) the availability of its own blood supply – obtained by a process which is called angiogenesis.[110]Over the period of many years while this process may be occurring, there are many ways in which the effect, either of the fibres or of the mutating cells, may be ameliorated. A list of the possible ways in which the body’s defences may protect it from damage was agreed between the five experts: i) There are the physical defences – the protections of the nose, mucus, ciliary clearance mechanisms and lymphatic clearance. ii) There are the tissue defence mechanisms: engulfment by macrophages, degradation of fibres and their chemical constituents, coating of fibres, the protection given within the lungs by neutrophils and in due course by natural killer cells. iii) Then there are what the biochemists call the cellular defence mechanisms:• cellular adaptation, by which cells adapt to environmental changes• DNA repairs – alterations to DNA that would otherwise result in mutation can take place naturally• cell cycle check points – processes that stop the cell from dividing after DNA damage or other insults• cellular senescence – a process by which cells permanently withdraw from the cell cycle, but remain alive in a quiescent state• apoptosis – the process of programmed cell death by which cells die in response to environmental insults or other signals. Finally there is the issue, to which I shall return, but which the experts list as part of the bodily defences, as to whether angiogenesis will take place or will be inhibited or prevented.[111]Once a cell has acquired what Dr Rudd calls a “full house” of the necessary 6/7 mutations, and has evaded all the bodily defences (described by Dr Rudd as “full house plus”), then it can be described as a malignant cell, and can and does begin a period of uncontrolled growth by multiplication. Notwithstanding what Dr Rudd has called evasion of the bodily defences, Professors Phillips and Heintz conclude that many full house cells with malignant potential may fail to grow into tumours. It appears to be common ground, at any rate so far as the biochemists are concerned, that such cell or cells at this stage are still at risk from natural killer cells, although they apparently develop a method of switching off the signals which summon the natural killer cells or put them on notice. There is also, despite the characteristic of limitless replication, the possibility, if not probability, of periods of dormancy: Professor Phillips points out that the norm of forty years from exposure to diagnosability suggests either that the mutation period lasts a very long time or that there are periods of tumour dormancy (or both).[112]Professor Heintz points out that mesotheliomas are not encountered in the course of their growth – they are for example rarely if ever chanced upon on autopsy, when death has occurred due to some other cause. Because of the impossibility of investigation or view of the malignant cell, or the tumour, at any stage until very much later, the experts are agreed that certain assumptions have to be made. It is agreed that an analogy can be drawn with the research which has been able to be carried out in relation to more normal and observable spherical tumours, in particular as deduced from the Geddes Article, which reached conclusions as to the ‘doubling’ of cells which go to form such a tumour. He estimated that the average time for such doubling is every 102 days, and the Geddes Table formed common ground between the parties as a central basis for discussion. The following matters emerged between the experts: i) It is probable that the rate is not strictly exponential, but can vary. In particular it is probable that the rate of growth is slower at the beginning and possibly also at the end of such growth. ii) There may well be periods, possibly lengthy periods, of dormancy, in which growth slows or ceases. iii) As Professor Geddes emphasises, the 102-day doubling is only a speculative average and it could be longer or shorter – possibly as fast as 45 days or as slow as 130 days. iv) It is still possible at this stage for the collection of cells or tumour to ‘die off’ and/or for the bodily defences to detect and neutralise it, although this is unlikely, and certainly becomes wholly unlikely after it has reached the size of 10 6 cells.[113]When the Geddes Article and Table were published, and indeed until very recently, there was no appreciation of an important aspect of the development and growth of the tumour which is now more fully understood: and that relates to how the malignant cell or cells become independent and obtain their own blood supply, which is fundamental to continued growth. This process, to which I have referred in paragraph 109 above, is angiogenesis. Once angiogenesis has occurred, and the multiplying cells have their own blood supply, there is no restriction on continued growth. It is thought probable by the experts that this occurs somewhere between the size of 10 6 (one million cells) and 10 9 (one billion cells). The tumour becomes sufficiently large to start creating symptoms by way of breathlessness etc when it is probably of the size of 10 9 - 10 12.

X. Consequences of the Defendants’ Interpretation

[114]The Defendants’ case is based upon the reinterpretation of the sustained wordings which they assert results from proper reconsideration after the Court of Appeal decision in Bolton,and the consequent realisation that, over the last thirty odd years of mesothelioma claims, claims have been paid on the exposure basis which should not have been paid. Their case is that injury in fact is only sustained not at date of inhalation but at date of tumour. The first consequence of course is that this overturns the settled interpretation and approach to mesothelioma claims which has been adopted at all times prior to 2006, and creates the ‘black hole’. As set out in paragraph 8 above, many, if not most, employers who were involved in activities relating to asbestos, have either ceased business entirely or, as with Bates, have come out of the construction industry and have ceased to have or need EL insurance. Those who have continued in business may well have changed insurers or, even if they have remained with the same insurers, may now be insured, since the unheralded changes of wording, referred to in paragraph 72 above, only on a caused basis, which would not respond to an injury in fact, developing by way of a tumour in e.g. 2000, caused 40 years earlier.[115]In any event, the necessary consequence would then be working out when, and therefore by reference to which policy year, such injury in fact was sustained. Even if some guidelines can be developed, on the basis of my judgment or otherwise, there is likely to be dispute in most, if not all, cases, which will at the very least slow up the fast track under CPR 3D. There was a similar problem in relation to proof of causation, but that has been resolved by Fairchild, so that the employer’s liability to the employee is ascertained prior to the reference to insurance, and is then handled by the various claims-handling agreements. But there is, on any basis, a great difficulty of concluding precisely when the “date of tumour/injury in fact” approach leads to an injury being sustained. Dr Rudd referred to it as “virtually an unanswerable question”.As set out in paragraph 94 and 99(i) above, it was not necessary for the purpose of Bolton, because of the presence of the two insurers, so to decide.[116]In Bolton, what has been called the back extrapolation of 10 ± 1 year prior to symptoms, or prior to what I have called diagnosability, was provisionally accepted. There is however a very real problem about a seamless acceptance of this “ten-year rule” (I leave aside the problem created by the ± 1 where there is a change of employer and/or insurer in the ninth or eleventh year). It is quite clear that the Rudd/Moore-Gillon “ten-year rule” when it evolved was a back extrapolation to the first malignant cell, based upon exponential or galloping multiplication thereafter in accordance with the Geddes Article and Table. But although there was before me considerable discussion about the cell with full house or full house plus, it became common ground between the parties, or if not common ground it became entirely clear to me, that, at the stage of such one cell, that could not be described as a tumour.[117]When therefore is there injury? When does the employee (or ex-employee) have a mesothelioma? Not when there are simply two cells or even four or eight? i) Is it when a tumour starts to grow whether uncontrollably or exponentially (Mr Stuart-Smith QC points out that exponential growth is not one of the defining characteristics of malignancy, which I have set out in paragraph 109 above)? If so, how early in that phase (given the possibilities, discussed in paragraph 112 above, of slow growth at the early stage and of dormancy), and particularly allowing for the fact that even Professor Geddes himself makes clear that his estimated 102 days for doubling is only speculative? Is it when the tumour is estimated to have reached a certain size? Is that 10 6? Is that when a person can be described as having mesothelioma or having an injury? ii) Or is at the stage when it is more likely than not, or inevitable, that the tumour will continue to grow and bring about symptoms, and thus become fatal? Is that to be taken as the stage of angiogenesis – the phenomenon not known of, or at any rate understood, at the time of Bolton – which may be, according to the evidence of the biochemists, only four or five years before death, as opposed to the 10 ± 1 taken in Bolton, which latter period is still the favoured one as far as the respiratory consultants in this case are concerned (i.e. the “ten-year rule”). However: a) If the right test is the “point of no return” (a phrase which I think Mr Edelman QC adopted from me) or what Professor Heintz called the “last significant barrier to unrestrained growth”,is angiogenesis such point? It is only a stage along the way, and, given the uncertainties as to the tumour either ceasing of its own accord or succumbing to the bodily defences even prior to angiogenesis, an earlier date could just as well be taken. b) Even though it could die before or without angiogenesis for lack of blood supply, there is a fully malignant mesothelioma/tumour, a “sufficient organic foreign body” (as Mr Palmer QC described it), which is in the process of doubling, well beforeangiogenesis.[118]The following points appear to be clear: i) It will be necessary to be able to ascertain, on the balance of probabilities, a date for the sustaining of injury, i.e. not simply ± 1, because there may be a material difference, such as a change of insurer, as between say Year 11 prior to diagnosability and Year 10. One such applies in relation to one of the Local Authorities in this case, namely Babergh District Council, whose claimant Mr King has a diagnosability date of November 2003, and would, depending upon whether the ‘back extrapolation’ date is 10 or 11 years, fall either within the cover of St Paul Insurance or of Zurich’s Select One Policy. ii) As it happens, in the particular cases before me, I believe that it would make no difference whether I were to arrive at a norm of four or five years prior to death (based upon the biochemists’ view of the likely date of angiogenesis) or ten years prior to death (as per the “ten-year rule” of the respiratory consultants), but it will obviously matter for other cases. Professor Phillips has explained how in animal experiments it is possible to introduce a small tumour mass and keep it in a dormant state by inhibiting angiogenesis, but that, quite apart from the general difficulty of examination and investigation of pleural mesothelioma, such an experiment, in order to learn more about angiogenesis,is not practicable in relation to humans. It is just not possible, in any case, to arrive at a scientific conclusion as to the date of tumour. There would however need to be at any rate a starting point, say ten years, or five years, or four years, even if, in a given case, there may be some evidence that, in relation to a particular patient, a tumour may have grown faster or slower than the norm, which may result, in a particular case, in a conclusion that there should be an alteration to that norm by one or two years either way. iii) the respiratory consultants consider that the agreed fact that ten years is the shortest recorded time of exposure to diagnosability or death (see paragraph 28 above) supports the “ten-year rule”, but I do not follow this – save that I see that that period would be a minimum from ‘point of no return’ to diagnosability/death; the malignancy in such a case would need to be almost immediate and the Peto ten years immediately start running. But that is plainly not the norm. iv) Professor Geddes, in his helpful paper of 16 July 2008 which, like the other consultants, he, at the request of the Court and the parties, put together after the close of oral evidence, suggests that it might be thought to be true of angiogenesis that it is the beginning of exponential growth. If that be right, then, by definition, exponential growth would mean faster growth after angiogenesis than before it. Taking his doubling time of 100 days up to 10 6, that would mean five years to angiogenesis, and on the original thesis of Dr Rudd that the relevant ten-year rule ran from full house plus, it would mean five years before angiogenesis and five years after it, totalling ten years in what Professor Geddes describes, in those circumstances, as the “unlikely event that pre-angiogenesis growth was the same as after”. It seems to me, as I believe it seemed to Professor Geddes, more likely that, taking angiogenesis at 10 6, i.e. one million cells, there would then be a period of five years for the doubling process from 10 6 up to in the region of 10 9 to 10 12, but a longer period, say ten or fifteen years, in respect of growth prior to angiogenesis, to allow for the speed of growth to be either a third or a half of the rate of the post-angiogenesis exponential growth. Plainly all this is speculative and, as the Claimants’ Counsel have pointed out, any conclusion of mine on the balance of probabilities would depend upon possibly ever-changing medical conclusions, as science improves.[119]The consequences of directing the investigation to the probable date of tumour is thus: i) that at any rate some speculative medical evidence would still be necessary in each case (see paragraph 118(ii) above). ii) In any event, the result would be to settle on a date which would then either mean that there was no insurance in place at all, or that one insurer was on risk, as opposed to the continuation of the present sharing arrangements, which would result from a continuation of the date of inhalation approach, by reference to the period of culpable exposure, which leads to a sharing out of the risk among a number of insurers.[120]Other consequences would follow: i) None of the present Defendants are continuing to write business in EL insurance. It would be likely that the conclusions on these wordings before me would apply to other insurance companies, not in run-off, which are not presently taking the same approach as the four insurance companies in this litigation, but are continuing to meet claims on a date of inhalation basis. ii) Clearly the same approach would have to be necessary, with consideration of medical evidence etc, in order to arrive at a similar date of injury in fact with regard to other long-tail diseases, such as asbestosis (where even some of these Defendants are still paying out on a date of inhalation basis, notwithstanding the apparent fact that there seems to be a five-year dormancy), pleural thickening, other cancers etc, so as to arrive at a date of injury in fact in such cases, at least as a starting point.[121]I have considered the consequences of the Defendants’ interpretation being accepted, not least because any sensible court will consider the effect of its judgment, but also because I have been referred to the dicta of Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd(No 2) [2001] 1 All ER (Comm) 299 at paragraph 16:
“... in my judgment the subclause has no very natural meaning and is, at the least, open to possible meanings or interpretations – one the judge’s, the other that it addresses two separate subject matters. In these circumstances, it is especially important to undertake the exercise on which the judge declined to embark, that is to consider the implications of each interpretation. In my opinion, a court when construing any document should always have an eye to the consequences of a particular construction, even if they often only serve as a check on an obvious meaning or a restraint upon adoption of a conceivable but unbusinesslike meaning.”
[122]However: i) It is important to note the context of such words, namely an ambiguity of construction, which was being resolved; and, in any event, the Defendants point out that this passage (although Latham LJ agreed with the judgment) was not adopted by Sir Christopher Staughton, who took the opportunity to warn (at paragraph 85) of the “temptation of the court to make a contract for the parties”. ii) It is important to appreciate that, although it is in the context of mesothelioma that the construction, and, for this purpose, the consequences of the construction, of these wordings are being considered, such construction must be approached as at their date. The Excess wordings being considered, from the 1960s and early 1970s, are from a time when mesothelioma would have been wholly unlikely to be in the mind of insurer or insured: see Cape v Iron Trades, which makes it plain that, although in some areas the distinction between asbestosis and mesothelioma was then being recognised, at any rate in the medical and statutory context, and there had been one or two claims, it was hardly in the minds either of the major industrial insurer or a major asbestos manufacturer.[123]I recognise that, notwithstanding the straining by the courts to do justice which is so apparent from the decision of the House of Lords in Fairchild, much of which may, as has been pointed out, be founded upon the traditional benevolence of the courts towards employees rather than employers, rather than as between employee/employer and their EL insurer, I must be careful not to construe the wordings out of sympathy. Construction of the policies in favour of the Claimants would give a substantial number of mesothelioma sufferers, and their dependants, proper compensation which they might - in many cases will - not, obtain in any other way. Construction against the Claimants might leave employers such as Bates, who thought for fifty years that they had full insurance to cover just such an eventuality, possibly driven into insolvency by having to meet substantial uninsured claims. Construction against the Defendants would leave those in insolvent run-off or administration little or no worse off, since they will either have to pay out nothing or nothing more than the small dividend available, while the balance of the sums due will be met in full, or almost in full, by the FSCS. In the case of MMI, they would not obtain the windfall of at least £85m, referred to in paragraph 98 above.[124]However Mr Edelman and Mr Stewart in particular point out that: i) In 1948, employee claimants and insureds might have been seeking to pursue the opposite contention, namely that sustained should not be construed as be caused, because they might have preferred to seek to recover under a post-1948 policy, when an earlier policy might have exempted liability for a non-scheduled disease. ii) In 1972 insureds or claimants might have again been seeking to make the reverse point, as above, and to argue for recovery under a post-1972 sustained policy, because there might, in a pre-compulsory insurance era (albeit that 90% of employers had been insured in some form), have been no insurance in place at the date of inhalation. It might be that there may still now be some claimants whose employers were not insured prior to 1972 and who have had no continuing exposure since 1972 so as to be able to recover (under the Compensation Act 2006) in full against such later employers. It must be said however that there is no sign whatever of the existence of such a category of claimants.[125]I shall be aware of this, but I shall also be conscious of the fact that it is only since the relaxation of the limitation laws that this kind of problem relating to long-tail liability has had to be addressed: and of course, because no one ever construed the wordings in the way now sought by the Defendants prior to Bolton, the matter only now has become contested and has to be resolved.

XI. Two submissions of the Claimants

[126]Before dealing with the main submissions of the Claimants, I address two self-contained submissions made by some of them. A. Timelessness[127]I address submissions put forward, severally by Mr Wynter QC in Action 2 and Mr Bartley Jones QC in Action 4, by reference to the construction of two of the policy wordings, that of Federated/Independent referable to the Fleming claim in Action 2, and the BAI second wording in Action 4. The arguments are different in each case, and only arise if the Claimants lose on the main argument, and the Defendants establish their injury in fact contention as to sustained injury being referable to the date of tumour and not the date of inhalation. Each of the two Counsel suggests that, on a proper construction of these wordings, there is no restriction of time as to when the injury is required to be sustained or the disease contracted or sustained. Their submission thus is that if, contrary to their contention, the relevant date is the date of tumour, such tumour does not require to arise during the period of insurance. I recite in full the material parts of the Independent policy in issue in the Fleming action (indeed the only Independent policy in issue in these proceedings) in relation to which this contention is put forward:
“NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions or conditions herein or endorsed hereon, the Company will indemnify the Insured as hereinafter specified SECTION 1 – EMPLOYERS’ LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of or in the course of his employment by the Insured in connection with the contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease ... SECTION 2 – PUBLIC LIABILITY The Company will indemnify the Insured against all sums for which the Insured shall be ... liable to pay in respect of (a) Accidental bodily injury ... (b) Accidental loss of or damage to property where such injury illness loss or damage happens or is caused in connection with the Contract specified ... in the Schedule during the Period of Insurance ... SECTION 3 – LOSS OF OR DAMAGE TO CONTRACT WORKS The Company will indemnify the Insured against (a) Accidental loss and/or damage from whatever cause occurring during the period of Insurance to Contract Works.”
SECTION 1 – EMPLOYERS’ LIABILITY SECTION 2 – PUBLIC LIABILITY SECTION 3 – LOSS OF OR DAMAGE TO CONTRACT WORKS

