Latent liability 'likely'

New Zealand insurers could be liable for asbestos cases that pre-date the Accident Compensation Corporation’s (ACC) 1973 establishment, a UK academic told the NZILA conference in Auckland on September 10-11.

Buckingham University’s Prof Adolfo Paolini said NZ had “traded off the right to sue” after 1973, but asbestos’s long-term latency meant there could be cases where exposure was before ACC’s existence.

He cited a 2015 UK Supreme Court case, Zurich v International Energy Group (IEG), in which the majority found Zurich liable for 100% of the damages in a mesothelioma case, despite it being on risk for only 22.8% of the man’s total exposure. “Every exposure to the dust was an insured event leading to 100% liability,” Prof Paolini said.

Zurich had the right to seek contribution from other insurers and IEG itself for the 19 years it was self insured. Prof Paolini said the paying insurer bore the risk of other insurers and/or self insureds being insolvent.

Prof Paolini said: “The same outcome could occur in NZ if [the disease] was contracted before 1973. Is it fair? Not for the insurance market but, for the victim, it is better to pass the burden to someone financially healthy who can recover in a straightforward way.

“Should someone who is dying need to sue three or four [former employers and their insurers] to get indemnity? Think about the victim, and the bargaining power an insurance company could have in that situation.”

Zurich was also found liable for 100% of the defence costs, with no recovery rights.

Prof Paolini said whether the reinsured could recover 100% from its reinsurers would depend on the policy wording.

IEG is Guernsey-based and supplies gas to the Channel Islands. It was previously Guernsey Gas Light Co Ltd, which employed the claimant, Alan Carré, from 13 November 1961 to 31 December 1988, during which time he was exposed to asbestos dust. He contracted mesothelioma and died in 2008. The claim was settled for £250,000 plus £15,300 towards Mr Carre’s costs.

Two insurers were identified, Excess Insurance Co Ltd, which provided employers’ liability insurance for two years from 31 December 1978 to 30 December 1980, and, Midland Assurance Ltd, whose insurance liabilities Zurich took over, which provided cover for six years from 31 December 1982 to 31 December 1988.

Lord Mance, who led the majority judgement, said: “It is each and every, or any, negligent exposure to asbestos involving a contribution by the employer to the risk of the victim sustaining mesothelioma that constitutes causation for the purposes of a liability insurance like the present. Any such exposure can be relied on as causing the mesothelioma and making the employer fully liable for the victim’s loss, and any such exposure occurring during any policy period will, on a like basis, mean the insurer incurs full liability.”

He said: “Zurich is entitled to look to IEG to make a contribution based on the proportionate part of the overall risk in respect of which it did not place insurance with Midland and [for] which Zurich does not recover contribution from any other insurer.”

Lord Sumption, who led the minority judgement, said: “I cannot agree with the reasons given by the majority, which seem to me to be contrary to a number of basic principles of the law of contract and to be productive of uncertainty and injustice.

“Insurers have deep pockets, but that in itself cannot justify imposing on them a liability [to] which they have not agreed.”

Lord Sumption said: “Eequity does not mend men’s bargains. It may intervene to avoid unconscionable bargains, or to give effect to the parties’ real intentions (for example, when proprietary rights are conferred for a limited purpose such as security), or to provide remedies where those available at law are defective. But these are principled exceptions which depend on the unconscionability of allowing the law to take its course. There is nothing unconscionable about the performance of a contract of insurance according to its terms.”