“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.”
“Whereas the Insured carrying on the business described in the Schedule and no other for the purposes of this insurance has applied to Midland Assurance Limited (hereinafter called the Company) for the insurance hereinafter contained and has paid or agreed to pay the premium as consideration for such insurance during the period stated in the Schedule or for any subsequent period for which the Company shall have accepted the premium required for renewal of this policy. If any person under a contract of service or apprenticeship with the Insured shall sustain any bodily injury or disease caused during any period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned, the Company will indemnify the Insured against all sums for which the Insured shall be liable in respect of any claim for damages for such injury or disease settled or defended with the consent of the Company. The Company will in addition pay claimants’ costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.”
“Before the introduction of wagering policies, it was, upon principles of convenience, very wisely established, that a man should not recover more than he had lost. Insurance was considered as an indemnity only, in case of a loss: and therefore the satisfaction ought not to exceed the loss. ... If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy that loss against which they have all insured. … Where a man makes a double insurance of the same thing, in such a manner that he can clearly recover, against several insurers in distinct policies, a double satisfaction, ‘the law certainly says that he ought not to recover doubly for the same loss, but be content with one single satisfaction for it’. … And if the whole should be recovered from one, he ought to stand in the place of the insured, to receive contribution from the other, who was equally liable to pay the whole.”
“121. … mesothelioma is an indivisible injury. What makes it an indivisible injury, and thus different from asbestosis or industrial deafness or any of the other dose-related cumulative diseases, is that it may be caused by a single fibre. This much, as I understand it, is known, although the mechanism whereby that fibre causes the transformation of a normal into a malignant cell is not known. 122. But it does not necessarily follow from the fact that the damage is a single indivisible injury that each of the persons who may have caused that injury should be liable to pay for all of its consequences. The common law rules that lead to liability in solidum for the whole damage have always been closely linked to the common law's approach to causation. There is no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations. Where joint tortfeasors act in concert, each is liable for the whole because each has caused the whole. The owner of one of the two dogs which had worried the sheep was liable for the whole damage because ‘each of the dogs did in law occasion the whole of the damage which was suffered by the sheep as a result of the action of the two dogs acting together’: Arneil v Paterson[1931] AC 560 , 563, per Viscount Hailsham. Where two people, acting independently, shoot simultaneously and kill another, each is still liable for the whole. This is because, according to Prosser & Keeton on Torts, 5th ed, p 345, there is no sensible basis for dividing up the single damage which they have combined to cause – ‘for death cannot be divided or apportioned except by an arbitrary rule’. 123. But as our perceptions of causation have expanded, so too has our conception of whether there may exist a sensible basis for apportionment. In Bonnington Castings Ltd v Wardlaw[1956] AC 613 , the issue was whether the employer was liable at all, given that some of the exposure to dust was in breach of duty and some was not; but it could be shown that the tortious exposure had materially contributed to the harm, even if it was not the only cause. In McGhee v National Coal Board[1973] 1 WLR 1 , where again some of the exposure was in breach of duty and some was not, but this time it could not be shown that the tortious exposure had even materially contributed to the harm, the issue again was whether the employer was liable at all; it was held that a material increase to the risk of harm was the equivalent of a material contribution to causing the harm. In neither case was it argued that the employer should only be liable to the extent that his behaviour had been in breach of duty. Yet in the case of diseases which progress over time, such exercises have now become commonplace, following the decision of Mustill J in Thompson v Smiths Shiprepairers (North Shields) Ltd[1984] QB 405 , whether as between successive employers or as between tortious and non-tortious exposure by the same employer. 