The Company will indemnify the Insured against

[128]Mr Wynter submits that the policy wording for Employers’ Liability (Section 1) does not require bodily injury to be sustained within the policy period, but that it can be covered whenever it is sustained. He relies on the fact that it is a Contractors’ Combined policy, and that in both Section 2 (Public Liability) and Section 3 (Loss of or Damage to Contract Works) the words “during the period of insurance” are used, as above, so that their omission in Section 1 must be intended.[129]It appears to me to go without saying that it is wholly unlikely that such cover would be timeless, such that for one premium, with no need to renew, notwithstanding the reference in the recital to subsequent periods, the employee is covered for life, whenever he sustains the injury. But further: i) Mr Wynter says that if “during the period of insurance” is to be read as covering all three Sections, then there is repetition or duplication in Sections 2 and 3. That however is a far more acceptable answer to any problem than Mr Wynter’s, for he himself accepts that if “during the period of insurance” is only intended to apply within the recital, it cannot make any sense, because then it would have to attach itself to “will indemnify the Insured”, and plainly the right and obligation in relation to indemnity must survive the end of the policy period in the event of a later claim – the insurance company cannot possibly only have to indemnify in respect of a claim made during the period! ii) It is quite plain that the recital is the effective clause, so that it does govern the rest of the policy, with the consequent but immaterial duplication in Sections 2 and 3: see for example Kelly v Norwich Union Fire Insurance Ltd [1990] 1 WLR 139 where the policy contained an effective clause defining the date, and at 147 Croom-Johnson LJ made it plain that “the words of indemnity ... must be subject to the words in the effective clause, and the risk must take place, as an event, during the period of the insurance”. iii) The construction is obvious, namely it must be read “NOW THIS POLICY WITNESSETH that during the Period of Insurance ... if any person ... shall sustain”, which is exactly the same meaning as “If, during the period of insurance any person shall sustain”, which, as it happens, is the wording of Federated’s contemporaneous separate EL policy.[130]I am afraid the submission is unsustainable. No more sustainable, in my judgment, is Mr Bartley Jones’s submission by reference to the BAI second wording in Action 4. This reads as follows in material part:
“The Company will ... indemnify the Insured ... in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured’s direct employment under a Contract of Service or Apprenticeship between the ... day of ... and the ... day of ... both inclusive, or at any time thereafter for which the Insured shall have paid and the Company shall have accepted a premium for the renewal of this policy.”
[131]Once again, Mr Bartley Jones’ submission is that, on a once and for all payment of the premium by the Insured, and notwithstanding no renewal as there provided for, BAI will give lifetime cover in respect of an employee, whenever he should subsequently sustain an injury i.e. not during a policy period. Mr Bartley Jones bases this submission on his suggestion that the words “between the ... day of ... and the ... day of ...” are to go with the “contract of service or apprenticeship”, and thus simply define the timing of that contract.[132]But the connected words are plainly “injury sustained or disease contracted ... between”. What there is is a lengthy description of the employee, which falls to be inserted, and thus separates off the “between ...” from the words to which they are actually attached, and it seems clear that the need for the lengthy description had recently become apparent to BAI as a result of the decision in Denhamv Midland Employers Mutual Assurance Ltd [1955] 2 QB 437, from which the need for the extra words derives. That addition was the only change from the first BAI wording, and it had resulted in some shuffling. The first wording had read “indemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the Insured or any dependant of such Employee in respect of any claim for injury sustained or disease contracted by such Employee between ...”. The definition of the employee there is shorter, and the “between ...” words are in their natural place. There is no possible justification or need for any differentiation in meaning between the first wording and the second wording. B. Personal Injury by Accident or Disease[133]Mr Wynter QC sought to argue that the Excess wording (which also appears in the MMI first wording) “shall sustain personal injury by accident or disease” should be construed so as to break the meaning after the word “accident” – i.e. so as to be interpreted ‘shall sustain any personal injury by accident, or shall sustain disease’.[134]The first post-1948 wording of Excess which is relevant in this case reads in material part as follows:
“If at any time during the said period, any employee in the Employer’s immediate service shall sustain any personal injury by accident or disease ... while engaged in the service of the Employer ... and in case the Employer shall be liable to damages for such injury ... the Company will indemnify the Employer.”
[135]Mr Wynter’s submissions were that “personal injury by disease” has no meaning and that in the Excess second wording, which replaced the first in the late 1950s, there were added, after the words underlined by me above “damages for such injury”, the words “or disease”. This latter point seems to me to be of no substance – as Mr Edelman QC pointed out, the liability would indeed be for the disease, so that the addition of the words would simply be clarificatory.[136]The reason why Mr Wynter put forward this argument was in order to attempt to separate ‘disease’ from ‘personal injury’, so as to make it unnecessary for there to be any personal injury before disease could be established for the purpose of the policy. Success in the argument could thus enable him, in case in these proceedings he failed to establish injury, to seek to set up a case based on disease alone.[137]I am entirely satisfied, however, that Mr Edelman is right to say that the words should not be broken up, as Mr Wynter suggests, but that the full phrase “personal injury by accident or disease” is drawn directly from the WCA period, where it (including ‘personal injury by disease’) was used as a term of art – see Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd (“Ellerbeck”) [1932] 1 KB 401 at 417 and Mayer and Sherratt v Co-operative Insurance Society (“Mayer”) [1939] 2 KB 627 at 631, 632, 636. I note that in the Wynter Team’s own skeleton in opening at paragraph 50 (p46) they, somewhat foot-shootingly in the event, make that very same point. XII. Injury at time of inhalation.[138]There has been a number of cases in this country (as contrasted with Australia, as described in paragraph 83-85 above) in which judges have found on the facts that there was no injury at the date of inhalation. Bolton of course, as referred to in paragraph 100(i) above, was not the first, but was the first at Court of Appeal level, upholding the findings of Judge Kershaw, but also approving the decision in Jameson, in which Sir Haydn Tudor Evans concluded, by reference to the date of contractual indemnity, in 1960, when the deceased mesothelioma sufferer was still working for the employer (at page 68):
“On this evidence, had damage or injury occurred before the Works were taken over? I find the evidence is far from establishing that any such damage or injury existed at that time. The fibres may have lain dormant causing no trouble, not even a minimal change in the cell or cells for many years. If Dr Rudd is right, and his clearly is a tenable theory, the microscopic process of cellular change may have occurred about ten years before the symptoms appeared ... I find that the evidence does not even establish that minimal microscopic changes occurred before 1960. I find that the damage in this case is the mesothelioma which occurred many years after the deceased finished working.”
[139]The limitation cases approved by Longmore LJ on the issue of actionability are not mesothelioma cases, but in each case it would appear that the conclusion would be consistent with no injury at date of inhalation. In Guidera, where an employee developed asbestosis, McCullough J concluded that:
“while the macrophages and [neutrophils] are attacking the fibres, enzymes are released into the lungs, and these destroy some of the lung cells. Dr Rudd does not regard such destruction as damage, because the healthy body every day of the week and every hour of the day is attempting to eliminate foreign particles of many kinds which had been inhaled, and in this process enzymes are released which destroy lung cells. The cells so destroyed are replaced, and when they have been replaced the body is no less impaired than it was before the cells were destroyed ... In the same way as cells which have been destroyed are replaced when the skin is cut, the cut heals and the integrity of the body is restored; yet, when cut, the body suffered damage. But a cut is not a normal incident of daily living. The destruction of cells is. I take the view that the destruction of the lung cells is not something which qualifies as damage ... Even if ... one can now say that it was inevitable by 4 June 1954 that this plaintiff would in the future suffer damage ... the fact is that by 4 June 1954 he had not sustained any damage.”
[140]In McCaul, a pleural thickening case, McNeill J concluded at page 19 that “prior to a time within three years before the 17 October 1988 the plaintiff suffered no injury to his lungs or, if he did, no more than purely minimal injury, certainly not amounting even to inconvenience, from his exposure to asbestos dust whilst in the defendants’ employment”.[141]In Rothwell, the pleural plaques case to which I referred in paragraph 57 above, it appears from paragraph 88 in Lord Rodger’s speech that it was conceded below by the Claimants that the presence of the asbestos fibres in their lungs did not constitute an injury.[142]Even if there is no requirement for the injury to be actionable at the time of inhalation(addressed below) there must be injury at date of inhalation which is more than an “insult”, more than “external excitement”. In the very case which Mr Wynter QC relies on to establish that bodily injury (e.g. in the Independent policy cited at paragraph 127 above) means no more than injury, Morris v KLM Royal Dutch Airlines [2002] 2 AC 628, Mr Edelman QC points out that Lord Hobhouse at paragraph 140 makes plain that:
“The word injury in the context of personal injury involves a condition which departs from the normal, which is not a mere transitory discomfort or inconvenience, and which, whilst not permanent or incurable, has, in conjunction with its degree of seriousness, a sufficient duration. It includes a loss of function.”
[143]I have found some assistance from consideration of the originally Latin, but now perhaps it must be said Scottish, term injuria. It is plain that for there to be injury there must be more than injuria. Mr Stewart QC and his team carried out at my request a review of the Scottish cases. Brown v North British Steel Foundry Ltd [1968] SC 51 happens to have been a pneumoconiosis case. At 64 Lord Clyde, the Lord President, said:
“To create a cause of action, injuria and damnum are essential ingredients. In the present case there is no evidence of any injuries to the workmen’s lungs in 1949. He had then merely a deposit of dust in his lungs, which might or might not subsequently create an injury. But, in addition, he had then sustained no damnum.”
[144]It appears clear to me that he is saying not only that there was no damnum founding a cause of action, but that there was no injury, thus suggesting that injuria, the breach of duty, injury, and damnum are three different things. This is clear also from Gray v North British Steel Foundry Ltd [1969] SC 231, another pneumoconiosis case, where, at 252, Lord Migdale says “On that day the negligence of the defenders caused physical injury to the deceased. On that day the injuria or fault of the defenders produced damnum in the deceased”. So too per Lord Keith in Dunlop v McGowans [1980] SC (HL) 73 at 81 and Bourhill v Young [1943] 1 AC 92 at 106 per Lord Wright.[145]Against this background, it is worth considering Rothwell. There was some discussion before me as to whether it was found, in those consolidated cases, not only that the existence of the pleural plaques founded no cause of action – that there was no actionable injury - but also that there was no injury at all. For there to be actionable injury, as further discussed below, there must be more than minimal injury – and Lord Hoffmann addressed this at paragraph 8 in his speech. At paragraph 19 he says that Smith LJ “asked herself the wrong question” in the Court of Appeal because:
“one is not concerned with whether the plaque is in some sense “injury” or (as she went on to decide) a “disease”
. The question is whether the claimant has suffered damage. That means: is he appreciably worse off on account of having plaques? The rare victim whose plaques are causing symptoms is worse off on that account. Likewise, the man with the disfiguring lesion is worse off because he is disfigured. In the usual case, however (including those of all the claimants in these proceedings) the plaques have no effect. They have not caused damage”.[146]At first instance, Holland J found, in one of the underlying cases, Greaves v Everard & Sons Ltd [2005] EWHC 88 QB at paragraph 71, that “permanent penetration by asbestos fibres cannot, simpliciter, constitute injury or damage so as to found a cause of action. Penetration that is permanent (that is, such that has defeated the body’s natural defences) raises a potential for damage, but no more”. At paragraph 10 in his speech, Lord Hoffmann further quotes from paragraph 80 of Holland J’s judgment, reciting that “Holland J found that the plaques in themselves were not damage which could found a cause of action”, but it seems to me in fact that Holland J was also finding that they did not constitute any injury. This is recognised by Lord Scott at paragraph 68 in his speech, although this was under the heading “Are pleural plaques an “injury” for the purposes of the tort of negligence”. He records and approves not only the conclusion that there is no tortious cause of action in negligence, but adds that “the judge’s conclusion, concurred in by all the members of the Court of Appeal, that pleural plaques could not be characterised as a disease or as an impairment of physical condition was in part a finding of fact but also a conclusion of law”.[147]Lord Hope, with his ingrained understanding of the Scottish concept of injuria, appears to leave open the question of whether pleural plaques may be “described as a disease or an injury” (paragraph 38), and then continues:
“39. ... I do not think that it is an abuse of language to describe pleural plaques as an injury. The question whether they can also be described as a disease is less easy to answer. But the use of these descriptions does not address the question of law, which is whether a physical change of this kind is actionable. There must be real damage, as distinct from damage which is purely minimal ... 47. ... Damages are given for injuries that cause harm, not for injuries that are harmless ... 49. ... While the pleural plaques can be said to amount to an injury or disease, neither the injury nor the disease was in itself harmful.”
[148]Lord Scott, having approved Holland J’s finding of fact at paragraph 68 in his speech, refers to Smith LJ’s dissenting opinion, based on her view that the pleural plaques did constitute an injury, in paragraph 71. He does not appear to agree with that dissenting opinion, yet appears to base his conclusion not on absence of injury but on absence of damage, in paragraph 73:
“Asymptomatic pleural plaques do not constitute damage; nor does risk of damage in the future; nor does anxiety about the future. Contrast a mere scratch on the skin which can, conceptually, qualify but may be too trivial to constitute physical damage sufficient to complete a cause of action in tort ... The mere simple scratch would fail to suffice not because it was not, conceptually speaking, a physical injury, but because it was too trivial to attract the attention of the law of tort.”
[149]Lord Rodger is plainly and expressly conscious of injuria and damnum, and indeed not only refers, as does Lord Hope, to Scottish cases, but in particular to the passage in the judgment of Lord President Clyde in Brown, from which I have quoted in paragraph 143 above. After citing Brown, he continues:
“87. In summary, three elements must combine before there is a cause of action for damages for personal injuries caused by a defendant’s negligence or breach of statutory duty. There must be (1) a negligent act or breach of statutory duty by the defendant, which (2) causes an injury to the claimant’s body and (3) the claimant must suffer material damage as a result.”
[150]It is plain he is there defining the three matters of injuria, injury and damnum. He continues:
“88. In these cases the claimants do not suggest that the presence of the asbestos fibres in their lung constitutes an injury. Rather they argue that the plaques constitute an injury – the plaques are a “physical change” in their bodies ... Taken by themselves, however, the plaques are benign and asymptomatic. So, even assuming that the plaques could constitute a relevant “injury” to the claimants’ bodies, they do not cause them any material damage and so do not give rise to a cause of action.”
He thus appears to leave open, as did Lord Hope and perhaps “conceptually” Lord Scott, the possibility that the asymptomatic plaques were a (minimal) injury.[151]It is unclear what conclusion Lord Mance would have come to on this aspect, but he obviously thought it unnecessary to do so, because in paragraph 103 he simply stated:
“I agree with the reasons given in the opinions of Lord Hoffmann, Lord Scott ... and Lord Rodger ... for concluding that the pleural plaques did not by themselves constitute or involve injury and damage sufficient to enable an action to lie in tort.”
He may have been concluding that there was no injury and no damage, or that there was possibly an injury but in any event no ‘injury and damage’.[152]The Claimants submit that the House of Lords decision in Rothwell,to the extent set out above, entitles me to reconsider the decision of Longmore LJ in Bolton on the basis that, although it was conceded in Rothwell that the presence of the asbestos fibres in the body did not amount to an injury, the majority of their Lordships concluded that the presence of the asymptomatic pleural plaques could be an injury. Such reconsideration could be given, it is submitted, in the light of the evidence now adduced, which, the Claimants suggest, is or may be different from that when Dr Rudd’s evidence stood alone in the earlier cases, or when Dr Rudd or Dr Moore-Gillon gave their compelling evidence in tandem in Bolton itself. In any event the medical evidence before me has been supplemented by Professor Geddes, and the new feature of the biochemists’ expertise.[153]The medical evidence I have heard, in my judgment, fundamentally supports the proposition that there was no injuryat the date of or indeed shortly after inhalation: i) There is no injuryby virtue of the inhalation of the fibres. We are all inhaling millions of foreign bodies, including millions of asbestos fibres. There is no injury suffered by the activation of the bodily defences by way of mucus, cilia, macrophages, neutrophils. ii) There is no structural damage to the lung tissue by virtue of the presence in the lungs either of the fibres or of the macrophages etc which are stimulated to deal with them: Dr Rudd refers to post mortem examinations of lung tissues relating to urban dwellers and to many who have been occupationally exposed to asbestos, which have disclosed no structural damage attributable to asbestos, despite the presence of numerous asbestos fibres. iii) The reaction of macrophages, their death with the consequent activation of neutrophils, the coating of fibres, all constitute the body’s response within the lung, and the description of this as an “inflammatory response” does not suggest that this amounts to any damage or irritation to the lungs or any part of the body. Dr Rudd explained that such inflammation “is part of the normal defences of the lung against foreign particles, it is an inevitable part of living that millions of foreign particles will be inhaled into the lungs” – and is certainly nothing which requires treatment. Such natural processes occur in every individual on a daily basis and, Dr Rudd explains, “may be present in the lungs for many years, always at a sub-clinical level”, and thus without any symptoms of any kind. iv) The sub-microscopic ‘penetration’ of the pleura again cannot be described as an injury. The pleura is 1/100th of a millimetre in thickness (10 microns). It is apparent from the ‘multi-stage’ nature of the process that it is impossible to say whether the subsequent slow process of mutations etc described in paragraphs 107 to 109 above is activated by the happenstance of one fibre penetrating the pleura and/or remaining among the mesothelial cells as they divided and subdivided, or by numerous such fibres, but I am satisfied that, whether there is penetration by one or by many fibres; none of that can amount to an injury. v) There is then the slow generational impact on the cells. But, as set out in paragraph 108 above, there are 50 billion cell deaths per day within our bodies, and 5,000 mutations per day, and most of those mutations are entirely harmless. vi) Natural killer cells will be attacking malignant cells within the body of any given individual according to Dr Rudd “thousands of times every day”, and both Dr Moore-Gillon and Professor Heintz explained how the natural killer cells were intended to identify the abnormal and to intervene naturally to prevent their development.[154]This picture of lack of injury until the tumour itself is met by a number of arguments by Counsel for the Claimants. The main argument is put forward by Mr Stuart-Smith QC, though all associated with it. This is what might be called his “retrospective” argument. It was sought to be put on the basis of predestination, but all the medical experts were plain that that had no role to play in the development of mesothelioma. Dr Moore-Gillon referred to “a very substantial element of chance” and Professor Heintz to “chance playing a very major role”. I have already referred in paragraph 103 above to the possibility that some sufferers may have had some susceptibility, but, particularly given the lengthy duration of the development of the mesothelioma, many of the stages of the multi-stage process can be triggered or facilitated, or inhibited, by such matters as age, general health or treatments for other conditions.[155]It is not really pre-destination that forms the foundation of the argument. The submission is that, in respect of the 3% who eventually get the mesothelioma, they suffer injury, because it is injuryfor that person to go down the route to death. The one part of Longmore LJ’s description in Bolton which received any critical consideration by the medical experts is that in which he says, at paragraph 15, in relation to Mr Green, “when he was first exposed to asbestos ... his body was, at that time, successfully dealing with the fibres which he was inhaling. He was at that stage a well man, not suffering from any injury at all”. The query was whether it could be said that the body was successfully dealing with the fibres, when in fact, in the event, Mr Green died. It was more a question of there being the natural defences which were not causing injury, as set out above, but which, in the event, were not being successful in entirely eliminating the consequences of the inhalation of the fibres.[156]Drawing such comfort as he can from Rothwell, Mr Stuart-Smith referred to the conclusion of Lord Hoffmann at paragraph 11 that the pleural plaques “did not increase the susceptibility of the claimants to other diseases or shorten their expectation of life” and in paragraph 19 that he was not “appreciably worse off on account of having plaques”. Mr Stuart-Smith submits that, in relation to the person who dies, his expectation of life was shortened and/or he was appreciably worse off: all those who inhale the fibres, and in relation to whom the bodily defences are in their various ways activated, and/or in the case of whom fibres penetrate the pleura, have an injury,but that injury, in relation to the 97%, is amortised by the bodily defences.[157]He relies on Professor Geddes’ statement (in his paragraph 16 of his Report) that:
“a mutation that is irrelevant in healthy people may be highly relevant in those who go on to develop cancer ... I agree that prospectively the mutation cannot be defined as relevant or not but retrospectively it seems to me as a physician to be a relevant injury. Here I am using the word injury to mean a detrimental change that is part of a continuous process leading to the diagnosis of mesothelioma and eventual death”
. Reliance is placed on the fact that the doctors do not rule out the possibility that the process could start soon after inhalation, by way of penetration of the pleura, followed by changes both genotypic (inside the genes) and phenotypic (affecting the cells’ appearance).[158]This argument, which concentrates retrospectively on the 3% who get the mesothelioma is supplemented by the submissions of Mr West QC. He submits that it is apparent, by reference to the post mortem examination of Mr Screach, the Claimant in Action 1 of this action – and no doubt the same will apply to others who have died from mesothelioma – that he had a substantially greater quantity of fibres in his lung tissue than the norm. He accepts that, in accordance with Dr Rudd’s evidence, the lungs of an individual living in an urban environment will contain on average 40 million white asbestos fibres (whether or not contaminated by tremolite); but Mr Screach appears to have had at least a hundred times that quantity in contaminated white and brown asbestos fibres in his lung at death.[159]Mr Bartley Jones QC further submits that, notwithstanding that the “single fibre theory” is no longer tenable, by virtue of Fairchild the legal theory is that it is the one fibre that has caused the damage, and the fact of causing injury should be ascribed and applied to that one ‘causation’ fibre.[160]All these submissions are attractive. However it is quite plain that all of them are simply another way of putting (the admitted) causation. To look at the process retrospectively is to trace it back to the beginning, but it does not answer the question as to when the injury so caused took place. Mr Edelman QC submits that Professor Geddes’ use of the word injury in the passage I have quoted in paragraph 154 above, simply means “past medical history”. The inhalation of the fibres heightens the risk of subsequent injury, and the 3% subsequently suffer that injury. The 3% may or may not be those who have many more fibres in their lungs, but it is plain, as referred to above, that the presence of fibres in the lungs of whatever quantity do not constitute an injury. I am satisfied that neither the 3% nor the 97% suffer any injuryat the date of inhalation. Professor Geddes suggests that techniques for examining the pleura might improve, so that early phenotypic changes could be detected, such that treatment to prevent progression to exponential growth could be considered; and he suggests that, if neither injurynor diseasewere concluded to have occurred by that time, then it would mean giving treatment before the disease. I am satisfied however that if such treatment were or became available it would be treatment to prevent disease or injury, at a time when the presence of phenotypic changes would have heightened the risk of subsequent injury or disease. Risk is damage, but it is not injury; and certainly not bodily injury, such as is required in the Independent and the second and third MMI wordings) – see Dhak v Insurance Co of North America (UK) Ltd [1996] 1 WLR 936 – nor “personal injury” (Excess and first MMI wordings).[161]Tentatively, Mr Stuart-Smith QC put forward an argument by reference to dicta in the House of Lords decision in Barker, which he accepted would not benefit him at this stage, but which he might wish to preserve for a higher court. He pointed to the passages in their Lordships’ speeches in that case, to which I have referred in paragraph 53 above, particularly paragraphs 48 in Lord Hoffman’s speech and 61 in that of Lord Scott, from which it appears that they concluded that it was the risk of injury, where in fact, as here, injurydideventuate, which is the basis of the cause of action. Although the Defendants dispute that this is the ratio of the case, the analysis that I have carried out above suggests to me that it is. They in any event submit that not only the effect but the substance of the case has been overturned by Parliament in the Compensation Act 2006. However, it is clear that if it be the ratio, and even if it remained valid, that would simply make the risk actionable, it does not make the risk injury, bodily injury or personal injury.[162]In any event: i) the subsequent decision of Rothwell in the House of Lords, preserving the decision in Gregg,makes plain (paragraphs 2, 12, 41, 50, 59, 67, 80, 88) that risk of itself is not actionable unless attached to something else, and there is no suggestion that, when the risk does eventuate in a subsequent injury, that injury is somehow backdated to the date of the risk. ii) the Barker development of the Fairchild exception is only a special exemption from the ordinary rules of causation. Not only does it apply only to mesothelioma, but also only to cases in which more than one employer is involved.[163]I am satisfied that no injuryis suffered at the date of inhalation.

