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The court
considered employers' liability for asbestosis claims and the definition
of asbestosis and other asbestos-related diseases; it analysed parties'
shared intentions when entering into policies and determined rights
of subrogation under the Third Parties (Rights Against Insurers) Act
1930.
The Court
had to determine the liability of defendant insurers for asbestos related
claims under employer's liability policies. Turner & Newall and
other group companies had gone into administration in 2001, also filing
for protection under Chapter 11 in the US, as a result of the large
number of asbestos related claims pending against them. Leave to pursue
claims under the Third Parties (Rights Against Insurers) Act 1930 was
granted because any claimant who was able to establish a claim against
Turner & Newall would be entitled to recover directly from the relevant
insurer.
The first
defendant, RSA, was Turner & Newall's employers' liability insurer
from 1969 to 1977 (prior to 1969, the company did not have any insurance
cover for employees in respect of asbestos claims). The second defendant
was the underwriter of the Lloyd's syndicate that provided cover from
1977 to 1995. The RSA policy taken out in 1969 did not include liability
in respect of pneumoconiosis. It was a condition of the later syndicate
policies that the assured undertook to pay the full cost and expense
of handling and disposing of asbestosis or mesothelioma claims.
Medical
evidence was accepted that pneumoconiosis caused by asbestos dust falls
within the diseases of pneumoconiosis and asbestosis but not within
the definition of mesothelioma. It was held that the wording of the
exclusion in the RSA policy did not apply to asbestos related disease
other than pneumoconiosis and asbestosis. The words were clear and unambiguous
and it would take exceptional circumstances for them not to be given
effect in accordance with those terms; they could not be extended to
include mesothelioma.
The contemporary
evidence and the commercial realities were such that Turner & Newall
and RSA had come to an arrangement of contractual force that RSA would
provide full employers' liability cover, as required by the Employers'
Liability (Compulsory Insurance) Act 1969, and that Turner & Newall
would continue to deal with asbestos-related claims and bear the first
£1,000 of any claim. The asbestos condition in the later syndicate
policies, that Turner & Newall would pay the full cost of handling
and disposing of asbestosis and mesothelioma claims, was not an exclusion.
This meant the syndicate remained liable if Turner & Newall became
unable to comply with the condition because of insolvency. It also related
only to asbestosis/pneumoconiosis and mesothelioma and not other asbestos-related
diseases. The court analysed and relied upon the parties' shared assumptions.
The Court
also had to determine whether the syndicate (which provided cover from
1977 to 1995) was entitled under the Third Party (Right against Insurers)
Act, or by virtue of subrogation, to sums payable to Turner & Newall
by the Part 20 defendant, Curzon. Curzon was a captive insurer established
by Turner & Newall, in order to reimburse the company in respect
of its liability to the syndicate. It was held that the Curzon/Turner
& Newall insurances were not insurances against liabilities to third
parties within the meaning of the 1930 Act and so no rights under the
insurances were transferred or vested in the syndicate under the Act.
The Act did not apply to the underwriting of liabilities voluntarily
incurred such as the payment of contract debts, where the only fault
of the insured would be the non-payment of the debt. There was no right
of subrogation in the circumstances because Turner & Newall was
insured in respect of its obligations to the syndicate and not in respect
of its liability to the employee.
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