124. There is, therefore, a logical connection between the law's approach to causation and the law's approach to the extent of liability. At each point along the road in developing the concept of causation, there is a choice to be made as to whether a single tortfeasor or a joint or concurrent tortfeasor should be liable for the whole or only for part of the damage. This is a policy question. One element in making that choice is whether there exists a sensible basis for apportioning liability. Another element is whether this would strike the right balance of fairness between claimant and defendant. 125. In one sense, there always exists a sensible basis for apportioning liability where more than one person is involved. Liability could be divided equally between them. But that would be arbitrary unless each was equally responsible. Even if liability were equally divided, this could be unfair to the claimant if, as in the dog-worrying and shooting examples, each defendant has in fact caused the whole of his damage. In the Bonnington Castings and McGhee situations, where one employer is responsible for all the potentially harmful exposure, there may exist a sensible basis for apportioning liability, but it may still be unfair to the claimant to do this, if the one employer has undoubtedly caused all his harm. 126. But in the Fairchild situation we have yet another development. For the first time in our legal history, persons are made liable for damage even though they may not have caused it at all, simply because they have materially contributed to the risk of causing that damage. Mr Stuart-Smith does not quarrel with the principle in Fairchild. He simply argues that it does not follow from the imposition of liability in such a case that each should be liable for the whole. I agree with the majority of your Lordships that indeed it does not follow. There is in this situation no magic in the indivisibility of the harm. It is not being said that each has caused or materially contributed to the harm. It can only be said that each has materially contributed to the risk of harm. The harm may be indivisible but the material contribution to the risk can be divided. There exists a sensible basis for doing so. Is it fair to do so? 127. In common with the majority of your Lordships, I think that it is fair to do so. On the one hand, the defendants are, by definition, in breach of their duties towards the claimants or the deceased. But then so are many employers, occupiers or other defendants who nevertheless escape liability altogether because it cannot be shown that their breach of duty caused the harm suffered by the claimant. For as long as we have rules of causation, some negligent (or otherwise duty-breaking) defendants will escape liability. The law of tort is not (generally) there to punish people for their behaviour. It is there to make them pay for the damage they have done. These Fairchild defendants may not have caused any harm at all. They are being made liable because it is thought fair that they should make at least some contribution to redressing the harm that may have flowed from their wrongdoing. It seems to me most fair that the contribution they should make is in proportion to the contribution they have made to the risk of that harm occurring. 128. This solution is all the more attractive as it also provides the solution to the problem posed by the Barker appeal. If the damage could have been suffered during a period of non-tortious exposure, it is suggested that the tortious exposers should escape liability altogether. There is considerable logic in this. One way of explaining Fairchild is that all were in breach of duty and one of them must be guilty, so that it made sense that all should be liable. That rationale does not apply, or certainly not with the same force, if there are other, non-tortious causers in the frame. But if the tortious exposers are only liable in proportion to their own contribution to the claimant’s overall exposure to the risk of harm, then the problem does not arise. The victim's own behaviour is only relevant if he fails to take reasonable care for his own safety during a period of tortious exposure by a defendant.”
“The judge came to the surprising conclusion that each reinsurance contract covered liability in respect of physical loss or damage whether or not it occurred during the period covered by the reinsurance contract and he went on expressly to contemplate that the same liability for the same physical loss or damage might be covered under a number of separate contracts of reinsurance covering different periods. This is a startling result and I am aware of no justification for it. When the relevant cover is placed on a time basis, the stated period of time is fundamental and must be given effect to. It is for that period of risk that the premium payable is assessed. This is so whether the cover is defined as in the present case by reference to when the physical loss or damage occurred, or by reference to when a liability was incurred or a claim made. Contracts of insurance (including reinsurance) are or can be sophisticated instruments containing a wide variety of provisions, but the definition of the period of cover is basic and clear.”