XIII. Disease

[164]Mr Stuart-Smith QC gives a dictionary definition as “interference with the normal state of organisms in the body”. Dr Rudd gave a definition of disease as the abnormal disturbance of the structure or function of part of the body, usually accompanied by symptoms, but thus, as he emphasised, not something happening to all of us.[165]The question is whether there is disease at the date of inhalation (or shortly thereafter). The claim under the policies is for mesothelioma. It is quite plain that the victims do not have mesothelioma at the date of inhalation. Nor do they then have any disease. The Claimants seek to draw comfort from a number of references in the reports of the medical experts to “disease process”, although Dr Rudd preferred to refer to a ‘process that eventually resulted in the emergence of the disease’, Dr Moore-Gillon to ‘a process that was going to lead to a disease’, and Professor Phillips to a ‘disease which is a culmination of a multi-stage process’.[166]But whether there is what Professor Geddes calls a continuum, or whether the process is, as Dr Rudd accepted, “inexorable”, a statement that the process begins at the date of inhalation (and Professor Phillips is only prepared to say that it could be “considered to have begun at any time from the moment of first exposure to asbestos”) is onlyanother way of asserting that there is causation between inhalation and the eventual disease. If it is necessary, in order to claim under the policy, that mesothelioma or any disease should be present at the date of inhalation, the answer must be that it is not. Even if Mr Wynter QC were right, that disease without injury would be sufficient, therefore, he must fail on that basis on any event.

XIV. Actionability

[167]If I had concluded that there was injury or disease present at the date of inhalation, the next issue would have been whether such was required to be actionable. The main thrust of the Claimants’ arguments is that there is injury at the date of inhalation,and it does not have to be actionable at the date of inhalation. In order to found a cause of action, injury must be, in accordance with Cartledge (referred to in paragraph 41 above) and with Rothwell, not insignificant, not negligible (Cartledge at 772) not purely minimal, (Cartledge at 774), appreciable (Cartledge at 775), material (Cartledge at 779), not de minimis (Rothwell at paragraph 8). The Claimants’ case is that some injury, albeit not measurable, not qualifying in Cartledge terms, and thus insufficient to found a cause of action at that stage, is present at inhalation, which injury becomes actionable later when the tumour develops: but that it is not necessary, nor required by the policy wording, that the injury, which is present on inhalation during the policy period, be actionable during the policy period.[168]It is common ground that, if this were a causation policy – injury caused during the period of the policy – the question of actionability would not arise, and the only issue in order to attract the terms of the policy would be whether the subsequent (and subsequently actionable) injury was caused during the period of the policy. The dispute is whether, if the requirement is that injury or disease be present during the term of the policy, that injury or disease must be actionable at that time.[169]There is no doubt that the injury or disease must be actionable by the time that the employer makes the claim under the policy, because otherwise there would be no employer’s liability to cover; but the Defendants say that the injury must be actionable during the policy period.[170]The Claimants concentrate on the agreed position that the real trigger under the policy is the liability of the employer, so as to contend that the time of that trigger alone is the time by which the injury must be actionable. When the claim on the insurance is made, the employer must show that he is liable i.e. that the injury is actionable by the employee. The question is thus retrospective in any event, to look back to see that it is actionable by the employee and when it became so, which, for the sake of argument, could be assumed to be the date of tumour. The Claimants submit that actionability is only a question for what it calls the main trigger, i.e. to be satisfied that there is liability on the part of the employer, and of course limitation, but that for the purpose of cover under a particular policy, or in a particular policy period, the retrospectivity should go back to when the injury was (then possibly in a non-actionable form) present during the period of the policy. Thus: i) Stage 1: Insignificant, negligible injury present (not (necessarily) actionable). ii) Stage 2: At some stage (difficult, as above, to assess, and, in any event, only relevant for limitation purposes, which, given the obvious lack of knowledge on the part of the sufferer, would not be a problem, ever since the end of the absolute 3-year bar) the injury becomes actionable. As Lord Atkin described the effect of a bacillus in Fife Coal Company Ltd v Young [1940] AC 479 at 489,the“trifling injury” becomes “so aggravated that it causes incapacity or death”. iii) Stage 3. The trigger, being the date when the employer becomes liable in respect of that actionable injury and claims on the policy.[171]This accords with the view expressed by the United States Court of Appeal in Insurance Co of North America referred to in paragraph 83 above, at 1222:
“We do not find persuasive appellants’ contention that “bodily injury” means “compensable bodily injury”
. The manufacturer here paid for protection from bodily injury resulting in liability. It should make no difference when the bodily injury happens to become compensable. Put another way, we see nothing in the policy which requires the underlying plaintiffs’ cause of action accrue within the policy period. There exists a clear distinction between when bodily injury occurs and when the bodily injury which has occurred becomes compensable.”[172]The Defendants rely heavily upon the decision in Bolton, to which I shall return, but I shall deal with a number of other arguments: i) Independent, MMI and Excess point to the wording used in their respective policies, namely that what is being indemnified is the employers’ “liability at law for damages for such injury or disease”, namely the injury or disease which was sustained during the policy, and submit that this must be the actionable injury or disease. The Claimants submit that it is the same injury or disease throughout, which simply starts by not being actionable and becomes actionable later. ii) Excess and, in relation to its first wording, BAI, point to the use of the words “personal injury”, which they assert to be a term of art meaning actionable injury. They have produced no authority to that effect, and I am not persuaded by it. The use of the words personal injury in paragraph 140 of Morris by Lord Hobhouse, referred to in paragraph 142 above, coupled with(i) reference by Lord Steyn at paragraph 17 in his speech in the same case to “the wide term “personal injury””,(ii) the interchangeable use in the very policies before me of injury and personal injury and(iii) the reference, which would otherwise be tautologous, by Lord Hoffmann in Rothwell at paragraph 13 to “actionable personal injury”, persuade me to the contrary. iii) Mr Edelman QC points to the case of Tesco Stores Ltd v Constable & Others [2008] Lloyd’s Rep IR 636 CA, in which, notwithstanding the absence of any reference to the word ‘actionable’, the loss in question was not recoverable under the policy, because not actionable in tort. However (paragraphs 40 to 41 of the judgment of Tuckey LJ) that loss never became actionable so as to fall within the terms of the policy. iv) The Defendants rely on Post Office v Norwich Union and Bradley v Eagle Star as showing that a claim must be actionable by the employer before it can be recovered from the insurer. That is not in doubt: the question is whether it must be actionable at the date of inhalation.[173]The Defendants rightly, in my judgment, dismiss the submissions of Mr West QC on behalf of the Local Authorities by reference to arguments drawn from the later development from an earlier accident of osteoarthritis or epilepsy. Such conditions may be a later development of an earlier injury, whether actionable or non-actionable, but do not add anything to the present argument.[174]I refer to what Longmore LJ said in Bolton, in paragraphs 15, 16 and 18, which I have set out at paragraph 100(ii) above. His first reference in support of the principle is to Promet, particularly at 157, where he cites Hobhouse LJ:
“Imminence of loss or damage is not the same as damage: damage is physical damage which has occurred.”
There was in Promet a damage policy, and it was necessary that there had to be damage during the policy, which the Court of Appeal found there was. In my judgment it does not bear on the case here where (had I not found against the Claimants on this point) there would be injury during the policy, which becomes actionable later. As for the limitation cases to which he refers, all of them, following Cartledge, found that there was no measurable injury sufficient for actionability, and hence so as to trigger the limitation period, until later: i.e. in this case there would be no cause of action until measurable injury at date of tumour. That is not in issue, but it does not bear upon the construction of the policy.[175]At the end of the day, the authority for the proposition that the injury is required to be actionable at the date of inhalation during the policy period, is that of Longmore LJ, giving the judgment of the Court of Appeal, himself; and the Defendants were able to find nothing else in the text books, even MacGillivray, formerly edited by Longmore LJ, to support or illustrate the proposition.[176]Mr Stuart-Smith QC points to the fact that, under the WCA and related legislation, and the EL insurance which operated to cover the employers’ liability under those Acts during that era, such proposition would appear inapt. Liability under the WCA required, and did not arise until, a disability certificate (see Blatchford v Staddon & Founds (“Blatchford”) [1927] AC 461, Ellerbeck and Smith & Son v Eagle Star (“Smith”) [1934] 48 Lloyd’s List Law Rep 67) or, in the absence of a certificate, death (Mayer). Once the employee’s right was established in that way, and he thus had an actionable claim, the obligation was passed back to the most recent employer in the previous twelve-month period (or five-year period in the case of the Asbestos Scheme) to pick up the liability, unless he could pass it on to another employer in that twelve-month (or five-year) period. It would be the insurance policy of that employer, or of any employer to whom the liability could be passed on, or with whom it could be shared, which would answer.[177]Thus, the employer would be claiming on his insurance in respect of an injury or disease sustained by his employee during the period of insurance, when, at the time of that sustaining of injury/disease, it was not actionable: see the description of the system by Du Parcq LJ in Mayer at 636 whereby “if he sustained personal injury by disease ... during the period of his engagement in the service of the assured and, of course, during the currency of the policy and if, as the result of the personal injury then sustained, the assured, though at some later date, had to make payments to the man or his dependants, then it seems to me plain as a matter of construction that the assured is entitled to succeed in his claim”.[178]Not least because Bolton was a PL case, there was no reference whatever to the WCA cases in Bolton, nor were they taken into account by Longmore LJ; and the Claimants submit that this renders the conclusion of Longmore LJ per incuriam, or certainly not binding in relation to EL insurance.[179]Even though it is quite plain, and I have already referred to this in paragraph 95 to 97 above, that Bolton was indeed not addressing EL insurance, I am not persuaded that the conclusion of Longmore LJ in this regard was per incuriam, nor that it was other than binding upon me, as his statement of principle in relation to actionability was not limited to PL insurance but was by reference to insurance generally. However, I am also persuaded by the arguments of Mr Palmer QC on behalf of MMI, which further support the conclusions to which Longmore LJ came. He points out that there is only one cause of action in respect of the employer’s negligence and in respect of which a claim is made on insurance: Brunsden v Humphrey [1884] 14 QBD 141 CA. As is clear from Rothwell, where no actionable injury, and no loss, had yet arisen by virtue of the pleural plaques, there can be no recovery either against the employer or against the employer’s insurance company in respect of non-actionable injury, or injury prior to its actionability. Whereas I accept that, once the initial trigger is operated, there is a retrospective enquiry back to the date of actionability, there is no justification for any further retrospectivity back to a time when the injury was not actionable. Recovery for the injury starts when it becomes actionable. Consequently, even if I had found that injury or disease was present at the date of inhalation, I would have to have found that such injury or disease was actionable at the date of inhalation before it would trigger any liability of the employer and consequently any indemnity which the employer could obtain upon the insurance cover then in place, and it would not be. XV. Custom/usage.[180]There was considerable submission before me as to the law on custom/usage and the underlying evidence, on the basis that it could be asserted that there was, prior to Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under EL policies by reference to date of inhalation/exposure, whatever the wording. On analysis of the pleadings, this was in fact only faintly in issue. It is not pleaded in Actions 1 or 4 against BAI, or against Excess in Actions 3 or 5, or against Independent in Action 2. It is only pleaded by Zurich against MMI in Action 6 as “at all material times, alternatively at all material times between 1992 and 1998”. Nevertheless, I consider both the evidence and the argument. It was pointed out that any such usage could not apply to all EL policies, because some might have been on a ‘claims-made’ basis (although there is no evidence of any) – but of course it is only intended by the Claimants to submit that the usage would apply to any EL policies which are on an occurrence/events basis (see paragraph 60 above).[181]I can deal with the law shortly, as the authorities, and what falls to be extracted from them, are not in issue. I was supplied with a bundle of 26 authorities, to which a number more were added, although we did not have the need to look at them all, not least in the light of the very helpful exegesis produced by Mr Stewart QC in closing. I must be astute to ensure that such usage as is alleged and relied upon: i) existed at the date of the relevant contract; ii) does not contradict the terms of the contract or clause; iii) is certain, notorious and universal; iv) is binding, in the sense that it is not simply a usage which parties choose from time to time to follow.[182]The Defendants submit that the market practice to pay mesothelioma and other claims on an exposure basis is post-contractual, so far as concerns at any rate Excess, BAI and Independent, was not certain, and was in any event not a legally binding usage. As for the existence of the claims-handling agreements, the Defendants point to Cunliffe-Owen v Teather & Greenwood [1967] 1 WLR 1421 per Ungoed-Thomas J at 1438 D-H:
“Arrangements or compromises to the same effect as the alleged usage do not establish usage; they contradict it. They may be the precursors of usage; but usage presupposes that arrangements and compromises are no longer required.”
[183]I turn to the evidence. The overwhelming evidence before me, by reference to witnesses called and the voluminous documentary evidence, was that disease claims, and in particular mesothelioma claims, were always paid out by reference to the date of inhalation/exposure. Such is indeed admitted by Excess, so far as their payment of mesothelioma claims since 1982 is concerned.[184]The starting point in relation to the approach to EL insurance is the “bedrock” to which Mr Howie referred at his ABI seminar, as set out in paragraph 61 above. Although in evidence he was unable further to particularise it, he referred to the ‘convention’ that all EL insurance was causation-based, unlike PL. He himself wrote to his Divisional Director, when he was Assistant Liability Manager at Eagle Star in December 1988, that “there is a very important difference between “causation” wordings and “claims occurring” wordings, the latter being used in public and product liability policies”. Mr Murray, to whom I have made reference in paragraph 90 above, in his 1983 prize essay continues on (starting from the passage I there quoted):
“Another difference between employers’ liability and public/product liability wordings is the use of ‘caused’ instead of ‘occurring’. Most commentators tend to ignore this inconsistency in terminology but a recent article suggested that there could well be some significant difference in the cover … In the UK an unofficial market agreement exists for employers’ liability claims … In practice all insurers share the claims in relation to the period for which each was on risk during the time of exposure to the source of the disability or illness. Thus the UK market may be said to have tacitly accepted the exposure theory. As to whether or not a similar view would be taken in relation to product or public liability is questionable … there is … the matter of the difference in wording referred to … above. It will be recalled that the employers’ liability policy uses the word ‘caused’, rather than ‘occurring’ which appears in public and product liability policies. The word ‘caused’ in its common usage, lends itself far more to the exposure theory than ‘occurring’ which tends to suggest manifestation.”
[185]An important letter was written in January 1984 by Mr Driver, the liability underwriting manager of Sun Alliance, to solicitors who were to seek the opinion of Michael Ogden QC as to the legality under ELCIA of ‘claims made’ policies, to which opinion I shall refer further in due course. The context was the intermittent discussion, referred to in paragraph 61 above, about whether all EL policies should be changed to a ‘claims made’ basis, Mr Driver wrote as follows to the solicitors:
“I … enclose a specimen of our Employers’ Liability policy in which the operative clause refers to ‘liability … caused during …’. Other leading Employers Liability insurers use either a wording identical to our own or sustained during or happening during. Whatever the form of words used, there is a common interpretation amongst insurers … The UK Employers’ Liability Insurers have an agreement to deal with [disease] claims and contribute towards claims settlements in proportion to each insurer’s time on risk whilst the ‘injured’ employee was exposed to the hazard, i.e. it is assumed that the employee sustained the ‘injuries’ throughout the period of his exposure.”
[186]I have heard or read evidence or documents emanating from many senior people involved in the insurance industry, underwriters, claims managers, brokers, reinsurers, employers, Industry groups, Government. All have accepted that EL policies were treated the same, without distinction of wording. I have seen an article by a well known insurance writer Mr Madge in the Post Magazine for 22 November 1984, in which he discloses, as a result of a letter he has received from a Nottingham broker, that “not all employers’ liability policies use the word ‘caused’” but he continues: “I rememberraising this very issue with the insurers who had issued a combined liability policy several years ago and they had taken the view that, in using the word ‘happening’, they had no intention of departing from their previous underwriting policy, which was to regard the EL as protecting in respect of disease ‘caused’ during the period of insurance. It would be interesting to have the views of those insurers who use a happening wording”.[187]In the course of the discussions in relation to the possible changeover to ‘claims made’, to which I have referred, just such thoughts were being aired. Mr Merchant, of Commercial Union Assurance, in a letter of 19 November 1982 to the AOA, noted one or two examples of unusual wordings in EL policies. He asked the question “Does the Royal’s “happening” in their EL policy produce the same interpretation when used by other companies in their PL/Product wordings”. He enclosed a paper on the proposed change to ‘claims made’ in which he noted:
“Employers’ Liability – current practice is for Insurers to meet, and to apportion, claims according to their periods of negligent exposure on risk. This method is generally known as the exposure basis, although it is also considered to be an occurrence basis on the grounds that the injury was sustained at the time of the exposure. There is conflicting medical evidence on this latter aspect in some cases.”
[188]However, for the purpose of actual consideration by the AOA of a changeover to ‘claims made’, there was no discussion of these minority EL wordings, but all non-‘claims made’ wordings were undifferentiated and simply described as an “events occurring” basis, as opposed to a ‘claims made’ basis (see paragraph 60 above). This is implicit in the minutes of a 30 September 1982 meeting of the AOA Sub-Committee charged with the issue, and is clear from a paper circulated by the AOA on 27 January 1984, seeking to reflect the views of that Sub-Committee, which begins as follows:
“Employers’ Liability Insurance has traditionally been written on an “events occurring” basis where the policy indemnifies an employer against his legal liability to his employees in respect of injury or disease sustained or caused during the currency of the policy.”
[189]It has been of some interest to look at the notes or publications by the Chartered Insurance Institute (“CII”). The earliest relevant study notes that we have are from 1960, and advise in relation to EL insurance that:
“The word “caused” is material; it is not “arising” or “becoming manifest”
. The wording used is deliberate and is aimed chiefly at the liability for disease and pneumoconiosis in particular. Bodily injury is usually apparent immediately, but a disease which began to develop during one year by reason of some fault in the employer’s system may not be capable of diagnosis until some years hence. In the meantime, the policy may have lapsed; the insurers would nevertheless still be liable if it could be proved that the disease was caused while they were on risk.”[190]There is similar discussion in an Insurance Handbook written by Mr Edward Whitmore, published by the CII in 1962, emphasising the significance of the word “caused”. In the 1995 tuition notes there are very similar words used in relation to the “deliberate” choice of “caused”, but the same passage states, by reference to a proviso to the specimen policy being discussed, that “Cover for injury or disease sustained while the employee is temporarily outside the territorial limits is conditional on the action for damages being brought in a court within those limits”, which suggests that sustained is being used but caused intended.[191]There is no separate literature from the CII on the issue of the meaning of sustained, or indeed recognising the existence of any sustained wording. The Court did however have the benefit, as described in paragraph 26 above, of the video link evidence of Dr Eaglestone, who might be described as the doyen of the insurance industry. He referred us to a number of his publications. The first of them was in a 1971 booklet relating to ELCIA called “Implications for Insurers”: the second was his 1979 publication “Insurance for the Construction Industry”: and then there were two 1985 publications, the latter of which he co-wrote with Mr C Smyth. In the 1971 publication, he wrote a passage which appeared again in similar form in the 1979 textbook, and which was then repeated verbatim in the two 1985 publications. He used, in the 1971 textbook, the word “caused”, where in the subsequent textbooks, he used the word “sustained”, and I shall cite only the subsequent version in this judgment, but he made it plain in evidence that, so far as he was concerned, both at the time and now, the words are “interchangeable”, and that caused was meant, whatever the wording:
“The bodily injury or disease must be sustained during the period of insurance. ‘Sustain’ is probably used to indicate that injuries or diseases which do not manifest themselves immediately may not be diagnosed until several years have elapsed when this policy may no longer be in force. The insured will then have to show that the policy was in force when the injury or disease was caused [this use of the word caused remained unchanged in both versions].”
[192]In the 1979 and 1985 publications there was then added the following sentence:
“Even if the word ‘sustain’ is not used, it is made clear that the bodily injury or disease must be caused during the period of insurance.”
[193]It is perhaps noteworthy that the co-author of the second 1985 book, Mr Smyth, was the underwriter at Federated responsible for what we are calling the Independent wording (in which the words “sustained bodily injury” is used, set out in paragraph 127 above). This issue of the interchangability of the words be caused and sustained became a matter of some discussion before me. Most witnesses did not even know that there were different wordings in use for EL insurance. Mr Chipperfield of Excess and Mr Woof of MMI and Zurich, to whom I have referred in paragraphs 76 and 77 above, were both senior underwriters, who did know that there were differences, and although Mr Chipperfield did not agree with Dr Eaglestone that the words were interchangeable, neither he nor Mr Woof nor Mr Franklin, a broker with Jardine Lloyd Thompson UK Ltd for nearly forty years, who also knew of different wordings in the market, ever considered that there was much difference between them. Nor did Mr Helmore, the Claimants’ expert.[194]The significance of Mr Chipperfield and Mr Woof is that they both actually did raise queries at different times, within their own companies, as to the possibility of there being some difference between a caused and sustained wording, Mr Chipperfield in 1978-9 and Mr Woof in 1996. In 1978 Mr Chipperfield pointed out a possible consequence by virtue of the unheralded change from sustained wording to caused wording by Excess in 1976, to which I have referred in paragraphs 72 and 73 above, and he raised the point again in February 1979 as to whether the change in the wording might not enable Excess to defend a claim then being made by Penrhyn Quarries, but the point was apparently not taken: and, as I have indicated, Excess accept that all claims were paid out on an exposure basis – i.e. just as if there had been throughout a caused wording and/or just as if there were no difference between their effect. As for Mr Woof, at the time of Zurich’s 1998 change of wording, to which I have referred in paragraph 77 above, he, and a Mr Leary, raised concerns as to the sustained wording, but those concerns were obviously allayed, because it was he who accepted and circulated at the time, and has given evidence before me, that, so far as he is and was concerned, Zurich’s change of wording to caused was simply clarificatory, a view shared by Mr Willett (see paragraph 77 above).[195]What is clear is that there is no evidence of any discussion in the industry (other than the very occasional internal queries to which I have referred above) as to the nature of a sustained wording, or of its constituting any exception to the ordinary interpretation of EL insurance. Mr Plumb, who was for many years with Guardian Royal Exchange, gave evidence that his company had EL “sustained” wordings, and always have treated them, and still are treating them and paying them out, on the basis of exposure, so far as disease claims are concerned.[196]The apparently universal treatment of EL on an exposure basis is, however, on the Defendants’ case, not explicable on the basis of a unanimity of view. In a letter of 18 January 1983, Mr Horsman, the Assistant Home Underwriting Manager of Phoenix Assurance, which it seems had, at that time at any rate, a sustained wording, told the AOA, in the context of the continuing discussions about the possible changeover by EL insurers to a ‘claims made’ basis, that because of “the difficulty for both ourselves and the plaintiff … to show when injury in fact occurred in long term … [cases], so exposure tends to be taken as a “on rule of thumb” guide”. The robust position of the Royal, in a similar letter to the AOA of 28 February 1983 from their Liability Underwriting Manager, was that:
“So far as EL is concerned, whatever the theoretical justifications there may be for differences in interpretation of the words used in current operative clauses, the practical reality is that actual claims are being handled in a consistent way throughout the market and I know of no cases where a claimant has been left uncompensated because of different approaches based on the niceties of different wordings … The exposure theory has not really been challenged in this country and it is our view that it is soundly rooted in law and that a change of EL policies to a claims made basis would not override existing practice.”
[197]The practice is referred to again at a joint meeting between the ABI and the Health and Safety Executive on 7 December 1987, which records that “disease claims are dealt with on a “period of exposure” basis between those insurers who have been on risk during the period in which the disease has developed”.[198]The Defendants point out that behind this united front of practical reality lay a variety of different positions: i) Some adhered to the practice because they believed that all EL policies were to be interpreted on a causation/exposure basis.Two underwriters appear to fall in that category, Dr Eaglestone and Mr Dare of Excess, but the others are claims managers or brokers: Mr Allen from Commercial Union, Mr Clarke from Eagle Star, Mr Franklin and Mr Plumb, to whom I have referred, and Mr White, Mr Malarkey and Mr Cornwell of MMI/Zurich. ii) Some believed that injury (but not disease) was indeed sustained at the date of inhalation (I do not suppose anyone thought about the question of actionability). The Claimants doubt that they can really have had this belief, because, at least in relation to asbestosis, it was well known by the time of the 1930 Merewether & Price Report that there was no fibrosis for five years after inhalation, and yet asbestosis claims were still paid out on an exposure basis. But there has been very firm evidence from Mr Payne, the only other underwriter who gave evidence, from MMI, who expressed that belief strongly (by reference of course to the occurring wording in PL policies) right the way up to the courtroom in Bolton. Although of the view that I have described in respect of causation, nevertheless Dr Eaglestone also appears to have believed that there was injury at the time of exposure (so too, it seems, did Mr Plumb). Numerous other witnesses gave evidence that the existence of injury at the date of inhalation was the basis for their belief in the appropriateness of paying out on an exposure basis – Messrs Moore and Herriott from BAI, Messrs Murray and Walker from MMI, Mr Klaiber from Zurich, and Mr Chamberlin of the Middlesbrough Council, qua insured. iii) A third possibility is that some, for example those at Excess, were, after the changes of wording, operating on a caused policy, without appreciating that there might have been some historically different wording, which they did not address. iv) Yet others, for example, Mr Skellett the solicitor handling matters on behalf of Excess, simply did not turn their minds to the question at all, as there was always continued cover for what was usually in those days a longstanding repeat client.[199]The fact that there were the changes of wording from sustained to caused, as set out in paragraph 72 above, and no difference whatever in practice, changes which took place quite irrespective of, and bore no relationship to, any concerns about limitation or long-tail experience, is obviously heavily supportive of the existence of Mr Howie’s ‘convention’, but it must of course be seen in the context of the diversity of view referred to above.[200]The other evidence that was considered in this context was: i) The system of recording or reserving for claims. There was no standard method in the industry. MMI’s Munilink system was entirely consistent with recording on a causation/exposure basis. Others’ systems would have been more consistent with a ‘claims-made’ basis. ii) There were the intra-insurer agreements, and then the claims-handling agreements, to which I have referred in paragraphs 79-80 above. It is quite apparent that these were of importance, and they do seem to have involved most if not all of the important insurers. But it is equally plain that the agreements were “unofficial” or “informal”, and, in any event, that they required renewal/reconsideration and were in no way binding.[201]Even assuming that a wider case were being alleged than the very limited one pleaded as set out in paragraph 180 above, I am satisfied that the universal practice to which I have referred, of paying out mesothelioma claims on an exposure basis, is not established as a usage, in accordance with the authorities. Save for Excess’s acceptance that the practice occurred, there is no evidence earlier than the 1980s that it can be put down to any kind of arguable usage. It is plainly not certain, not least by virtue of the multiplicity of approaches to or bases for the practice, and, above all, it is not binding: it bound neither insurer nor insured. It was not a usage incorporated into the contracts between EL insurer and insured.

