Bolton Metropolitan Borough Council v (1) Municipal Mutual Insurance Limited (2) Commercial Union Company Limited
Expertise: Insurance & Reinsurance
Final Judgment was handed down this week by HHJ Kershaw Q.C. in the Manchester Mercantile Court, in what Insurance Week magazine called the ‘landmark asbestos case’ of last year.
The case concerned a fairly typical scenario in which a workman, Mr. Gordon Green, was exposed to asbestos dust caused by Bolton’s negligence in about 1963. Although working in Bolton’s premises, he was never Bolton’s employee. In January 1991 he was diagnosed as suffering from mesothelioma from which he died in November 1991. There was no dispute that the exposure to asbestos dust was as a result of negligence on Bolton’s part.
Mr Green’s widow commenced proceedings against Bolton, which it settled on consent terms by paying damages in 1999. Bolton then turned to its insurers.
At the time of the negligent exposure, Bolton was insured under a public liability policy with Ocean Accident and Guarantee Corporation Limited, a predecessor of the Second Defendant, Commercial Union. This policy was initially taken out in 1960 and had been renewed until 1965. From 1979 until 1991 Bolton had been insured under a public liability policy with the MMI.
Both policies had “injury occurring wording”. MMI insured liabilities incurred by Bolton ‘arising out of….accidental bodily injury or illness .. 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’. CU’s wording was that ‘[Ocean] will indemnify [Bolton] against all sums which [Bolton] shall become legally liable to pay for compensation in respect of .. bodily injury to or illness of any person … occurring within Great Britain … during the Period of Indemnity as a result of an accident.’
The view of the majority of the market, formed in the late 1990’s, was that these wordings are not sufficient to attach the risk of a mesothelioma claim to the policy extant at the time of the original exposure to asbestos, but that the policy which responds is that in existence at the time when the mesothelioma occurs.
MMI, however, had ceased underwriting in 1992, when it was more commonly thought that PL coverage related to the period of the negligent activity. Hence it sought formal clarification of the position, contending that the policy to respond was the one in place at the time of exposure.
Extensive evidence was given by three of world’s leading experts in the aetiology of asbestos induced diseases, in particular mesothelioma (Drs. Rudd, Moore Gillon and Page). This evidence demonstrated that, whilst certain of the body’s defence mechanisms are brought into play immediately asbestos fibres are inhaled, and whilst those defence mechanisms occasion microscopic changes within the body, there was nothing which occurred in the course of those processes which could be described by a medical man as an injury. The evidence also described in greater detail than in Fairchild the processes by which mesotheliomas develop as a result of asbestos inhalation. Although these processes begin as soon as asbestos fibres enter the pleura, the development of a mesothelioma cannot be said to have commenced until, many years later, genetic changes allow malignant mesothelial cells not only to develop in small numbers but to become established in malignancy. It was agreed by all the medical experts that it could not be predicted whether or when such malignancy would ever be established in a particular individual, but only that the chances of its happening were greatly increased (if not exclusively created) by the presence of asbestos fibres. It was also agreed between the experts that, once established, a mesothelioma normally took about 10 years to progress to the stage where it gave rise to noticeable symptoms and was diagnosable as such. CU therefore argued that the injury which gave rise to Mr. Green’s cause of action first occurred in about 1981, and certainly after MMI came on risk in 1979.
In the light of the medical evidence, MMI’s contentions concentrated on urging the court to interpret the word ‘injury’ in the policies in a purposive manner and not by reference to what medical men might call an injury nor by reference to the requirement for injury demanded by the law of limitation (to establish when a cause of action in tort arises). It was therefore contended that the ‘insult’ of inhalation of dangerous asbestos particles was an ‘injury’ for the purposes of the policy.
Additional support for this interpretation was to be found in CU’s wording, which required that the bodily injury or illness should ‘occur within Great Britain’ – could it really have been intended that the policy was triggered only if Mr Green happened to reside in the United Kingdom when his mesothelioma developed? MMI suggested that the intention must have been that the negligent act giving rise to the liability should occur in Great Britain, an interpretation which could only sensibly be achieved by interpreting the phrase ‘bodily injury’ as equivalent to the insult which coincided with the negligent act.
MMI’s arguments drew on the US jurisprudence which has been dealing with asbestos induced injury claims in far greater numbers and for a greater period of time than the British Courts. The US courts have developed a ‘multiple trigger’ interpretation of insurance policies, in which policies with similar wordings to the present ones are found to respond if they are in existence at the time of the exposure and also if in existence at the time of the development or manifestation of the mesothelioma.
The Judge rejected MMI’s arguments. He adopted a definition of injury which was consistent with the medical understanding of the term and with the large body of case law which had considered when ‘personal injury’ occurs for the purposes of limitation (see the House of Lords decision in Cartledge v Jopling  A.C. 758). He therefore found that Mr. Green did not suffer ‘injury’ until about 1980 and the ‘injury occurring’ policy that responded was MMI’s. The Judge also rejected the attempt to gain support from US decisions. He relied on dicta in the Court of Appeal in cases such as Yorkshire Water v SAL  2 Ll. Rep. 21,
‘the American Courts adopt a much more benign attitude towards the Insured; this seems to be based variously on the ‘folly’ argument … or ‘general principles of law and equity’… or that insurance contracts are ‘contracts of adhesion between parties who are not equally situated giving rise to the principle that doubts as to the existence or extent of coverage must generally be resolved in favour of the assured’. .. For the most part these notions which reflect a substantial element of public policy are not part of the principles of construction of contracts under English law. These are well-known’
There were a number of other issues of note which arose in the case. CU succeeded in relying on a breach of a condition precedent requiring notification of claims, in spite of a plea by Bolton that CU had waived reliance on this term. The judge also had to answer the hypothetical question whether, in the event of both the CU and MMI policy wordings being found to respond, contribution could be claimed by MMI from CU even though CU had an accrued late notification defence to the claim on the policy by Bolton (see Drake v Provident  1 LR (IR) 277).