“Double insurance arises where the same party is insured with two (or more) insurers in respect of the same interest on the same subjectmatter against the same risks. If a loss by a peril insured against occurs, the general rule is that, subject to any particular modifying terms and to the limits of indemnity provided under each insurance contract, the insured may recover for the whole of the loss from either insurer. Upon such indemnity being paid to the insured by either one of the two insurers, that insurer is, in general, entitled to recover a contribution from the other. To quote from Lord Woolf in Eagle Star Insurance Co Ltd v Provincial Insurance plc[1994] 1 AC 130 , 138: ‘As was pointed out by Lloyd LJ at the beginning of his judgment in the Legal and General case [Legal and General Assurance Society Ltd v Drake Insurance Co Ltd][1992] QB 887 , 891], in general ‘the principles on which one insurer is entitled to recover from another in a case of double insurance have been settled since Lord Mansfield's day’. As Kitto J stated in Albion Insurance Co Ltd v Government Insurance Office of New South Wales(1969) 121 CLR 342 , 349-350, ‘a principle applicable at law no less than in equity, is that persons who are under co-ordinate liabilities to make good one loss (eg sureties liable to make good a failure to pay the one debt) must share the burden pro rata’: the object being, as Hamilton J stated in American Surety Co of New York v Wrightson(1910) 103 LT 663 , 667: ‘to put people who have commonly guaranteed or commonly insured in the same position as if the principal creditor or the assured had pursued his remedies rateably among them instead of doing as he is entitled to do, exhausting them to suit himself against one or other of them.’”
“as between several interested parties it should not rest with the creditor by his selection of remedies open to him to determine where ultimately the burden was to fall.”
“The recognition and application of exceptions requires a carefully considered approach to the policies involved. A blanket rule that legal entitlement to the enrichment bars restitution does not represent the present law and would be needlessly blunt and insufficiently nuanced.”
“(1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities to third parties which he may incur, then - (a) in the event of the insured becoming bankrupt or making a composition or arrangement with his creditors; or (b) in the case of the insured being a company, in the event of a winding-up order or an administration order being made, or a resolution for a voluntary winding-up being passed, with respect to the company, or of a receiver or manager of the company’s business or undertaking being duly appointed, or of possession being taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property comprised in or subject to the charge or of a voluntary arrangement proposed for the purposes ofPart I of the Insolvency Act 1986 being approved under that Part; if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred. (2) Where the estate of any person falls to be administered in accordance with an order undersection 421 of the Insolvency Act 1986 , then, if any debt provable in bankruptcy … is owing by the deceased in respect of a liability against which he was insured under a contract of insurance as being a liability to a third party, the deceased debtor’s rights against the insurer under the contract in respect of that liability shall, notwithstanding anything in any such order, be transferred to and vest in the person to whom the debt is owing. (3) In so far as any contract of insurance made after the commencement of this Act in respect of any liability of the insured to third parties purports, whether directly or indirectly, to avoid the contract or to alter the rights of the parties thereunder upon the happening to the insured of any of the events specified in paragraph (a) or paragraph (b) of subsection (1) of this section or upon the estate of any person falling to be administered in accordance with an order undersection 421 of the Insolvency Act 1986 , the contract shall be of no effect. (4) Upon a transfer under subsection (1) or subsection (2) of this section, the insurer shall, subject to the provisions of section 3 of this Act, be under the same liability to the third party as he would have been under to the insured, but - (a) if the liability of the insurer to the insured exceeds the liability of the insured to the third party, nothing in this Act shall affect the rights of the insured against the insurer in respect of the excess; and (b) if the liability of the insurer to the insured is less than the liability of the insured to the third party, nothing in this Act shall affect the rights of the third party against the insured in respect of the balance.”
“once the mesothelioma tumour is present and assured of growth (ie has passed the stage where a malignant mutation may die off), further asbestos exposure and indeed further asbestos fibres in the body can make no difference and are not causative.”
“The issue in these appeals does not concern the general validity and applicability of that requirement, which is not in question, but is whether in special circumstances such as those in these cases there should be any variation or relaxation of it.”
“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 likelihood 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 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. Were the law otherwise, an employer exposing his employee to asbestos dust could obtain complete immunity against mesothelioma (but not asbestosis) claims by employing only those who had previously been exposed to excessive quantities of asbestos dust. Such a result would reflect no credit on the law. It seems to me, as it did to Lord Wilberforce in McGhee[1973] 1 WLR 1 , 7 that: ‘the employers should be liable for an injury squarely within the risk which they created and that they, not the pursuer, should suffer the consequence of the impossibility, foreseeably inherent in the nature of his injury, of segregating the precise consequence of their default.’”