XVI. Construction of wordings

[202]This brings me to the fundamental question, which is as to construction of the wordings, whether in the light of, or notwithstanding, my conclusion that, as at date of inhalation, there was in fact no injury and no disease. This is of course an objective question, and arises irrespective of whether I have found that there was an enforceable usage. I have been given considerable assistance in relation to authorities on construction. I shall start with the common ground, that I am entitled to take into account the factual matrix, and Mr Stewart QC, as delegate for all Counsel, produced, at a very early stage, a document upon which I can safely rely as to the permitted scope of the factual matrix, which can be summarised as follows: i) The factual matrix is “all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract” and includes “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”: ICSL v West Bromwich BS (“West Bromwich”) [1998] 1 WLR 896 at 912-913 (Lord Hoffmann) applied in BCCI v Ali (“BCCI”)[2002] 1 AC 251. ii) “The background may not merely enable the reasonable man to choose between possible meanings of words which are ambiguous but even …conclude that the parties must, for whatever reason, have used the wrong words or syntax” (West Bromwich at 913D, Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd (“Mannai”)[1997] AC 749). iii) In Reardon Smith Line v Hanson-Tangen (“Reardon Smith”)[1976] 1 WLR 989 at 996, Lord Wilberforce considered that in a commercial contract this included “knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating”: see also The Tychy (No 2) [2001] 2 Lloyd’s Rep 403 CA at 408 para 27. iv) In West Bromwich, Lord Hoffmann prefaced his propositions by stating that the result of the approach in Reardon Smith (and the preceding case of Prenn v Simmonds [1971] 1 WLR 1381) “has been subject to one important exception [i.e. the exclusion of evidence regarding subjective intention],to assimilate the way in which such documents are interpreted by judges to the common sense principle by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded” [at 912]. v) There are three important qualifications. The first is relevance (see e.g. Lord Hoffman in BCCI at 269, Lord Phillips MR in The Tychy (No 2) at 409). The second is knowledge: the facts in question “should have been reasonably available to the parties” (West Bromwich per Lord Hoffmann at 912, Dairy Containers Ltd v Tasman Orient CV [2005] 1 WLR 215 at 220 per Lord Bingham). The third qualification is objectivity, so as not to introduce by a side wind evidence of the subjective intention of the parties, but subject, as per Lord Hoffman in West Bromwich at 913A-B, to a certain degree of flexibility (Mannai at 768, Proforce Recruit Ltd v Rugby Group Ltd [2006] EWCA Civ 69 at paras 53-57 per Arden LJ).[203]A summary of helpful principles, drawn largely from the words of Longmore LJ in Absalom v TCRU Ltd [2006] 2 Lloyd’s Rep 129 at para 7, and based upon submissions to me by Counsel, which I had approved, in a recent case of Reilly v National Insurance and Guarantee Corporation Ltd [2008] EWHC 722 (Comm) at para 13, was again the subject matter of agreement, and I repeat and incorporate it:
“(a) Ordinary Meaning. There is a presumption that the words to be construed should be construed in their ordinary and popular sense, since the parties to the contract must be taken to have intended, as reasonable men, to use words and phrases in their commonly understood and accepted sense. [See also paragraph 7(i) – (iii) in the judgment of Longmore LJ, and in particular: “The object of the enquiry is not necessarily to probe the 'real' intention of the parties, but to ascertain what the language they used in the document would signify to a properly informed observer.”] (b) Businesslike Interpretation. It is an accepted canon of construction that a commercial document, such as an insurance policy, should be construed in accordance with sound commercial principles and good business sense, so that its provisions receive a fair and sensible application. [See also the words of Lord Diplock in Antaios Compania Naviera v Salen Rederierna AB [1985] AC 191 at 201, cited in paragraph 7(iv) by Longmore LJ: If a “detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense”.] (c) Commercial Object. The commercial object or function of the clause in question and its relationship to the contract as a whole will be relevant in resolving any ambiguity in the wording. (d) Construction to avoid unreasonable results. If the wording of a clause is ambiguous, and one reading produces a fairer result than the alternative, the reasonable interpretation should be adopted. It is to be presumed that the parties, as reasonable men, would have intended to include reasonable stipulations in their contract.”
[204]For the rest, I summarise shortly matters I have borne in mind: i) I should be looking for the natural and ordinary meaning, but such as to give effect to the objective intention of the parties within the factual matrix; but without surrender to what Lord Steyn in Sirius Insurance Co v FAI General Insurance Ltd (“Sirius”) [2004] 1 WLR 3251referred to as “literalism”, and bearing in mind, as Lord Steyn advised in Mannai, that a commercial construction is more likely to give effect to the intention of the parties (BCCI at 259, Mannai at 771B, Sirius at 3257-8). ii) I should guard against taking account of, or accepting, subjective views and intentions, and against rewriting the contract in such a way as might seem in the court’s mind to achieve fairness. iii) The construction must be as at the time of the wordings – which may have been – in the case of Excess was – before mesothelioma was appreciated adequately or at all, and indeed would have been prior to Fairchild, and the sorting out of issues of causation. But I must bear in mind that, as appears to an extent from Cape v Iron Trades (referred to in paragraphs 36 and 122(ii) above), and Phillips (paragraph 79 above), an insurer can and does take the risk of the insured’s liability increasing or expanding as a result of legal developments, for example, the abolition of defences such as common employment, the extensions of the limitation period and the effect on the liability of an employer of such cases as McGhee v National Coal Board [1973] 1 WLR, and Fairchild itself.[205]One specific matter that must be addressed is the question of commercial purpose or object. Mr Stuart-Smith QC submits, and relies on a large number of answers, some solicited, some unsolicited, from witnesses in oral evidence to the effect, that “the purpose of annual policies of insurance is and has always been to indemnify the insured employer against any liabilities that he may incur to those employed during the period of insurance as a result of his activities during that period, irrespective of when those liabilities accrue”. He picks up further unsolicited support from: i) an article in the Journal of the CII in 1966 Vol 64 at p64 by a Mr Provart who says:
“The common form of employers’ liability policy indemnifies an employer against his liability at law for damages in respect of bodily injury or disease sustained by any person under a contract of service or apprenticeship with him and arising out of and in the course of his employment by the insured. The injury or disease must be caused during the period of the insurance and the insured must be carrying on the business described in the schedule to the policy. So there is a start.” ii) the brief report of the chief claims inspector for the Prudential, Mr Pickard, in the Post Magazine for 1964, defining the function of the EL policy as “providing an indemnity against the insured’s legal liability to any person under contract, service or apprenticeship with him in respect of bodily injury or disease caused during the period of insurance and arising out of and in the course of the business of the insured.”
[206]The Defendants submit that the only commercial purpose of an EL policy is to provide an indemnity in accordance with the terms of the policy. But, in any event, they submit that the search for such a purpose cannot override the natural meaning of the clause, and arises only in the event of ambiguity. Mr Stuart-Smith asserts ambiguity, but in any event refers to, and relies upon, the words of Lord Wilberforce in Reardon Smith at 995H, namely:
“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
This returns us to the agreed scope of the factual matrix, set out above.[207]I am entitled and obliged to interpret the wordings, and resolve any ambiguity, by reference to the factual matrix as and when the relevant policies were issued. In this case I am not construing a factual matrix particular to one insurer/insured, as these are standard form policies, and, indeed, applicable, in this case, to five insurers, and to slightly different wordings, but no doubt to other EL insurers and insureds. Although it is possible for the meaning of the same wordings, renewed in the same terms every year, to change, that is wholly unlikely. What could be possible however, is that, if the wordings changed, in the absence of any discussion the meaning may still have stayed the same.[208]I have already set out in paragraph 16 above the nub of the disputed policies in this action, as to which the issue of construction arises. Although to an extent there is different wording in each, there is no doubt in my mind, having heard argument, that one way or another the same answer will apply to all. I also do not see any sensible basis upon which it can be asserted, or that the conclusion can be arrived at, that there would be a different trigger by reference to disease than from injury, where what is being addressed is liability for mesothelioma.[209]The Defendants submit simply that injury or personal injury or bodily injury or personal injury by disease is sustained when it is suffered: and that disease is contracted or sustained when the sufferer is inflicted with it or catches it, i.e. when the disease starts. The Claimants effectively construe “sustained injury” as meaning “be caused injury”. Their case is, spearheaded by Mr Stuart-Smith, that the meaning of all these sustained wordings is in fact the same as causation, which is, as described above, the fundamental basis of EL insurance as opposed to PL. It is, as I have indicated in paragraph 168 above, common ground that the causation wording is an exception to the requirement that the injury must be actionable, i.e. if the question is whether the injury was caused during a policy period, then the question of actionability does not arise; and such would also be the case if sustained meant be caused.[210]This issue falls to be resolved entirely as a matter of EL insurance. There is a fundamental problem in all these policies, and that is the problem of the ex-employee. On the Defendants’ interpretation, the sustained/injury in fact policies would cover (and only cover) those who develop the tumour during the policy period, but: i) Must they have been employed at the time when they inhaled the asbestos fibres? There is no dispute that the answer is Yes: but the route to the answer is not agreed. ii) Must they be employees when they develop the tumour? iii) If they were employed at the time when they inhaled the asbestos, but are not employed when they develop the tumour, and the insurer has a sustained policy, are they covered?[211]Most of the Defendants rush to say that Question (ii) must be answered No and Question (iii) is to be answered Yes – ex-employees are covered. Excess so submitted as their primary case, relying upon Mr Edelman’s construction of Ellerbeck as establishing that ex-employees were covered during the WCA era (I shall resolve this below). It is clear in my judgment, and the Defendants are driven to recognise, that it would make no commercial (or industrial) sense if an employee were only covered if he were still employed at the date of tumour (40 + years after the exposure). But how is this to be arrived at?[212]The Claimants say that the policies must be construed on the basis that the employees must be covered when they inhale, namely by reference to the date of inhalation, and that the employees must have been employees at the date of inhalation – and whether or not they are also (still) employees at the date of tumour is irrelevant.[213]There is, in my judgment, a clear ambiguity in the policy wordings in a respect which is, to my mind, crucial to the construction of the wordings. The Defendants say that the wording should be construed as injury in fact wordings, and the ex-employees can be covered by some rough and ready construction – reading in words such as “at the time of the original accident”. The Claimants simply say that, by some rough and ready construction, the wordings can all be construed consistently with what they contend to be the fundamental commercialpurpose of EL policies, namely, as they assert (supported by the evidence referred to in paragraph 205 above), to cover the employer’s liability to those who were its employees during the period of insurance when the injuries were caused: and also assert that the factual matrix, and indeed certain aspects of the policies themselves, fortify their case. The issue of ex-employees, and the ambiguity to be resolved in relation to them, is in my judgment central to the resolution of the question of construction. XVII. Construction, including Factual Matrix A. WCA and the employee[214]I have already referred to the central importance of the WCA in the historical background of fifty years of the provision of EL insurance. However, it can be seen that the WCA era is of significance in particular to the derivation of the wordings being considered before me: i) There is no doubt, and Mr Edelman QC confirms, that the Excess wordings do derive from the WCA period. There is hardly any change as between the central part of the wordings of the Excess policy of the late 1930s and 1940s (which made express reference to the WCA - and to ELA 1880), and the three Excess policies in issue in this action which post-date 1948, which provide: “If at any time during the said period, any employee in the Employers’ immediate service shall sustain any personal injury by accident or disease … while engaged in the service of the employer”. ii) Although we have no pre-1948 wordings for MMI, we know that they were insuring EL from almost the start of the century and: a) the first MMI wording plainly derives, just as did Excess’s, from the WCA: “… shall sustain any personal injury by accident or disease”. b) Mr Willett, with MMI since 1967, and very familiar with its history, confirms his belief that such first wording does derive from that of its predecessor back to before 1948. iii) We know that BAI and Federated were insuring throughout the WCA era. We have no examples of policy wordings between 1907 (in both cases) and the post-1948 wordings, but there is no reason to doubt that in each case similar wording was used, just as was the Tariff wording (set out in paragraph 65 above) throughout the WCA period.[215]Mr Edelman submits that the liability/entitlement of an employee under the WCA was on a ‘manifestation’ basis, by virtue of the fact that he had to establish disablement, by certificate or death, before entitlement. The trigger point was indeed a disablement certificate or death, which may be said to be manifestation for the purpose of proof. However it is quite plain that, once disablement was established, the liability is taken back to the last employer (in the twelve months period) and to the insurer of that employer - or, if the employer is successful in passing on or sharing such liability (see paragraphs 34(vi) and 35 above), then to such other employer and its insurer, so that the disablement arises/is caused, during relevant employment by, and thus, normally, insurance cover of, the relevant employer. This seems to me clear from the structure of the Act, but is amplified and clarified by consideration of the WCA cases which, with Mr Edelman’s help, I was enabled to consider: i) Victoria Insurance Co v Junction North Broken Hill Mine [1925] AC 354. This decision of the Privy Council was subsequently found to have been wrong (in a later decision of the Privy Council, Sunshine Porcelain Properties Pty v Nash [1961] AC 927 (“Sunshine”)) in concluding, in the case of a workman disabled by a scheduled disease, that the effect of the New South Wales Workman’s Compensation Act (materially identical to the WCA at that stage) was not to treat the certified date of disablement as the date of the happening of the accident. The workman in question was not employed at the certificated date, and so would not have been covered at that date by the employer’s insurers, and so the Privy Council found that the date of the (deemed) accident was earlier – the date when “the disease was contracted”, at which time the employee was employed and the employer was insured. That this was the purpose of the Privy Council is clear from the opinion of Lord Wrenbury at 358:
“If this be not the right view of the Act, it would result that if the workman was out of employment at the date of disablement or suspension he would be without remedy. Mr Clauson pointed out as matter of illustration the consequence which would ensue in this case if the appellants’ contention were sound. Suppose that the policy had been renewed for a second year, commencing July 1 1921, the intention of both contracting parties, of course, would have been that the insured would be covered in respect of liability to which he became exposed during the currency of either of the two policies. But upon the appellants’ view he would have no claim on the first policy because the disablement was after July 1 1921, and in so much as the workman, in as much having left his employment before July 1 1921, could not be named in the list of employees required by … the second policy, he would have no claim under that policy either.” ii) The construction in Victoria Insurance was first doubted (and not followed) in Ellerbeck, a decision on the WCA in the Court of Appeal. It is plain, however, that, although the Court of Appeal was unable (since the decision of the Privy Council in Victoria Insurance was inconsistent with the construction of the UK WCA by the House of Lords in Blatchford), to conclude otherwise than that the date in the certificate was the date of the accident and thus of the disablement, nevertheless it achieved exactly the same result, in terms of achieving compensation for the employees, by concluding that they were employed, and the employer insured, at that date of disablement. The Court of Appeal concluded that, at the date of disablement, i.e. the date in the certificate, although neither employee was receiving wages he was, or at any rate was deemed to be, employed and covered by insurance. Mr Stuart-Smith heavily relied upon the reasoning of the judges as stating the commercial purpose of EL insurance: a) Scrutton LJ firmly states at 408: “I approach the construction of the policy from the point of view that it is intended to protect the employers against their liability to their workmen under the [WCA].”
Not, Mr Stuart-Smith points out, their ex-workmen. Scrutton LJ continues at 411:
“The section then means that the last employer within twelve months before the date of the disablement certified is primarily liable to the workmen, but can discharge or distribute his liability in whole or part by proving that other employers within the twelve months have caused or contributed to the disability. The Certifying Surgeon’s date of disablement is final, and is to be taken as the date of “the accident”, and fixes the twelve months within which the employers can be made to contribute, besides fixing the date before which you are to look for the last employer whom the workman can safely sue, whether employment by him did or did not cause or contribute to the disablement. The employer then claims on the insurance company, on the ground that he is liable to make compensation for an injury by the disease.”
Finally at 413-4 Scrutton LJ says:
“The second point raised by the insurance company is that as the workman was not being paid wages by the employer at the date of the accident, he was not then in the employer’s service. [Scrutton LJ gives an answer to this and continues.] Another and a better answer is that Parliament, to enable the workman to recover compensation, has treated him as employed at the time of the certified disablement by the last relevant employer previous to that date; and that it is this conventional and fictitious state of things that is the basis of the employers’ and insurers’ liability.” b) Greer LJ, having, at 418, concluded that the last employer during the twelve months from liability “would be entitled to indemnity on a policy in force during the time they were the workmen’s last employers”, continues: “It was further contended for the appellants that the liability to compensate the two men ought to be held to be outside the contract of insurance because they were not in receipt of wages, and therefore the amount of their wages would not form an element in the calculation of the premium payable by the respondents. This is admittedly the fact, but it is to be remembered that the contract of insurance is a contract to indemnify the assured against all claims during the term of the insurance by the respondent’s workpeople. There is not a separate consideration for the insurance in respect of each workman. The wage calculation is a rough and ready way of ascertaining the amount of the premium. It is not unreasonable to neglect in the calculation the wages of workmen in the service but not actually working during part of the insured term … the risk of the certification of industrial disease might well be accepted by an insurance company without any modification of the usual method of calculating the premium payable for insurance against all claims under the Act”
. Once again the articulation by Greer LJ that “the contract of insurance is a contract to indemnify the assured against all claims during the term of the insurance by the respondents’ work people” is a powerful one. The Defendants, and in particular Excess (see paragraph 211 above), rely upon Ellerbeck to show that ex-employees will be covered by the WCA. However, in my judgment it establishes the reverse. It shows that no ex-employee will be covered. They must be (or be deemed to be) employees of the relevant last employer at the date of disablement and, for insurance purposes, at a time when that employer was insured. iii) Smith. This was another decision of the Court of Appeal, again including Scrutton LJ. In this case, at the certificated date of disablement, the employee was no longer employed by the last employer (this was a Scheme case and so the longer period of five years applied), nor was the employer then insured. The Court of Appeal concluded that the date to test whether the employee was employed and the employer insured was when the disease was contracted (which Scrutton LJ did not conclude meant “first contracted” (at 70)). Thus, again, the Court of Appeal rested its conclusion on the basis that at the relevant date of disablement the employee was employed and the employer insured. iv) Mayer was a death case, not a disablement certificate case, in the sense that the employee died before obtaining such a certificate. At the date of death, the employee was not employed any longer by the employer, nor the employer insured. The summary of facts records (at 629) that “it was contended for the appellants that under s43 of the [WCA] the death of Sutton must be treated as the happening of the accident, and that, as there could be no liability to his dependants until his death, neither the notional accident nor the liability arose until after the contract to indemnify had expired”. McKinnon LJ concluded that “I think that the liability to the widow of Sutton established by the award of the County Court judge did arise during the currency of the policy – namely in respect of a personal injury by the disease which was sustained by Sutton during the period from May 1932 to April 1936, while working with lead in that service. That clearly was during the period of the policy.” Du Parcq LJ is very clear at 638:
“If one treats disease as a personal injury by accident, then the question is: When was that personal injury sustained? It really is verging on the absurd, I think, to suggest that anyone could say that it was sustained some time after the workman was removed from all the dangers of working as a lead worker”. v) The Privy Council decision in Sunshine, referred to in subparagraph (i) above, is itself of significance. It addresses the Workers’ Compensation Act of Victoria at a time prior to a change in the law by amendment of that Act, which altered the basis of that Act from what it had been previously, namely then identical to the UK WCA. On the basis of that previous statutory position, the Privy Council was clear that the injury under the WCA must be sustained during the employment: see per Lord Reid at 940: “In the ordinary case under s5 it would seem clear that the injury must be sustained while the worker is still in the employment, but the position under s12 [the new section] is far from clear.”
He concludes at 943 “In their Lordships’ judgment, s12 does not follow s5 in requiring that the injury must occur during the employment”.[216]In sum, it is clear to me that, under the WCA, the issue is whether the injured/disabled employee was so disabled/injured when he was employed by the last relevant employer, and whether at that time, the employer was covered by insurance. As (inter alios) Lord Wrenbury, Scrutton LJ and Du Parcq LJ make clear, for the purposes of the WCA and recovery under insurance by the employer and hence by the employee, the injury must be sustained while the employee is employed and the employer is insured. For completeness, there is no sign that the position is or could be any different even in the case of an extension, if granted, under s2(2), as referred to in paragraph 34(ii) above. In the case of Coulson, where an accident led to a hernia, albeit that there was a considerable extension beyond the normal six months, the employee remained employed up to the date shortly prior to his claim, and was thus able to recover against the last relevant employer while still an employee.[217]The fundamental principle of dealing with diseases under the WCA was by reference to exposure in the relevant employment. Such long-tail claims as there were, so far as WCA claims are concerned by reference to the Coulson extension, and no doubt a very rare common law claim within the then six-year limitation period, were treated no differently from short-tail claims. There was then more long-tail after 1948, and the abolition of exclusions in 1972, and still more after the lifting of the bars on limitation by the Limitation Act 1963 etc. Long-tail disease claims did not really arise until the 1960s. There is no sign of any different approach to the need for injury/disease to be addressed by reference to the policy in place during the employment of the claimant. There was no change of attitude among EL insurers to long-tail EL claims, in the light of the dramatic alterations to limitation laws from 1963 onwards, nor any alteration in the policies save for ‘clarificatory’ changes, and there was, as Mr Williams confirms, no literature indicating any change in approach after the end of the WCA era.[218]Mr Stuart-Smith QC further relies upon contractual documents ancillary to policies during the WCA era, to which I shall refer, and also to what appears to be the only proposal form in the papers, emanating from MMI in the period immediately after 1948. All these support his proposition that it can properly be deduced as an important part of the factual matrix that the exclusive approach of insurance companies and the courts throughout the first half of the last century was in accordance with the commercial purpose which he asserts, and which will be of significance to resolve any ambiguity in construction of the policies in issue.[219]There are three such policies, all dated 1907, to which he refers: i) The earliest Federated policy produced by Independent, dated 17 July 1907, has attached to it a schedule which shows the “Workmen covered in respect of liability under the [WCA], [ELA 1880] …and common law.” There are then listed the “average number of direct employees”, the “classification of occupations and kind of work” and the estimated salaries and wages etc. ii) A BAI policy for 1907 defines workmen as not including “any person employed otherwise than by way of manual labour whose remuneration exceeds £250 a year”. iii) A 1907 Midland policy provides by condition 6 that “the premium for this policy is calculated on the amount of earnings by workmen declared by the assured to be the amount estimated by him to be earned and payable to his workmen …”[220]There is also a 1931 Midland policy, which has a schedule not dissimilar to the 1907 Federated policy referred to above, headed up “Employees covered in respect of liability under the [WCA]”, with a space for “places at which the employees are to be engaged”.[221]The significance of this is as follows, in my judgment. First, that these policies are dedicated towards workmen/employees in employment during the policy period: secondly that there is provision for exclusion from cover of employees who are earning more than a certain amount in the given year: thirdly that that information is directed toward the calculation of premium. Mr Edelman QC points to In Re Bradley and Essex and Suffolk Accident Indemnity Society [1912] 1 KB 415, where the failure by the insured to supply the insurer with a correct account of wages, salaries etc, was held not to be a condition precedent to liability, on the basis, inter alia, of upholding the first instance judge’s conclusion that one object of the clause was that of adjustment of premium, but another was to prevent claims being made in respect of persons who had never been employed. However there are the powerful dicta of the Court of Appeal in Ellerbeck, both by Greer LJ at 418, quoted at paragraph 215(ii)(b) above, and to similar effect by Scrutton LJ at 414, which underlines, condition precedent or not, what both the Federated 1907 policy and the Midland 1931 policy emphasise, namely that the workmen who are to be covered by the policy are intended to be at least generically identified. What is at no stage anywhere provided for or required is the identity of ex-employees, who may now be sustaining/developing injuries arising out of their past employment.[222]The MMI proposal form, to which I refer above, is attached to a 1949 policy which expressly provides that such proposal “shall be the basis of this contract and be considered as incorporated herein”. It too provides for information as to “description of employees” and “estimated annual salaries and wages”, which it is apparent then forms the basis of the schedule to the policy. Once again, although there is provision in the proposal form for a declaration as to the “number of cases of injury to your employees by accident or disease during the past three years in respect of which claims for damages at common law were made against you”, no information is sought or given as to numbers of ex-employees, or the employer’s past record which might have put such ex-employees at risk, or the employers at risk of ex-employees making a sustained claim. Of course the reality is that at no time until 2006 has it ever been considered that there was any such claim available, or to be provided for.[223]I turn to consider, against this background, whether, in respect of the policies in issue before me, ex-employees are covered, or whether the absence of reference to them rather suggests that they are not in mind and that what is intended to be covered is employees during the period of insurance. The Defendants rely on Wilkinson v Barking Corporation [1948] 1 KB 721, which they contend shows that the word employee can be ‘generic’. The statute that was there being considered by the Court of Appeal was s35 of the Local Government Act 1937 whereby:
“Any question concerning the rights and liabilities of an employee of a local authority … shall be decided in the first instance by the authority concerned, and if the employee is dissatisfied with any such decision … shall be determined by the Minister, and the Minister’s determination shall be final. ”
[224]The plaintiff, on resigning from employment by the defendant after eleven years, claimed that he was entitled to receive an annual superannuation allowance to which, by s8, “a contributory employee of an employing authority shall be entitled on ceasing to be employed by them”. The defendant contended that such dispute fell within s35, which the plaintiff denied, asserting his right to have the matter decided by the court, as he was now not an employee but an ex-employee. The Court of Appeal concluded that, for the purpose of s35, “any question concerning the rights and liabilities of an employee of a local authority” included a question such as had been raised by the plaintiff. The Defendants contend that this means that, in an appropriate case, reference to an employee can include an ex-employee. I shall bear that in mind when considering the policies to which I shall now turn, but it is in my judgment wholly apparent that Wilkinson was a very straightforward case. The dispute was as to whether an employee was entitled to an allowance on retirement, the whole issue revolved around what was to happen on his ceasing to be an employee, and s35 plainly applied. The question was one concerning the rights and liabilities of an employee (on his retirement)and the employee was the person so dissatisfied.[225]I shall now consider the relevant part of each policy against the background of what I have already identified as the central dispute, namely whether, on a straightforward construction of the policies, but one taking into account the historic factual matrix to which I have referred, they are intended to cover employers against liabilities for injuries during the policy period when the employee is employed, or whether they are to be construed as covering employers in respect of injuries which may develop later, at a time when the employee who was exposed at an earlier stage may now be, indeed may have long been, an ex-employee. i) Independent. The central wording is “If any person who is[my underlining] under a contract of service … with the insured shall sustain bodily injury or disease …”. This suggests, as the Claimants assert, that the employee is and must be an employee when he sustains the bodily injury. The Defendants must construe it as covering anyone sustaining an injury who was at the time when such injury was originally caused under a contract of service with the insured. ii) Excess. There are three wordings in issue and a fourth which antedates them (the 1930s/1940s policy). The relevant words of the 1930s/40s policy and of the first (post-1948) wording in issue are in this regard identical:
“If … any employee in the Employer’s immediate service shall sustain any personal injury by accident or disease … while[my underlining] engaged in the service of the employer, in work forming part of or process in the business above mentioned”
. This seems to me once again to read straightforwardly, as the Claimants contend, namely that the personal injury by accident or disease must be sustained by the employee while engaged. The Defendants somehow - and it seems to me to be very difficult - if they are, as they wish and need to do (see paragraphs 211 and 213 above), to assert that it covers ex-employees, must get around or disregard the “while engaged”. The second and third wordings are slightly different:
“If at any time … any person of a description mentioned in the Schedule who is[my underlining] under a contract of service … shall sustain personal injury by accident or disease …”
. It is difficult first of all to see why these wordings should have any different meaning from the earlier wordings, and there has been no suggestion that they do. But even if they might mean something different, and given that the word while, which is so difficult in my judgment for the Defendants to surmount, is not present, nevertheless the obvious construction would be that the cover is for someone sustaining an injury who is an employee: whereas once again the Defendants would have to construe the words as meaning “who was at the time when the personal injury was originally caused”. iii) BAI has two relevant wordings. The first reads in material part:
“The Company will … indemnify the Insured against all sums of money which the Insured may become liable to pay to any employee engaged in the direct service of the Insured … in respect of any claim for injury sustained or disease contracted by such employee between …”
. The Claimants submit that this relates to payment required to be made to an employee who is engaged in the employer’s service when the injury is sustained, and leaves no room for ex-employees. The Defendants submit that, in any event, the wording is odd, as on either party’s case the person receiving payment would not need to be an employee at the time when the insured becomes liable to make payment to him. But the Defendants would need to construe the clause so as to refer to an employee engaged in the direct service of the insuredwhen the injury/disease was caused and/or the employee was exposed. Although there is no “who is” or “while”, it is still not simple for the Defendants. They are not able simply to refer to Wilkinson and the “generic” employee. This must be an employee who is not necessarily now engaged in their direct service, but was at the specific relevant time so engaged. The second wording reads:
“in respect of any claim for injury sustained or disease contracted by any person … in the [employer’s] direct employment …”
. The Claimants say that this is a claim that must be made by someone who is an employee when the injury is sustained. The Defendants again must assert that he does not need to be an employee when the injury is sustained, but needs to have been one at the material earlier date. iv) MMI’s first and second wordings are materially identical for this purpose:
“any person under a contract of service with the Insured shall sustain any personal injury by accident or disease [bodily injury or disease] arising out of or in the course of his employment by the insured”
. There are the same counter arguments. The Claimants assert that the person must be under a contract of service when he sustains the injury. The Defendants assert that such person does not have to be under a contract of service when he sustains the injury but must have been so at the material earlier date. MMI’s third wording reads:
“which the Insured shall be legally liable to pay as compensation for bodily injury or disease … suffered by any person under a contract of service … with the Insured when such injury or disease arises out of and in the course of employment … and is sustained or contracted during the currency of this policy.”
The rival arguments are the same: again the Claimants’ construction appears much more straightforward.[226]I conclude that it is far more likely that the proper construction of the policies, by reference to the principles and matters that I have set out at paragraphs 202 to 206 above, is that they cover the employer in respect of injury, resulting from exposure during the policy, to an employee while he is an employee. Du Parcq LJ might have considered any other answer to be “verging on the absurd”(paragraph 215(iv) above). I have no doubt at all that the Claimants’ interpretation accords with the aspect of the factual matrix to which I have referred above, namely that it is to injuries to employees during the period of the policy that the EL wordings are intended to respond.[227]I return to the questions posed in paragraph 210 above. It makes no sense (and most Defendants do not contend) that the policies can or should be construed so that the employee loses his right to be indemnified if he develops the tumour later, when he is no longer an employee. To achieve the Defendants’ construction it is clear that a good deal of violence would need to be done to the wordings of the policies, and indeed in some cases violence would not be enough, but a complete rewrite or disregard would be necessary. On a construction of the policies, it is not easy to see how they can be construed so as to answer Question(i) Yes, once the sustaining injury is to be tied to the tumour period, as the Defendants assert, nor similarly to answer Question(ii) No and Question(iii) Yes, when such sustaining injury is so apparently tied to being an employee. On the Claimants’ case, there is simply a claim by an employee in respect of an injury during his employment: Yes is straightforwardly answered to Question (i) and answers are not required to (ii) and (iii). For the Defendants’ construction, or, insofar as Excess does not so assert, then in any event to achieve the commercial and industrial sense referred to in paragraph 211 above and underlying the history of EL insurance set out in paragraphs 214 to 226 above, something more is required. There would need to be written in a right for an ex-employee to recover in respect of a (still unmanifested) injury which has developed during a later insured period, provided that he or she had been an employee at the time of the original accident which caused that injury. The only violence that would be done to the policies by the Claimants’ construction would be the need to read sustain and contract as be caused, and sustained and contracted as caused: before returning to consider such construction, I shall review the other aspects of factual matrix upon which the Claimants seek to rely. B. Sustaining, the WCA and ELCIA[228]The Defendants submit that sustained in the WCA era cannot have meant be caused and/or that the jurisprudence/approach of the WCA cannot be of assistance in construction, because liability under the WCA was not based on causation. Mr Edelman submits that the basis of liability under the WCA was manifestation and not causation. It must first be pointed out that the EL policies during the WCA era had of course also to address, despite their lack of frequency, claims at common law and/or under the ELA 1880, which were of course based on causation (see paragraph 33 above). As for the WCA, I have already addressed, in paragraph 215 above, the suggestion that the WCA was based on ‘manifestation’, but Mr Edelman is of course right that, in the ordinary course, it was not significant to show that the disablement was caused by a specific employer. However: i) This certainly arose and was necessary where s8, and the passing on of liability to other employers within the twelve months (or five years in a Scheme case), was in play. There are three scenarii in s8. The first, by reference to s8(1)(c)(i), is where the workman fails to supply the relevant information, and the employer can then escape liability “upon proving that the disease was not contracted whilst the workman was in his employment”. The second scenario is where, once provided with information by the employee if such be necessary, the employer seeks, pursuant to s8(1)(c)(ii), to allege that “the disease was in fact contracted whilst the workman was in the employment of some other employer”. The third scenario, pursuant to s8(1)(c)(iii), is by way of seeking contribution, and the Court of Appeal decision in Barron v Seaton Burn Coal Co Ltd [1915] 1 KB 756 makes it plain that, when an arbitrator has to resolve contribution between employers, the arbitrator must do more than simply apply a rateable proportion by reference to time, but must decide, insofar as he can, whether one employer is more likely to have caused the problem than another. ii) In any event, it is plain that causation did arise under the structure of the WCA. The notice under s2(2) required the cause of the injury to be stated. The WCA may not, save in the circumstances discussed in (i) above, relate to the causation of disability by the employer, but it was to be attributable to the employment at the time when he was injured – viz s1(1) “if in any employment personal injury by accident arising out of and in the course of the employment is caused to a workman”. The injury/disablement, if so caused, was sustained in the course of employment (hence the available use of the word sustained in relation to the s2(2) notice in the 1897 Act – “shall state in ordinary language the cause of the injury and the date at which it was sustained”, changing to “the date at which the accident happened” in the 1906 Act, as set out in paragraph 34(iv) above. The sustained wording in the WCA era Tariff policy (set out in paragraph 65 above), responds to a claim for disablement arising during employment (“while engaged in the service of the Insured”): policies in the WCA era covered the insurance of employers’ liabilities to those employed during the period of insurance whose disability was caused by the employment and arose (or was deemed to arise) during that period of employment.[229]ELCIA cannot be of relevance as factual matrix to the first or second Excess wordings, because they antedate it, while the third Excess wording appears to have arrived on the scene between the passage of the Act onto the statute book and its coming into force, but, as set out above, there is no material difference between the second and third wordings. However where the Act can still be relevant to the Excess policies (as it is in any event to the others) is if it is material on the issue of consistency of interpretation, i.e. if it indicates no change from the previous factual matrix. David Richards J concluded in Re T and N Ltd and Others (No 3) [2007] 1 All ER 851 at paragraph 104 that “[ELCIA] is no doubt relevant to the construction of a liability policy taken out in compliance with the Act”.[230]Mr Wynter QC’s submission is that ELCIA, the main provision of which is s1(1), set out at paragraph 69 above, ought to be interpreted on the basis that all EL policies after 1972 must be on an exposure/causation basis in order to comply with the Act. He seeks to build upon the very short (one page and a bit) advice by Michael Ogden QC of 23 February 1984, when instructed to advise on the potential change to ‘claims made’ for EL policies then being debated (see paragraph 185 above) by solicitors on behalf of Sun Alliance, but in practice on behalf of the AOA. Mr Ogden, as he then was, advised:
“I do not consider that to go over to a straight ‘claims made’ basis would comply with the spirit of the Act. In my judgment nor would it comply with the statutory provisions. The whole purpose of the Act is to ensure that employees who are entitled to damages against their employers should not fail … because of the inability of the employer to pay them. Under a straight ‘claims made’ basis this cannot be guaranteed.”
[231]He does not expand on his reasons. Mr Ogden did not address the issue of a sustained policy, but then of course at that stage no one had suggested that it would or could be interpreted as per Bolton, 22 years later. Mr Wynter’s submission is that a sustained policy, as now interpreted, is as bad as Mr Ogden considered a ‘claims made’ policy was, because an employer would not be covered for this year’s employee who, as a result of inhalation this year, sustains injury later, unless the sustained insurance is maintained.[232]I am satisfied, however, that, given that(i) the obligation under the Act is to insure and maintain insurance and(ii) there is provision under the Act (s1(3)(a)) to limit insurance to approved policies, and no steps were taken, otherwise than by reference to outlawing exemptions (see paragraphs 37 and 70 above) to disapprove any policy, ELCIA did not dictate any form of policy, nor render any particular form of policy unlawful.[233]However, plainly the exposure basis of EL insurance (which was, as summarised in paragraph 183 above, what in fact was generally believed to be the case) was best, and inevitably recommended by reference to ELCIA, because there is once and for all insurance of the employee, whether or not the policy is maintained/renewed. Hence a date of inhalation policy best complies with ELCIA, and that is how everybody treated, and continued to treat, a sustained policy. The word sustained is expressly used in s1(1) – “every employer … shall insure … against liability for bodily injury or disease sustained by his employees”.[234]The Claimants refer to the debate on the Act in Hansard on 7 May 1969 to show that that part of s1(1) which I have just quoted, using the word “sustained”, was put forward by the Minister by way of an amendment, instead of a rival amendment using the word “caused”, so as to achieve what the withdrawer of the latter amendment described as achieving “the same object much better and with a greater economy of words”. It seems to me that such reference to Hansard is sufficiently admissible to be of assistance in relation to the construction of the word sustained in the Act to show its intended identity with caused, whereas reference to other literature, be it Dr Eaglestone’s textbooks (referred to in paragraph 191 above) or guidance from the Department of Employment in 1971, or from the Health and Safety Executive some years later, albeit all consistent, is strictly not so admissible.[235]However, there is a further passage in s1(1) of the Act which, even without such assistance, appears to me to be supportive of the Claimants’ case. The obligation in s1(1) set out above on every employer is to “insure … against liability for bodily injury or disease sustained by his employees and arising out of or in the course of their employment in Great Britain”, but “except in so far as regulations otherwise provide, not including injury or disease suffered or contracted outside Great Britain”. It would appear clear that “sustained” is there intended to mean the same as “suffered or contracted”, and that, on any sensible construction of the exemption, it cannot be intended to be excluding insurance in respect of a tumour which happens to develop years later when the ex-employee is out of Great Britain, but is rather intending to refer to an exposure, i.e. an inhalation, outside Great Britain, and an exposure of an employee, not an ex-employee.[236]This would suggest a similar significance for the conditions found in the Excess EL policy (relevant to the third wording) and the MMI policy relevant to its third wording: i) In the main part of the Excess policy it is provided:
“The Company shall not be liable under this policy … for accidents occurring elsewhere than in Great Britain … except as provided in B below: B. This Policy is further extended to indemnify the employer in respect of liability which attaches by reason of personal injury sustained[my underlining] by accident or disease by persons under a contract of service or apprenticeship with the employer while temporarily employed outside Great Britain.” ii) In the MMI policy there is a section B headed “EXCLUSIONS”, whereby: “The Company shall not be liable to make any payment hereunder in respect of … (2). Injuries sustained or disease contracted elsewhere than in Great Britain …”
[237]In these conditions/provisos also it is plain that sustained cannot refer to the development of the tumour in the body of someone who has gone abroad, but to the accident/exposure itself. This can be seen also in the 1995 CII notes referred to in paragraph 190 above.[238]Mr Palmer QC on behalf of MMI sought in Bolton, when arguing in the opposite corner, to rely on a similar but less persuasive case. He referred to the wording of an endorsement to the MMI PL policy relating to the period on or after October 1991, in relation to a policy whose construction as at in or about 1980 (10 ± years prior to August 1990) was being addressed. Longmore LJ rejected the submission, by reference to the statement that “that would be to let the tail of the endorsement wag the main insuring clause of the policy”, and in any event he concluded that the endorsement was couched in significantly different terms from the terms of the insuring clause. It is one thing if the main part of the policy has a plain meaning which is unlikely to be ousted by a later clause or proviso, and a fortiori by a subsequent endorsement, not even part of the original policy, as was found in the case of Bolton. It is however another if, as here, one part of the policy is ambiguous, or even consistent with the provisions of what is in fact not a tail but simply another part of the policy. Once again, as with the construction of s1 of ELCIA, the use of the words sustained and contracted in the above conditions is wholly consistent with what Dr Eaglestone has called the interchangeability of caused and sustained.