“41 The present appeals are another example of such circumstances, where good policy reasons exist for departing from the usual threshold ‘but for’ test of causal connection. Inhalation of asbestos dust carries a risk of mesothelioma. That is one of the very risks from which an employer's duty of care is intended to protect employees. Tragically, each claimant acquired this fatal disease from wrongful exposure to asbestos dust in the course of his employment. A former employee's inability to identify which particular period of wrongful exposure brought about the onset of his disease ought not, in all justice, to preclude recovery of compensation. 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. Given the present state of medical science, this outcome may cast responsibility on a defendant whose exposure of a claimant to the risk of contracting the disease had in fact no causative effect. But the unattractiveness of casting the net of responsibility as widely as this is far outweighed by the unattractiveness of the alternative outcome.”
“… 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.”
“whether under the Fairchild exception a defendant is liable, jointly and severally with any other defendants, for all the damage consequent upon the contraction of mesothelioma by the claimant or whether he is liable only for an aliquot share, apportioned according to the share of the risk created by his breach of duty.”
“Where injury has been done to the plaintiff and the injury is indivisible, any tortfeasor whose act has been a proximate cause of the injury must compensate for the whole of it. As between the plaintiff and the defendant it is immaterial that there are others whose acts also have been a cause of the injury and it does not matter whether those others have or have not a good defence. These factors would be relevant in a claim between tortfeasors for contribution, but the plaintiff is not concerned with that; he can obtain judgment for total compensation from anyone whose act has been a cause of his injury. If there are more than one of such persons, it is immaterial to the plaintiff whether they are joint tortfeasors or not. If four men, acting severally and not in concert, strike the plaintiff one after another and as a result of his injuries he suffers shock and is detained in hospital and loses a month's wages, each wrongdoer is liable to compensate for the whole loss of earnings. If there were four distinct physical injuries, each man would be liable only for the consequences peculiar to the injury he inflicted, but in the example I have given the loss of earnings is one injury caused in part by all four defendants. It is essential for this purpose that the loss should be one and indivisible; whether it is so or not is a matter of fact and not a matter of law.”
“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. Chances are infinitely divisible and different people can be separately responsible to a greater or lesser degree for the chances of an event happening, in the way that a person who buys a whole book of tickets in a raffle has a separate and larger chance of winning the prize than a person who has bought a single ticket.”
“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. The defendant was a wrongdoer, it is true, and should not be allowed to escape liability altogether, but he should not be liable for more than the damage which he caused and, since this is a case in which science can deal only in probabilities, the law should accept that position and attribute liability according to probabilities. The justification for the joint and several liability rule is that if you caused harm, there is no reason why your liability should be reduced because someone else also caused the same harm. But when liability is exceptionally imposed because you may have caused harm, the same considerations do not apply and fairness suggests that if more than one person may have been responsible, liability should be divided according to the probability that one or other caused the harm.”
“Although the Fairchild exception treats the risk of contracting mesothelioma as the damage, it applies only when the disease has actually been contracted. Mr Stuart-Smith, who appeared for Corus, was reluctant to characterise the claim as being for causing a risk of the disease because he did not want to suggest that someone could sue for being exposed to a risk which had not materialised. But in cases which fall within the Fairchild exception, that possibility is precluded by the terms of the exception. 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[2005] 2 AC 176 , 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 exposures to asbestos which created the risk, it is known that those exposures were together sufficient to cause the disease. The damages which would have been awarded against a defendant who had actually caused the disease must be apportioned to the defendants according to their contributions to the risk.”