XVIII. Conclusion

[239]I return to the issue left open at the end of paragraph 227 above. I do not find such reading a difficulty, as have not those who have paid out on disease claims for fifty years, and I so resolve the ambiguity and contested construction. Both words, sustained and contracted, require to be construed in their context and within the factual matrix, set out above, and I am satisfied that they are to be construed as meaning the same as a causation test, i.e. as caused, or, where the context requires, be caused (I return to the nine wordings below).Once that is the case,there is no problem with the question of actionability (see paragraph 168 above): this may also be the answer to Mr Stuart-Smith’s submissions about the WCA cases set out in paragraphs 176 to 177 above.[240]I am satisfied that in this way the construction of the policies is consistent with the factual matrix and the commercial purpose of EL insurance, and the ambiguity and uncertainty addressed in paragraphs 213 to 238 above are laid to rest. The result is consistent with the public policy which plainly underlay both the WCA - and the approach of the courts to ensure that employees could look to insured employers - and ELCIA, namely facilitating, against the background that employers might change insurers, continuity of cover for employees of a given year. I find it powerfully persuasive that to have a caused wording (or to have a sustained wording construed as meaning be caused) is the only way consistent with that public policy, and with the intent of ELCIA (see paragraph 233 above) to ensure that the employee injured as a result of his tortious exposure is covered, irrespective of what may happen thereafter.[241]Does anything stand in the way of this construction? i) The Stewart Team submitted, with reference to the wording of s1(1) of ELCIA to which I have referred in paragraph 235 above, that the use of the words can be ascribed to a draftsman’s error, or to inapt usage, which is to be explained by the fact that the 1969 Act was introduced as a Private Members’ Bill, and so cannot possibly affect the construction of policy wordings first drafted many years earlier. They submit that “the conclusion that the Parliamentary draftsman used the word “contracted” when he meant “caused” is compelled solely by the fact that any other conclusion would be absurd”. As to thealleged error, they point to the remarks of Lord Guthrie in Brown (referred to in paragraph 143 above) about a mistake in the pleadings. As can be seen from the relevant passage at pp68-69 in Brown, there was an apparent concession in the defence that “the pursuer’s said pneumoconiosis was contracted whilst the pursuer was working in the employment of the defenders in or before 1949”, by which concession the pursuer was held entitled not to be bound, in the circumstances. Lord Guthrie however adds “that, when the defence is considered as a whole, it appears that the word “contracted” was mistakenly used for “caused”, and that parties seem to have proceeded on the understanding that “caused” was intended”. I am entirely unpersuaded that what is set out in the statute was indeed a mistake: it is both consistent with the passage in Hansard, and in any event with what I am satisfied is the proper construction in its context of the policies in issue in this case. In any event, the very statement by Lord Guthrie only emphasises the interchangeability of the words and the interrelationship of the concepts. So far as concerns the suggestion that ELCIA cannot change the meaning already established in policies (although the BAI and Independent policies, which I am asked to construe in this action, both, as it happens, post-date ELCIA), I have already referred to this question in paragraph 229 above. I am entirely satisfied that ELCIA simply recognises, and to that extent enshrines, and illustrates, the previously accepted meaning and formulation. ii) Contract disease, or disease contracted, is not a constant feature – it appears in the MMI third wording and in BAI’s first and second wordings, whereas the Independent wording and the MMI second wording use sustain disease. It is common ground that there is no legal definition of the word contracted. Scrutton LJ, as appears in paragraph 215(iii) above, in Smith at page 70 construed the word broadly, but so as to conclude that it was not limited to initial contracting (“I do not myself read “contracted” as “first contracted”),but could also apply to a subsequent period in which the employee was influenced by the disease or the disease increased. The medical experts agree that there is also no medical definition. I have already mentioned (in subparagraph (i) above) my lack of surprise as to the ‘mistake’ in the pleadings referred to by Lord Guthrie in Brown, as evidencing the apparently easy interchangeability between caused and contracted. It is of course also apparent from s1(1) of ELCIA, as I addressed in paragraph 235 above, where “injury or disease sustained” is plainly intended to have the same meaning as “injury or disease suffered or contracted”: and this is even more aptly exemplified by what I have just set out, namely that amongst the very policies in issue in this case the words sustain diseaseand contract diseaseare both found, and plainly have the same meaning. I have no difficulty in concluding that, once I have construed these policies as applying on a causation/exposure basis, the word contracted – inflicted – is wide enough also to mean be caused. iii) Mr Edelman points to Excess’s particular wording (which also of course appears in the first MMI wording):
“shall sustain personal injury by accident or disease”
. Mr Edelman submitted, when attacking the case that there was injury or disease present at the date of inhalation, that mesothelioma would not qualify as personal injury by accident as would have been understood by the WCA cases – see Williams and Roberts referred to in paragraph 34(iii) above – although it could still be personal injury by disease, now that the limitation to scheduled diseases has long gone. Once however I have construed the word sustained to mean be caused, then this issue does not arise: plainly the employee has suffered something – be it injury or disease – which is conceded to fall within the policy if sustained during the policy period. If an employee (or ex-employee) develops a mesothelioma from having inhaled asbestos fibres during employment, asbestos fibres have caused him personal injury and disease, or personal injury by accident (the inhalation) or personal injury by disease (the tumour). The employee will therefore be covered under the three Excess wordings and the MMI first wording, because such a person is caused [sustains] personal injury by accident or disease arising out of and in the course of his employment, during the policy period. iv) The Defendants have drawn attention to the different syntax used in the various policies – sustain/contract (present tense) and sustained/ contracted (past participle), but I see no difficulty or need for distinction. As to Excess’s wordings and MMI’s first wording, I refer to subparagraph (iii) above. As for the other wordings, a person with mesothelioma resulting from inhalation of asbestos fibres during employment will be caused [sustain] [bodily] injury or disease (Independent/MMI second wording), has a claim for injury caused [sustained] or disease caused [contracted] (the two BAI wordings) or will have an injury or disease caused [sustained or contracted] (MMI third wording). v) I am not persuaded that there is any problem if, on occasion, EL and PL insurance are both covered in a combined policy, and the same or similar wordings are used, and yet must fall, in the light of the factual matrix and the different history and nature of the two kinds of insurance, to be construed differently. It may well be an anomaly if there is some leakage at a swimming pool and there is a different basis for the liability of the employing local authority to, on the one hand, an employee, and, on the other, a swimmer or an independent contractor. However that would arise in any event in most cases, given that almost all EL policies are expressly written on a caused basis, and almost all PL policies are on an occurring basis. My judgment is simply collecting the sustained wordings into the caused, rather than the occurring, pot. vi) It is pointed out by the Defendants that the post-1948 Tariff wording uses the words “if any person under a contract of service or apprenticeship with the insured shall sustain bodily injury or disease caused during the period of insurance ...” It is submitted that this shows that sustain and caused must mean something different. That is one possibility. The other is that they mean the same thing. It is noteworthy that there are six EL wordings issued by various other insurers in the papers where the wording “injury sustained … and … occurring”are used, in which phrase such words are again either cumulative or duplicative: they too either mean the same thing or something different. I conclude, if I were to need, in the light of my conclusions, to construe the post-1948 Tariff wording, that, particularly in the light of the change of law, the revival of the law of tort in this area, in 1948, the word caused was inserted for, and should be treated as merely providing, clarification of what would in any event be the interpretation of the clause without it. I agree with Dr Eaglestone that the words have the same meaning and effect. vii) Reference is made by the Defendants to a BAI policy issued to George Wimpey in 1977 in which the wording “injury sustained or disease contracted by”any person has been altered to “injury illness or disease to” any person, which is again entirely consistent with a broker’s clarification of the meaning, rather than any alteration to it.[242]I return to Bolton. Thereis no doubt that, in ordinary language, if I were to ask someone when their injury occurred and when their injury was sustained, those questions would be treated as duplicative, and the same answer would be given to each. However, Bolton was a Court of Appeal decision construing a PL policy incorporating, in the context of the relevant factual matrix, the word occur. I am construing an EL policy, as Bolton was not. Bolton of course did not consider Fairchild, nor Barker in the Court of Appeal (the House of Lords decision came afterwards, as did Rothwell). Indeed Bolton did not consider any of the vital aspects which it is necessary to address in relation to EL and the factual matrix of EL insurance, nor was the Court of Appeal considering any EL wordings, nor the differences between PL and EL, though Longmore LJ recognised that there were or might be such differences, as referred to in paragraph 95 to 97 above. Nothing in this judgment can be taken nor is intended to cast any doubt – save by reference to the updating and expansion of the medical evidence – upon, nor differ from, the decision in Bolton. Apart from the issue of actionability, which I have already resolved in accordance with Bolton, there is nothing in Bolton which binds my decision-making or would require me to decide other than the way I have.[243]I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period. They respond, consistently with other EL policies, in respect of mesothelioma claims, on an ‘exposure’ basis. For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed. The Claimants, employees and employers, therefore succeed in Actions 1 to 5 against the three Insurer Defendants in establishing entitlement to cover, under the six policies in issue in those Actions. As for Action 6, in which MMI is the Claimant, its action fails, which means that it, and not Zurich, save where Zurich accepts its liability under the First Select policy, are liable to indemnify the Local Authorities, as appropriate, under the first, second and third MMI wordings. I shall invite Counsel to resolve the appropriate form of consequential order, to include the financial consequence of success for the individual Claimants, including the Local Authorities.

XIX. Backwards Extrapolation

[244]I return to address the question as to if, contrary to my conclusions, the sustain wording is to be construed as an injury in fact wording relating to the date of tumour, when that date is. Mr Edelman QC alone contended for the date of manifestation as the time when, at least for the purposes of his policy, but, by analogy, for all the others, personal injury by disease is sustained, recognising as he does the difficulty of arriving at precisely when this invisible tumour is sufficiently present to be considered or concluded to be an injury or disease. I recognise that the date of manifestation, the date when symptoms arise, when the tumour is diagnosable, is clear and identifiable, even on the present state of medical knowledge. However, if I am looking for when injury takes place/occurs, or when disease is present, I do not consider that it can be left as late as the onset of symptoms. It is plain that there is, albeit unknown to the sufferer, an injury and a disease present in his or her body well before it makes itself manifest by his finding difficulty in breathing: and if I am not to conclude that injury is sustained when it is caused, then I am certainly clear that it is sustained in those circumstances well before it becomes manifest, not least because I must bear in mind that this particular disease/injury becomes manifest such a short time before death, and that death is a certainty well before it becomes manifest.[245]As set out in paragraph 116 above, Dr Rudd’s “ten-year Rule” started as a speculative ten-year period based upon Professor Geddes’s doublings, back to the very first malignant cell, the full houseplus. I am satisfied however that the mere presence of the malignant full house cell is not the stage at which it can be said that there is present either injury or disease. The enormous experience and skill of Drs Rudd and Moore-Gillon has on this occasion been accompanied by that of Professor Geddes, the author of the research upon which both of them base their theories, and, for the first time, by the opinions of two expert biochemists. There has been very considerable additional evidence not previously considered, such as the preponderance of view as to the existence of dormancy, the considerable doubt about the speed and the regularity of doubling, and above all the impact and effect of angiogenesis. I am persuaded, in particular, both by the evidence of the biochemists as to the likely timing of angiogenesis, and the speculative but authoritative views of Professor Geddes based upon it, referred to in paragraph 118(iv) above. It is my duty to reach a conclusion, although I am reluctant to do so in this very speculative sphere, and it is of some comfort to me that: i) if my main conclusions are right, this issue will not arise in EL. ii) although it will undoubtedly impact upon the date of the occurring of injury for the purposes of PL policies, despite the fact that Bolton itself was a PL case, it is plain from the statistics set out in paragraph 87 above that mesothelioma claims in PL insurance are very rare. I should also add that there is no evidence of any changes in wording of PL policies or of any general cessation of PL insurance cover, so in a PL insurance case there is no reason to believe it would make a difference to a claimant which year is triggered.[246]I conclude that the starting point for the occurring or (contrary to my conclusions above, the sustaining) of injury/disease in mesothelioma cases is five years prior to diagnosability. I reach this conclusion by reference to the following considerations: i) It is probable that at that stage the tumour will be sufficiently large both to be having a sufficient effect on the body and as no longer to be at any risk (subject to there being angiogenesis) of death or defeat at the hands of the bodily defences. ii) It is probable that at that stage angiogenesis will have taken place, so as to ensure its independent blood supply and the near certainty of exponential or accelerating growth on to full size, to diagnosability and to death of the sufferer.[247]I must explain what I mean by starting point. This is that, in a given case, it would be assumed that injury/disease takes place (to take a neutral word) five years prior to diagnosability, unless, in such given case, there is some evidence that the tumour was either faster or slower than the norm, in which case a factual investigation would be necessary.

XX. Estoppel

[248]Zurich’s contention, and the main argument for the Local Authorities, against MMI, was that, if, contrary to the conclusion that I have in the event made, MMI’s first, second and third wordings were to be construed on an injury in fact basis, then MMI would be estopped by convention (or representation) from so asserting, and/or MMI had warranted or agreed that the policies should be construed on a causation/exposure basis, such that the Local Authorities would be entitled to recover under those policies as against MMI (and not against Zurich). There were also two subsidiary cases of estoppel/warranty brought by Mr West QC, by amendment at my initiative in the light of the evidence, on behalf of the fifth and eighth Defendants, arising out of specific communications between MMI and themselves respectively in February 1987 and October 1983 (the “Specific Cases”).[249]In the light of my conclusion on the main issue, these questions fall away, because the policies are in any event to be construed in the way for which Zurich and the Local Authorities contend. But, as I have heard evidence and argument, I shall in any event resolve these issues. It is important to read the following paragraphs on the basis, which would be tedious if too often repeated, that, as Zurich and the Local Authorities have succeeded on construction of their policies, they have no need for the estoppel arguments.[250]As set out in paragraphs 15 and 72(iv) above, Zurich, inheriting MMI’s business after 1992, retained the MMI third wording in all material respects, as the Zurich Select One wording, and kept it until the change to Select Two in 1998, with its express caused wording. If MMI were right that its policy wordings only responded as at date of tumour, then Zurich’s First Select wording could respond to those who developed a tumour between 1993 and 1998 as at date of tumour, which would pick up some of those whose tumours were caused by inhalation forty years or so earlier during MMI’s periods of cover. If the sustained wording is to be construed as caused wording (as I have found), then MMI continue to be liable to those employers who were covered by MMI’s wordings at date of inhalation, and Zurich would only be liable for those employees (presumably none) who may develop tumours as a result of inhalation between 1993 and 1998, at some later date.[251]The real case for Zurich is not that they took over any liabilities under MMI policies prior to 1993, which of course they did not, but that, had they known the true position, or but for the common assumption that the MMI third wording fell to be construed on a causation/exposure basis, they would not, when they inherited or took over MMI’s customers (such as the Local Authorities), have retained the MMI wording, by adopting it in their First Select wording. They assert a case, further or in the alternative, that they would not have entered into the 1993 Agreement with MMI at all – profitable though it turns out to have been – or would have entered into it on a different basis.[252]Zurich asserts that they should not have been liable (had I found them to be so) on an injury in fact basis for the period from 1993 until 1998, when they changed to caused, but that MMI, rather than Zurich, should respond to suchclaims by a number of the Local Authority Defendants. The Local Authorities however go further, and seek to say that, by virtue of their estoppel arguments, MMI must be liable on a causationbasis in respect of all sustained policies prior to 1992, and hence in respect of any mesothelioma sufferers who now develop a tumour which originated prior to 1992. Thus: i) Zurich has a case, which is not just based on estoppel, but is also based upon its construction of its Asset Purchase Agreement of 9 March 1993 (“APA”) (Clause 10(A)), as interpreted in the light of the estoppel, and by reference to a letter dated 7 January 1993, written by Mr White, then Zurich’s Chief Executive, on behalf of Zurich, but, as Zurich assert, also on behalf of MMI, to those local authorities who might wish to transfer ‘mid-term’ from MMI to Zurich (the Mid-Term Transfer Letter (“MTL”)). But the effect of the estoppel/ agreement which they allege is, as set out above, limited to the period of their First Select policy, namely from 1993 until the change to the Select Two policy in 1998. ii) Leaving aside the “Special Cases”, to which I shall return below, the Local Authorities have a case based only upon estoppel and, so far as concerns the Third, Eighth and Eleventh Defendants, (the only Defendants who received it – see paragraph 15 above) the MTL. However, as set out above, such estoppel case extends to an assertion that MMI are estopped from denying liability on any EL policy issued prior to 1993 to any of the Local Authority Defendants (or, once the precedent is established, any other relevant local authority).[253]The background of what I shall in general terms call the estoppel case is of course the universal approach of the insurance market to dealing with mesothelioma claims on an exposure basis, to which I have referred in paragraphs 183 to 197 above. So far as MMI is concerned, the case is concentrated upon the events of 1992 to 1993. It is plain that MMI appreciated by 1992 that it was in very great financial difficulty, and, by virtue of constant liaison with the DTI, was attempting to resolve its problems; and, in particular, with the assistance of a very experienced senior insurance executive, Mr Brian Wright, who was brought in as Chief Executive of MMI in May 1992 specifically to oversee such a successful resolution, was seeking if possible a successful disposition of the MMI business. The negotiations which led to the APA were carried on between Mr Wright and Mr White, and it is plain that only they had authority to act and negotiate on behalf of their respective companies. The APA itself, and its detailed terms, were entirely handled on an arms’ length basis by experienced solicitors on both sides, after the carrying out of thorough due diligence by a team on Zurich’s behalf.[254]Zurich’s formal offer to MMI of 22 December 1992 was limited in its terms, and formed the basis of the eventual agreement. Clause 2 expressly provided that there would be “no transfer of any policy liabilities (claims or premium reserves)”. So far as matters relevant to this case are concerned, the central agreement was that MMI would remain liable for and on all policies issued prior to 30 September 1992, when it had ceased to carry on any further insurance business, and Zurich would effectively take over the goodwill, and in particular the opportunity to continue in business with the vast book of MMI’s insureds.[255]I have described in paragraph 15 above the various ways in which Zurich in the event picked up all or most of those insured. There was of course no obligation upon Zurich to do so, but that was the carrot for them, and it was, as Mr White accepted, a very profitable transaction for them by virtue of the amount of business they inherited from MMI. The MTL was written to effect one of such methods, by which such insureds were inherited by Zurich, namely in respect of those who, by January 1993, still had ongoing policies with MMI, and were to be persuaded to cancel those policies mid-term and commence, seamlessly, new policies with Zurich. Mr Wright left Mr White to liaise, if he wished, with one of his senior executives, Mr Murray, who, like many if not all of the MMI staff, was to transfer to Zurich, and subsequently became, as from March 1993, effectively the Chief Executive Officer of Zurich Municipal.[256]Although it was Mr Wright’s view that the best way of ensuring that as many local authorities as possible would transfer to Zurich (which would suit Zurich and, because of commission payments for MMI on such business, also suit MMI) would be if the new policies that Zurich were to offer were as similar as possible to the old MMI policies, nevertheless it is quite clear that Mr Wright, as he put it in evidence, “left it up to [Zurich]” as to what terms Zurich agreed.[257]Mr White drafted the MTL, the material terms of which I shall set out below, on 5 January 1993, and faxed a copy to Mr Murray on the same day. Although he had a meeting with Mr Wright on 6 January, he neither showed Mr Wright the draft MTL nor discussed it with him, and it was then sent on the 7th. Mr Murray sent an internal memo on 6 January to all regional management (effectively of MMI, but which was going to become that of Zurich Municipal) to explain the position, and such memo read in material part as follows:
“Following successful completion of negotiations, it is anticipated that many customers with renewal dates throughout 1993 will wish to avail themselves immediately of Zurich security. Accordingly a letter (copy attached) [this was the MTL] is being sent to all customers (with a few exceptions) inviting them to transfer at existing terms subject to [a new] Terrorism exclusion and to Errors and Omission covers being put onto a claims made basis …Premiums and fees will be apportioned between MMI and Zurich by [Head Office] Finance … It is important to appreciate by completing the form [to be sent with the letter] the customer will be cancelling the MMI policy and effecting a new contract with Zurich. This means that the Zurich policy will respond only to claims occurring (i.e. with an accident date) not earlier than the date of transfer ...It is anticipated that most customers will wish to take advantage of this offer, which is administratively simple and is to be actively encouraged. Policyholders do, however, have the right to allow their MMI policies to run off if that is their wish.”
[258]The MTL, sent the following day, read in material part as follows, addressed to the relevant local authority policyholders:
“You will doubtless have heard that agreement has been reached in principle between Zurich and Municipal Mutual for the transfer of Municipal Mutual’s commercial lines business. We are part of the worldwide Zurich Insurance Group, which has been operating in the UK since 1922. The Group has assets exceeding £20 billions … Zurich carries the highest international financial rating for claims paying ability … Those customers having policies with Municipal Mutual will be receiving terms from us effective from the 1993 renewal date … but we anticipate that some may wish to effect transfer prior to expiry of the current contract. We are pleased, therefore, to inform you that as part of the interim arrangements we have negotiated with Municipal Mutual, Zurich is able to offer cover in place of those policies that are annually renewable at current rates of premium (subject to certain cover amendments which are set out below) for the unexpired period. If you wish to take advantage of this offer please complete the attached form and return it to the address shown on the form … Details of amendments to cover are set out below. The main alteration is, of course, the change of insurer from [MMI] to [Zurich]. Zurich will assume responsibility for claims in respect of accidents happening on or after transfer date. Incidents prior to this date will be the responsibility of Municipal Mutual, but we shall handle the claims on Municipal Mutual’s behalf.”
[259]This letter was sent by Mr White as Chief Executive of Zurich UK. It was mentioned in the subsequent APA of 9 March 1993 in Clause 5(B), which recited the arrangements that had been made between the parties with regard to encouraging insureds to transfer, and a copy of the letter was attached as Appendix D to the Agreement. It has been loosely described as a “tripartite agreement” in the course of the trial. Plainly the letter itself is not an agreement, but, because it enclosed a form to be completed by the relevant policyholder, once that form was completed, that would constitute such a tripartite agreement, in the sense that, by one and the same document, it was thus agreed that the insured’s policy with MMI was cancelled, and a new policy with Zurich commenced in respect of the unexpired period of the MMI policy (the balance of the unearned premia being transferred between MMI and Zurich).

XXI. Estoppel by Representation

[260]Although it is pleaded, in closing submissions Zurich did not pursue any case of estoppel by representation. The estoppel upon which Zurich relies is estoppel by convention, to which I shall refer below. It is manifestly the case that all the negotiations were carried on between Mr Wright and Mr White, and that Mr Wright made no representations whatever to Mr White, and indeed none are relied upon, nor is the exercise of due diligence by Zurich in any way relied upon as constituting or evidencing representations made to Zurich; and although some witnesses were originally intended by Zurich to be called, their statements being exchanged, only one or two such witnesses were called in the event, and none gave evidence of any representations being made to them. The reality was starkly clear from the persuasive evidence of Mr Wright, who made it plain that, in his words, this was a question of caveat emptor. He left Zurich to get on with it, and to carry out its own due diligence. The situation, as he made entirely clear, was that, despite the fact that he was anxious, and briefed, to dispose of MMI as a going concern if he could, MMI was under tremendous pressure from the DTI, and the deal was really ‘take it or leave it’ as far as he was concerned. MMI needed to receive £60m (less the fee it would be paying for ongoing servicing by Zurich of its back business (see paragraph 15 above)) and this was not negotiable. If Zurich did not want, or was not in a position, to acquire on those terms, then MMI would simply allow insolvency processes to take their course (and of course Zurich would have lost an excellent business opportunity).[261]Save for what I have described above as the Specific Cases, in effect the Local Authorities also rely only on a case of estoppel by convention. A case was pleaded, but effectively not pursued in closing submissions, by reference to estoppel by representation, by reference to two sets of documents, an MMI Notice to Policyholders, distributed on a one-off basis to its insureds by MMI in 1971/2 and Certificates of Insurance, issued from time to time to some local authorities by MMI.[262]I deal first with the Notice to Policyholders (referred to in paragraph 15 above). This was headed up by reference to ELCIA “and Related Regulations”. It explained that certain employers were exempt from ELCIA, such as local authorities, that there were now certain requirements in relation to non-exempt policyholders and that:
“to ensure that all exempted employers are in no less favourable position, policies issued to them will be similarly extended to 1 January 1972 by the inclusion of this clause.”
This was effectively to be treated as if it were an endorsement to the policy. It is quite plain, not least from contemporaneous industry literature, that the purpose of this Notice was so that exempt insureds would obtain the benefit from the Act and the 1971 Regulations of the new outlawing of exclusions (but subject to the insurer’s right to claim back any monies which would not otherwise have been payable to the employee from the insured (see paragraph 37 above)). This benefit was thus made available to MMI’s otherwise exempt local authority insureds (subject to the claim over, which was expressly referred to in paragraph 3(ii) of the Notice).[263]The pleaded case on behalf of the Local Authorities was that: i) this Notice amounts to a warranty that exempt policyholders will have the same protection as non-exempt, and that ELCIA will apply in its full force to them. ii) (as adumbrated in paragraph 230 above) ELCIA renders it unlawful to provide to non-exempt employers (and as a result of this Notice now also to otherwise exempt employers) any other EL policy than a caused policy, such that then and thereafter MMI are estopped by representation from denying that they were offering a caused policy to Local Authorities.[264]I am satisfied that this is unarguable. First I have already concluded, in paragraphs 232 to 233 above, that ELCIA did not require (though as can be seen from those conclusions it would plainly encourage) a causation policy. Secondly, even if it could somehow be relevant to estoppel by representation that it were now clear that MMI was in breach of that Notice to policyholders by the cover it had subsequently extended, that would be of no assistance to the Local Authorities, because they would have been liable to repay to MMI any sums otherwise payable. In any event, no detriment, necessary to estoppel by representation, has been pleaded or even arguably established.[265]As for the Certificates of Insurance, which were headed up as under ELCIA, these, it seems, were sent occasionally to some of the local authorities, as set out in paragraph 69 above, but they were plainly not required to be supplied to exempt employers. The relevant passage upon which reliance seems to have been placed for the purposes of the pleadings was:
“We hereby certify that the Policy to which this certificate relates is issued in accordance with the requirements of [ELCIA] and regulations thereunder.”
Given that ELCIA did not require the issue of a certificate to exempt employers, it is difficult to see what meaning can be drawn from the statement that the Certificate is issued in accordance with ELCIA. Insofar as any point arises at all, paragraph 264 above contains a total answer. Mr West QC did right not to pursue this case.