“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 the 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[2005] 2 AC 176 . But if the victim does contract the disease the risk has materialised. If the degree of risk associated with each period of exposure, whether under successive employers or during selfemployment or while engaged in domestic tasks, were expressed in percentage terms, the sum of the percentages, once the disease had been contracted, would total 100%. But the extent of the risk for which each negligent employer was responsible and on the basis of which that employer was to be held liable would be independent of the extent of the risk attributable to the periods of exposure for which others were responsible. The relationship between the various negligent employers seems to me much more akin to the relationship between tortfeasors each of whom has, independently of the others, caused an identifiable part of the damage of which the victim complains. The joint and several liability of tortfeasors is based upon a finding that the breach of duty of each has been a cause of the indivisible damage for which redress is sought. No such finding can be made in a Fairchild type of case and the logic of imposing joint and several liability on Fairchild defendants is, in my opinion, absent. Moreover, Fairchild constitutes an exception, perhaps an anomalous one, to the causation principles of tortious liability. It should not, therefore, be found to be surprising if consequential adjustments to other principles of tortious liability become necessary.”
“The solution to the problem is in my opinion more radical, in line with the radical departure which this House has already made in Fairchild. That case was decided by the majority, as I have already noted, not on the fictional basis that the defendants should be treated as having caused the claimant's (or deceased's) damage, but on the factual basis that they had wrongfully exposed him to the risk of damage. The damage was indivisible, but the risk was divisible - a matter of statistics. In line with that new principle established or affirmed in Fairchild, and as a solution which does justice (so far as possible) both to the generality of claimants and to the generality of defendants, limited liability proportionate to risk is the better course for the law to take.”
“But it does not necessarily follow from the fact that the damage is a single indivisible injury that each of the persons who may have caused that injury should be liable to pay for all of its consequences. The common law rules that lead to liability in solidum for the whole damage have always been closely linked to the common law's approach to causation. There is no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations. … But in the Fairchild situation we have yet another development. For the first time in our legal history, persons are made liable for damage even though they may not have caused it at all, simply because they have materially contributed to the risk of causing that damage. Mr Stuart-Smith does not quarrel with the principle in Fairchild. He simply argues that it does not follow from the imposition of liability in such a case that each should be liable for the whole. I agree with the majority of your Lordships that indeed it does not follow. There is in this situation no magic in the indivisibility of the harm. It is not being said that each has caused or materially contributed to the harm. It can only be said that each has materially contributed to the risk of harm. The harm may be indivisible but the material contribution to the risk can be divided. There exists a sensible basis for doing so. Is it fair to do so? In common with the majority of your Lordships, I think that it is.”
“the meanings we assign to the concept of causation, first in the context of considering employers’ liability to their employees and then in considering the scope of employers’ insurance cover with respect to such liability.”
“73. In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient ‘weak’ or ‘broad’ causal link for the disease to be regarded as ‘caused’ within the insurance period. … The risk is no more than an element or condition necessary to establish liability for the mesothelioma. The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma. 74. For this purpose, the law accepts a weak or broad causal link. The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease. But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond. The concept of a disease being ‘caused’ during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker. Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.”
“… once it is accepted that exposure during any policy period met the causal requirement for the employer's liability to the victim, for which the employer was potentially entitled to indemnity from the insurer under the terms of the relevant policies, to withhold part of that indemnity from the employer on account of its conduct in other years would be to deprive the employer of insurance coverage for which it paid.”
“If an employer is liable to his employee for his employee's mesothelioma following upon a tortious exposure to asbestos created during an insurance period, then, for the purposes of the insuring clause in the employers’ liability policy, the disease is ‘caused’ within the insurance period. This is because it is sufficient that there is what Lord Mance calls (following Hart & Honoré’s use of the phrase) a ‘weak’ or ‘broad’ causal link, in this case between the exposure to the asbestos during the insurance period and the employee's eventual contraction of the mesothelioma. Once that causal requirement is fulfilled, then the employer will have proved that the mesothelioma (the disease) was ‘caused during any period of insurance’. It follows from the policy wording that the insurer is then liable to indemnify IEG for ‘all sums for which the Insured shall be liable in respect of any claim for damages for ... such disease’ (my emphasis). In other words, Zurich will be liable to indemnify IEG for the whole of the damages paid out by IEG in respect of Mr Carré’s claim for damages for contracting mesothelioma, not just a proportion worked out by reference to the period during which IEG was covered by policies for which Zurich is responsible.”