XXII. Estoppel by Convention

[266]The seminal passage is of course the articulation of estoppel by convention by Lord Denning MR in Amalgamated Property Co v Texas Bank [1982] 1 QB 84 at 122C-D:
“When the parties to a transaction proceed on the basis of an underlying assumption – either of fact or of law – whether due to misrepresentation or mistake makes no difference – on which they have conducted the dealings between them – neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow them to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”
This was approved by Lord Bingham in the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1 at 33.[267]The three ingredients are succinctly summarised by Bingham LJ in The Vistafjord [1988] 2 Lloyd’s Law Rep 343 at 352, namely that it applies where:
“(1.) parties have established by their construction of their agreement or their apprehension of its legal effect a conventional basis, (2) on that basis they have regulated their subsequent dealings, to which I would add (3) it would be unjust or unconscionable if one of the parties resiled from that convention. ”
[268]As Bingham LJ points out at 351, and as he further makes clear in the Captain Gregos (No 2) [1992] Lloyd’s Law Rep 395 at 405, each party must be “fully cognizant” of the shared assumption and “an estoppel by convention requires communications to pass across the line between the parties”. It is clear from both Texas Bank and The Vistafjord that the shared assumption can be a shared assumption of law, but some care must be taken by the courts in this regard, as is made clear in Spencer BowerEstoppel By Representation (4th Ed) at p191, by reference to Keen v Holland [1984] 1 WLR 251 at 261, and other cases, namely that “the courts do not regard it as unfair for one party (once enlightened) to assert the correct law against the other … [where] … the courts do not regard that party as having rendered himself answerable to the other for the correctness of the shared view of the law [such that] the assumption of responsibility necessary for a convention is not made out”.[269]Finally there is still the principle that estoppel can be used as a ‘shield not a sword’. Mance LJ addressed the limits of this principle in Baird Textiles v Marks and Spencer [2001] 1 All ER (Comm) 737 at 763:
“88. How far an estoppel may assist in bringing about a cause of action, without standing alone as ‘a cause of action in itself’ has remained a matter of dispute over subsequent years. It may enlarge the effect of an agreement, by binding parties to an interpretation which would not otherwise be correct: see e.g. De Tchihatchef v Salerni Coupling Ltd [1932] 1 Ch 330 ... The Karen Oltmann [1976] 2 Lloyd’s Reports 708.”
[270]Ms Mulcahy, who has valiantly shouldered the burden on behalf of her leader Mr Stuart-Smith QC of arguing the issue of estoppel on behalf of Zurich, relies on this concept, so as to “enlarge” the effect of Clause 10(A) of the APA.[271]Zurich now alleges, having streamlined its case, two common assumptions between Zurich and MMI, the first of which also founds the Local Authorities’ case: i) that the MMI EL policies would respond on a causation basis, by reference to the period of negligent exposure. ii) that in the 1992/1993 transaction between Zurich and MMI, Zurich was not taking “the tail”, which included liabilities in respect of long-tail diseases.[272]MMI asserts that there is no common assumption, other perhaps than that: i) as was plainly the fundamental basis of the 1992/1993 transaction, pre-1993 policy liabilities would be left behind with MMI (see paragraph 252 above). ii) such policies would be construed in accordance with their terms.[273]I deal first with the case for the Local Authorities. It is not easy for them to latch on to anything that arises out of the 1992/1993 arrangements. In particular the MTL, upon which they place reliance, was not sent to all local authorities; so far as concerns the Defendants in this action, only the three Defendants, the Third, Tenth and Eleventh, received it and acted in accordance with it to execute a mid-term transfer. But really their case lies outside that letter, although I shall return to it. Their case for a common assumption, as set out in paragraph 271(i) above, rests upon the assertion that this was what everyone believed. I leave aside, as I have earlier in my judgment, the fact that the pleaded case relies only upon the claims handling from 1992 to 2003 (see paragraph 180 above), which would not begin to avail the Local Authorities by way of an estoppel against MMI, which issued no further policies after 1992. But on the assumed basis that the common assumption asserted is the same as the universal belief, which I have discussed in paragraphs 183 to 197 above, it cannot possibly succeed, any more than it could succeed as a universal usage. Only one or two witnesses from amongst the Local Authority Defendants have spoken of their own belief or approach, but there was the forceful evidence of Mr Payne from MMI, referred to in paragraph 198(ii) above. It is in this area that the lack of a coherence in the basis for the alleged assumption, which I have referred to in paragraph 198 above, is of importance. In order for there to be a common assumption, there would have to be a basis for it, and it is quite apparent, from what I have there said, that some understood that payment out was made as at inhalation because of a causation basis, while others thought it was because injury was suffered as at inhalation, and others had yet further views (or none). In order to create an estoppel, an assumption, just like a statement (see Low v Bouverie [1891] 3 Ch 82 at 113 per Kay LJ) must be “clear and unambiguous”.[274]I turn to the MTL, which could be relied upon directly by the Third, Tenth and Eleventh Defendants, and as some kind of evidence of common assumption generally by the other Local Authority Defendants. Mr West QC’s submission is different from that of Ms Mulcahy. Ms Mulcahy submits, as will be seen, that the MTL can be relied upon as setting out, and to a degree confirming, what has always been, and continues to be, the basis for EL policies. Mr West relies upon the passage that I have set out in paragraph 258 above, commencing “Details of amendments to cover are set out below” to support his contention that what is set out in the MTL is an amendment to the MMI policies. This amendment is contained in the following two sentences, as to what Zurich will assume responsibility for and what will remain the responsibility of MMI.[275]Both these sentences hang upon the word “incidents”. Mr White, the author of the letter, did in fact explain to us what he meant by that word. He says that it meant, and referred to, the triggering event under a relevant policy, which he accepted would not be restricted to EL policies, because the policies the subject matter of the MTL included not only EL but PL, product liability and directors’ negligence policies. Mr White said he had in mind the MMI Guide and the MMI Munilink reporting system, to which I have made reference in paragraph 200(i) above. Mr West QC fairly accepted that he could not say that that factor should feature at all in construction or interpretation of the letter, either on an objective basis or indeed from the point of view of any of the Local Authority Defendants, whose knowledge of Munilink he was not in any position to prove.[276]Particularly given the fact that so many different kinds of policies are being referred to, I am entirely satisfied that no meaning can be drawn from these two sentences other than what MMI asserts, namely that, whatever the events are that will trigger liability, given that the balance of the policy period is being transferred from MMI to Zurich, MMI will be responsible for triggering events prior to the transfer date and Zurich for those afterwards. Not only does this not assist in the slightest as to any interpretation of what those incidents are, but in my judgment Mr Palmer QC is right to say that, in any event, these sentences could only apply to the year’s policy which is being apportioned, as explained by the letter. What it cannot possibly do in my judgment is what Mr West would seek to have it do, namely to amount to some fresh interpretation by amendment of all EL policies which had previously been issued by MMI.[277]In any event, we had the benefit of the evidence from both sides of the negotiations, who alone had the authority or the occasion to amend such policies if minded to do so, and Mr Wright and Mr White, and indeed Mr Murray, so far as relevant, were unanimous in saying that nothing that they did or intended or were authorised to do involved any change in the terms of the MMI policies. At best Mr Wright was acquiescent in, and Mr White was introducing, certain minor changes for the future in the Zurich Municipal policy, which was now being offered to the local authorities previously insured with MMI, who were to change over mid-term, “the main alteration [being] of course, the change of insurer”.[278]Even if there were any kind of argument by way of common assumption, which the Local Authorities could put forward on the above or any basis, there has not even been a suggestion as to what the detriment is or might be, and none is pleaded, which could be relied upon to show that it would be unconscionable to allow MMI to resile from the alleged common assumption, within the required test for estoppel by convention – and it is noteworthy that in Action 5 the Akzo/Amec Claimants were compelled to abandon their case of estoppel because they were unable to prove any such detriment in their case, notwithstanding substantial effort, including the instruction of experts. This is without even considering the difficulties for the Local Authorities as to whether they could assert that they were using any estoppel they could establish was either as a shield or as a sword, but falling within the Baird exception. The Local Authorities’ estoppel case is unsustainable.[279]I turn to Zurich’s case. Once again, I am satisfied that they cannot rely upon any common assumption drawn from the general usage within the industry. Nor is there any even arguable shared assumption between Mr Wright and Mr White, such as is alleged in paragraph 271(i) above. Mr Wright gave firm and persuasive evidence, which Mr White did not seek to challenge, that they never discussed long-tail liabilities, disease claims, asbestos or mesothelioma claims, market practice, whether relating to EL policies or otherwise, or policy wordings. So far as the due diligence is concerned, the Zurich team will of course have seen that MMI will have recorded how they paid out claims, and made reserves, all on the basis, common throughout the industry, as discussed above, that disease claims would be paid out on the basis of exposure. But there is no evidence as to whether any of them looked at or considered the MMI policies, or compared them with Zurich policies, and in any event Mr White confirmed that he never reviewed policies, or discussed policies with anyone, nor is there any suggestion that he at any time turned his mind to the issue of the sustained wording: and neither Mr Wright nor Mr White had any detailed knowledge of MMI’s reserves, and certainly did not discuss them with each other.[280]So far as the common assumption referred to in paragraph 271(ii) above, Mr Wright and Mr White, it seems, on one, or possibly two, occasions discussed the tail, but, as set out above, not in any way by reference to mesothelioma claims. MMI had a heavy burden of old liabilities in EL and PL and other areas, the most worrying of which appears to have been, as discussed between them, the issue of possible sexual abuse claims. It was agreed that they would, as it was put, ring-fence, and leave behind with MMI, all old liabilities. And that is what they did. I am entirely satisfied that Mr Wright is right when he says that what MMI retained was all liabilities under the pre-1992 policies, whatever they should turn out to be. Mr White accepted in evidence that the obligations under those policies would depend upon their wordings, and that neither he nor Mr Wright suggested or contemplated that such liabilities would be determined otherwise than in accordance with their proper legal interpretation. There was no common assumption at all between Mr Wright and Mr White as to what the nature of those liabilities would be, and certainly none which began to address whether their EL liabilities were or were not on a causation basis.[281]In any event, it is not suggested that what has occurred has resulted in MMI not meeting any liabilities on its own policies (subject of course to my decision in this case). What would have happened (had my judgment been otherwise) would have been that, because Zurich chose to carry on MMI’ssustained wording until they changed it in 1998, Zurich became liable to some of those policyholders, but not under or in respect of MMI’s policies.[282]The question then arises as to whether the picture is in any way affected by the terms of the MTL. Mr Murray’s memo of 6 January, referred to in paragraph 257 above, might here be of some relevance, given that he was writing and circulating that memo to MMI staff, but with the knowledge of Zurich. However, the only passage which might be material is that which states:
“The Zurich policy will respond only to claims occurring (i.e. with an accident date) not earlier than the date of transfer”
. It is unclear to me how this changes the picture. The reality is that the MTL was simply mechanistic. It was only a part of the picture – the business of many other local authorities previously insured with MMI was picked up in other ways (see paragraph 16 above). The MTL did not change, and is not, at any rate by Ms Mulcahy, suggested to have changed, the terms of the policy. The letter was in my judgment simply setting out the position as to liability for pre-transfer date and post-transfer date liabilities under the policies, and gave no description of what those liabilities were, or what the incidents were, which might or might not trigger a claim under the policy. I do not accept that Munilink was in mind.[283]It is no doubt the case that MMI and Zurich, like other insurers, assumed that all EL policies responded on an exposure basis, for one reason or another, and that was no doubt the reason why Zurich was content to offer policyholders the same or materially the same terms as MMI had done. But the mistake (if it had been a mistake) was the same mistake as all insurers would have been under prior to Bolton, and the consequence of that mistake, if mistake it had been, was not the entering into of the APA, but the grant of (materially) the same terms to the old policyholders, which Zurich had no obligation to do, but chose to do, and which MMI had no obligation to advise them not to do.[284]I am satisfied that, even if there were some common assumption, there is no estoppel, because it would not have been unconscionable for MMI to resile from the mistake, if mistake it had been, in the light of Bolton (of course Mr Palmer has suggested that Zurich themselves could have changed the polices earlier than they did, even before Bolton, in the light of and at the time of, Mr Leary’s and Mr Woof’s concerns discussed in paragraph 194 above). The APA was extremely profitable for Zurich, and has remained so, even though they might have had to have paid out on sustained policies during the period 1993 to 1998. Zurich suggests that they might have gone ahead with the APA on different terms, but, as I have said in paragraph 260 above, it is entirely clear that no other terms were available; it was ‘take it or leave it’, and fortunately for Zurich they took it.[285]So far as concerns Zurich’s entry into the new sustained policies with those local authorities who took up the offer of a mid-term transfer, it seems to me, by reference to the passage in Spencer Bower to which I have referred in paragraph 206 above, that it can be said, by adapting the words of Mr Simon Berry QC, sitting as a Deputy Judge of the Chancery Division in Wilson v Truelove [2003] EWHC 750 Ch, that, if there was a misunderstanding as to the effect of that wording, [MMI and Zurich] did not ... proceed jointly on the basis of that misunderstanding: things were done or not done individually [by Zurich]on the basis of their own misunderstanding and not on the basis of any encouragement, still less representations on the part of [MMI].[286]As for the issue of sword not shield, Ms Mulcahy accepted that, although an estoppel, if it existed, might assist in a limited respect, namely by way of a defence to MMI’s claim for a declaration, it would not assist Zurich in the real issue, which would be defending their liability to the Local Authorities or obtaining an indemnity over against MMI. For this they would need a sword of the Baird variety (unless, as speculated in Riverside Housing Association v White [2006] HLR 282 the House of Lords might at some stage reconsider the law). The only way such estoppel (which in any event I have found not to exist) might have assisted Zurich would be by combining it with its case on Clause 10(A) of the APA, to which I now turn.[287]Zurich accepts that it has no claim under Clause 10(A) unless it is enlarged by the estoppel. Clause 10 LIABILITIES reads as follows:
“10(A) The Seller shall be solely responsible for all debts and liabilities of the Business of any nature whatsoever incurred before Completion (including for the avoidance of doubt and without limiting the generality of the foregoing liabilities and obligations under the Assumed Contracts other than those to be discharged or performed by the Purchaser under clause 11) and the Seller shall indemnify the Purchaser and keep the Purchaser fully and effectively indemnified from and against all losses damages liabilities costs (including legal costs) claims expenses actions and demands arising in respect thereof. 10(B) The Purchaser shall be solely responsible for all debts and liabilities of the Business of any nature whatsoever incurred after Completion (including for the avoidance of doubt and without limiting the generality of the foregoing liabilities and obligations under the Assumed Contracts to be discharged or performed by the Purchaser under clause 11) but excluding the Insurance Contracts …and the Purchaser shall indemnify the Seller and keep the Seller fully and effectively indemnified from and against all losses damages liabilities costs (including legal costs) claims expenses actions and demands arising in respect thereof.”
[288]I address the clause first without the estoppel arguments. It states that MMI will be solely responsible for all debts and liabilities of the business incurred prior to 9 March 1993, with Zurich responsible for all debts and liabilities of the business after 1993. Mr Palmer QC submits that this clause has nothing whatsoever to do with insurance policies in any event. Ms Mulcahy submits that the Business that is being sold is defined in the Interpretation section (Clause 1(A)) as “the Sellers’ business of effecting and carrying out contracts of insurance ...” She points out that Insurance Contracts, which are defined in the Interpretation clause as those that have been entered into by the Seller, are expressly excluded by Clause 10(B) and so must be included in Clause 10(A), and the fact that Assumed Contracts in Clause 10(A) exclude the Insurance Contracts is not a problem, because of the words “without limiting the generality of the foregoing”, which leaves open the possibility that other contracts, such as Insurance Contracts, in addition to the Assumed Contracts are included in the definition of the debts and liabilities of the Business.[289]I am entirely satisfied that Mr Palmer is right that Clause 10 has no relevance to the insurance contracts entered into by MMI prior to 30 September 1992, when it ceased to take on any further insurance. There was never any question of existing insurance contracts forming part of the business sold. Indeed, by Clause 22(A), MMI was going to provide to Zurich (but to be held to their order) insurance records for certain (managerial) purposes, and by Clause 20(C) Zurich was going to pay over to MMI any premia that they might receive. The existing insurance business of MMI, being its policies already in place, was never part of what was to be transferred. What was transferred was the totality of the assets of the MMI business, other than existing insurance policies, with, in particular, the goodwill of that continuing business, so that Zurich would be in a position to place fresh insurance with those policyholders, as discussed above.[290]However if, contrary to my conclusion, debts and liabilities of MMI in respect of the old insurance contracts were the subject matter of Clause 10(A) then, as Ms Mulcahy accepts, unlessenlarged by the estoppel, there is no breach. The position is quite clear, namely that MMI indeed was and remains responsible for all liabilities in respect of the insurance contracts, and has not sought to evade them (save by their unsuccessful contentions in these proceedings). What Zurich submits is that the estoppel would enlarge the meaning of the word incurred in Clause 10(A).[291]If indeed there was a common assumption as to the nature of the EL policy wordings with regard to disease claims, and mesothelioma in particular, and such assumption informed the arrangements between Zurich and MMI, then Zurich submits that liabilities should be more broadly interpreted. The Seller, MMI, was agreeing to be responsible for what, on the asserted common assumption, would be items that were not strictly liabilities under the policies, but would be what, in insurance accounting jargon, are called IBNR, namely Incurred But Not Reported, which means incurred by the employer (not of course by the insurance company), but not yet reported by the employer to the insurance company (because not yet known by the employer), but for which a prudent insurer would have reserved. In their due diligence, the Zurich Team certainly noted IBNR reserves. The significance of course would be that these IBNR reserves were made on the basis that the EL policies were on an exposure basis, which is of course what MMI believed.[292]But such estoppel would create a warranty, not only that MMI would meet such liabilities as they should subsequently be found to have in respect of insurance contracts, but also that they had reserved on a causation basis, that those reserves would be used to meet such liabilities, and that they would pay out on policies on an exposure basis. This is plainly not what Clause 10(A) was doing in this caveat emptor arrangement. If Bolton,and/or this judgment, had changed the law, or corrected any mistaken assumption as to EL sustained policies, MMI did not bear or accept the risk of that. Even if I had not found that there was no estoppel, I would not have found that any estoppel enlarged the meaning of Clause 10(A) in this way, so as to found a case for an indemnity over by Zurich against MMI if Zurich had been found liable, after construction by the Court of the policies, to the Local Authorities.

XXIII. The Specific Cases

[293]I turn finally to the separate claims by the Fifth Defendant (the London Borough of Newham) and the Eighth Defendant (the Middlesborough Council, formerly the Cleveland County Council).[294]Cleveland. It seems that in 1983 unacceptable levels of asbestos, not previously known, were discovered in the roof at one of the schools in Stockton. A teacher at that school wrote to the Council in September 1983, concerned that she might have been at risk as a result. The County Treasurer passed on the relevant correspondence to MMI, and Mr Penman of MMI, who gave evidence before me and, while not specifically recollecting the incident, confirmed that the relevant letter was his, and would have been written with the authority of MMI, wrote on 6 October 1983 in material terms as follows:
“... at present, there is no danger to employees or pupils of the County Council from the presence of asbestos in this particular school. We feel however that it would be prudent of the County Council to maintain regular checks of any building where brown asbestos has been used in the ceilings ... As regards the cover under your employers’ liability Policy, we confirm that the Policy will operate should a claim be made against the Council, providing of course that the Council has been negligent in allowing the build up of asbestos.”
[295]This letter was then passed back by the County Treasurer to the County Education Officer and no doubt for onward distribution. I am entirely satisfied that this letter is quite clear, and amounts to a warranty that the EL policy, with sustained wording, “will operate” should a claim be made by a teacher or other employee at the relevant school as a result of inhalation of asbestos by that person at a time prior to October 1983. This must and can only be a warranty that that policy will operate, i.e. that it will answer on a causation/ exposure basis. If such policy were to be interpreted by reference to sustained, in accordance with the case which MMI have put forward before me, then the policy would not operate. It would not respond if such an employee were later to develop a tumour: there would simply be an unanswerable question whether at such later date of tumour the policy then issued to Cleveland by an insurer would cover the claim. This is in my judgment not simply a question of estoppel, but of warranty, and the consideration would have been the continued insurance with MMI by Cleveland, now Middlesborough. If MMI declines to cover such a teacher, as they say they will, they will be in breach of that warranty.[296]Newham. A similar position arose in relation to Newham, although in this case there is no witness to speak to the relevant correspondence, which is not denied by MMI. By a letter of 5 January 1987, the Asbestos Unit Manager of the Borough wrote to the insurance department of the Borough, which letter was subsequently passed on by the Director of Finance to the Metropolitan branch of MMI. The Manager’s letter appears to have been written in the context of negotiation of that year’s policy, because it refers to a conversation “concerning insurance premiums for persons working within the asbestos removal industry”. The letter continues:
“I realise that the Employee Liability Insurance policy held within the Borough probably covers all personnel on a blanket basis, however I am concerned to ensure that the operatives working within Newham Building Services Asbestos Unit are fully protected for any future claims they may wish to make against Newham Local Authority, arising from their employment on the Asbestos Unit. For the record, the Asbestos Unit has been in operation removing all types of asbestos effective from 3 June 1985 and the operatives listed below have been working within the unit on a needs basis since the above date.”
[297]MMI’s response, dated 26 February 1987, was as follows:
“We note the comments made in this letter and would confirm that the London Borough of Newham’s policy covers the operatives working within the Newham Building Services Asbestos Unit, provided they are direct employees of Newham Council.”
[298]In my judgment, exactly the same applies in relation to the statement in this letter, which similarly amounts to a warranty in consideration for which there was continued cover by MMI, indeed it may even be that there was on that basis renewal of that year’s policy. The warranty that is given relates to the fact that all operatives within that Asbestos Unit since 3 June 1985 and until 3 April 1993, which is, I am informed, the end date of the Third Defendant’s insurance with MMI, were covered on an exposure basis. If any such employee were to make a claim on MMI, then if MMI were to answer that the cover given at the time was on an injury in fact basis, it would mean that the employees were not in fact covered in respect of their injuries under that policy, contrary to the warranty.[299]As MMI have denied that they would be liable to claims by either the employees of the Stockton school in respect of exposure prior to 1983, or the employees of the Newham Asbestos Unit in respect of exposure between 1985 and 1993, I conclude that it is appropriate to grant a declaration that, if such claims were made against the respective Council employer, and the Council employer were found liable in respect of such claims, then respectively Middlesborough and Newham would be entitled to recover under their MMI policies. I shall again ask Counsel to formulate the appropriate relief.

XXV. Coda

[300]I would like to thank again the Lead Solicitors, and in particular Mr Leon Taylor, for their excellent efficiency, and all the solicitors in the case for their immaculate preparation, all Counsel for their hard work and advocacy, the shorthand writers and finally my Clerk for her marathon typing exercise, in relation to what has been a lengthy, but without their help would have been a much lengthier, resolution of these important proceedings. I should also record with some sadness that when I rose at 5pm at the end of this hearing on the last day of the summer term, it was the last time that the traditional civil robes will be worn in court by a High Court judge.

Cited in 2 later judgments