“The courts’ usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. … The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong. … it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred. ...”
“If any person under a contract of service or apprenticeship with the Insured shall sustain any bodily injury or disease caused during any period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned, the Company will indemnify the Insured against all sums for which the Insured shall be liable in respect of any claim for damages for such injury or disease settled or defended with the consent of the Company. The Company will in addition pay claimants’ costs and expenses and be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.”
“… it was incumbent upon the judge to recognise … and give effect to the essentially annual character of each reinsurance contract. Applying the wording of the original policy to each reinsurance contract it is necessary to ask whether or not the relevant physical loss or damage arose during the relevant period of cover. The judge came to the surprising conclusion that each reinsurance contract covered liability in respect of physical loss or damage whether or not it occurred during the period covered by the reinsurance contract and he went on expressly to contemplate that the same liability for the same physical loss or damage might be covered under a number of separate contracts of reinsurance covering different periods. This is a startling result and I am aware of no justification for it. When the relevant cover is placed on a time basis, the stated period of time is fundamental and must be given effect to. It is for that period of risk that the premium payable is assessed. This is so whether the cover is defined as in the present case by reference to when the physical loss or damage occurred, or by reference to when a liability was incurred or a claim made. Contracts of insurance (including reinsurance) are or can be sophisticated instruments containing a wide variety of provisions, but the definition of the period of cover is basic and clear. It provides a temporal limit to the cover and does not provide cover outside that period; the insurer is not then ‘on risk’. It will be appreciated that the judge's suggestion that there could or should be contribution between those signing the different slips for the different years is likewise radically mistaken.”
“40. Viewing the reinsurance through purely English law eyes, it cannot therefore be construed as a contract to indemnify Alcoa in respect of all contamination of Alcoa sites, whenever caused or occurring, provided that part of such contamination manifested itself or was in being during the reinsurance period. That would involve reinsurers in an unpredictable exposure, to which their own protections might not necessarily respond. It would mean that the same exposure would arise, even if they had granted the reinsurance for a shorter period than the three-year period matching the original - since the original itself would, even if in force for only one year, have had effectively the same exposure as that for which the Washington Supreme Court held it answerable. Under the approach taken by the Washington Supreme Court, reinsurers must have incurred liability (in practice probably up to the reinsurance limits), as soon as they wrote the reinsurance. The retention must likewise have been exhausted before the reinsurance period began, and cannot have fulfilled any object of introducing an element of discipline into insurers' handling of the insurance. These represent as fundamental and surprising changes in the ordinary understanding of reinsurance and of a reinsurance period as those to which Hobhouse LJ was referring in the Municipal Mutual case [1998] Lloyd's Rep IR 421. 41. The reference in the reinsurance slip to the retention as ‘subject to excess of loss &/or treaty R/I’ is a reminder that an insurance and reinsurance such as the present are likely to be part of a larger programme of protections. Excess of loss reinsurance is underwritten on either a losses occurring or risks attaching basis: Balfour v Beaumont[1984] 1 Lloyd's Rep 272 . In other words, it is fundamental that such a reinsurance will respond in the one case to losses occurring during the reinsurance period, in the other to losses occurring during the period of policies attaching during the reinsurance period. To treat excess of loss policies as covering losses through contamination occurring during any period, so long as some of the contamination occurred or existed during the reinsurance period, would be to change completely their nature and effect.”
“In an underlying asbestosis suit, the plaintiff must show that FortyEight's products injured him in order to be able to maintain a cause of action against Forty-Eight. Under Borel, Forty-Eight would be jointly and severally liable along with the other asbestos manufacturers: 493 F 2d at 1094-96. However, in allocating the cost of indemnification under the exposure theory, only contract law is involved. Each insurer is liable for its pro rata share. The insurer's liability is not ‘joint and several’, it is individual and proportionate. Accordingly, where an insurer can show that no exposure to asbestos manufactured by its insured took place during certain years, then that insurer cannot be liable for those years. The reason is simple: no bodily injury resulting from Forty-Eight's products, took place during the years in question. The same thing would be true if an insurer could show that a worker used an effective respirator during certain years. Again, no ‘bodily injury’ would have taken place.”
“The occurrence clauses undoubtedly contemplated indemnity for provable damages incurred by the policyholder because of injury that occurred during the policy period. The continuous-trigger theory coupled with joint-and-several liability is premised on a tenuous foundation: that at every point in the progression the provable damages due to injury in any one of the years from exposure to manifestation will be substantially the same (the collapsed accordion). As we have seen, our law has been developing in a different manner.”
“… the Keene rule of law reduces the incentive of the property owners to insure against future risks. Recall the circumstances in the final three years. … Assuming the availability of insurance, a principle of law that would act as a disincentive to the building owners in the hypothetical might serve in the long run to reduce the available assets to manage the risk. O-I's counsel counters that these are not correct assumptions about the way in which the ‘real world’ responds. We cannot be sure that the policy will be effective. We believe, however, that the policy goal is sound. Finally, principles of simple justice cannot be entirely discounted. To rebut effectively the question posed in Forty-Eight Insulations is difficult. ‘Were we to adopt [the policyholder's] position on defence costs a manufacturer which had insurance coverage for only one year out of 20 would be entitled to a complete defence of all asbestos actions the same as a manufacturer which had coverage for 20 years out of 20. Neither logic nor precedent support such a result.’”
“Because multiple policies of insurance are triggered under the continuous-trigger theory, it becomes necessary to determine the extent to which each triggered policy shall provide indemnity. ‘Other insurance’ clauses in standard CGL policies were not intended to resolve that question. A fair method of allocation appears to be one that is related to both the time on the risk and the degree of risk assumed. When periods of no insurance reflect a decision by an actor to assume or retain a risk, as opposed to periods when coverage for a risk is not available, to expect the risk-bearer to share in the allocation is reasonable. Estimating the degree of risk assumed is difficult but not impossible. Insurers whose policies are triggered by an injury during a policy period must respond to any claims presented to them and, if they deny full coverage, must initiate proceedings to determine the portion allocable for defence and indemnity costs.”
“Con Edison wants to combine this uncertainty-based approach, which implicates many successive policies, with an entitlement to choose a particular policy for indemnity. Yet collecting all the indemnity from a particular policy presupposes ability to pin an accident to a particular policy period (see Sybron Transition Corp, 258 F 3d at 601; Owens-Illinois, 138 NJ at 465, 650 A 2d at 988-989). Although more than one policy may be implicated by a gradual harm (see eg McGroarty v Great Am Ins Co, 36 NY 2d 358, 365), joint and several allocation is not consistent with the language of the policies providing indemnification for ‘all sums’ of liability that resulted from an accident or occurrence ‘during the policy period’ (see Olin Corp, 221 F 3d 307, 323). Pro rata allocation under these facts, while not explicitly mandated by the policies, is consistent with the language of the policies. Most fundamentally, the policies provide indemnification for liability incurred as a result of an accident or occurrence during the policy period, not outside that period (see Forty-Eight Insulations, 633 F 2d at 1224). Con Edison's singular focus on "all sums" would read this important qualification out of the policies. Proration of liability among the insurers acknowledges the fact that there is uncertainty as to what actually transpired during any particular policy period (see Sybron Transition Corp, 258 F 3d at 602).”
“The Company will in addition … be responsible for all costs and expenses incurred with the consent of the Company in defending any such claim for damages.”
“The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy which acknowledges the parties' autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation.”