The Court of Appeal judgment in Bolton Metropolitan Borough Council v Municipal Mutual Insurance and Commercial Union Assurance Company Ltd, handed down last week, raised an issue of considerable importance for public liability insurers.
It is unlikely to affect employers' liability claims, which are usually written on a 'caused by' rather than an 'injury occurring' basis.
Dismissing Municipal Mutual Insurance's (MMI) appeal, the court held it liable to indemnify Bolton Metropolitan Borough Council (BMBC) for damages paid out by BMBC in a mesothelioma claim.
The appeal turned to the interpretation of public liability policy wordings to assess when a liability to indemnify arises in cases where the negligent exposure occurs at a significantly earlier date than the injury becomes apparent.
Mr Green was negligently exposed to asbestos by BMBC between 1960 and 1963. BMBC was not his employer, but Green was carrying out demolition work on BMBC's site.
In August or September 1990, he consulted his doctor as a result of breathing difficulties and chest pain. Mesothelioma was diagnosed in January 1991 and he died in November 1991. The agreed medical evidence was that the first cell division marking the start of the malignant growth probably occurred between 1979 and 1981.
BMBC settled the claim brought by Green's widow and sought to recover its outlay from MMI.
BMBC argued that MMI was the public liability insurer on risk at the time BMBC's liability to Green arose, which was in 1980 when Green's mesothelioma occurred. BMBC held public liability cover with MMI from 1979 to 1991.
MMI denied liability and argued that the insurer at the time of the exposure was liable.
As a result, BMBC joined Commercial Union (CU), which provided public liability cover to BMBC between 1960 and 1964.
The MMI policy wording provided an indemnity for accidental bodily injury or illness which "occurs during the currency of the policy".
The indemnity under the CU policy wording was for bodily injury to, or illness of, any person "occurring during the period of indemnity".
At first instance, MMI was held liable to indemnify BMBC, since the mesothelioma for which BMBC was liable to Green was an accidental bodily injury which occurred during the currency of MMI's cover.
MMI appealed. The Court of Appeal confirmed that an actionable injury does not occur on exposure or the occurrence of initial bodily changes at that time, but only at a much later date.
Whether that is when a malignant tumour is first created or when identifiable symptoms first occurred did not matter for the purposes of the judgment, as MMI's cover spanned both dates. Therefore, MMI was liable to indemnify BMBC.
CU's policy did not cover the claim because it applied during the period of exposure and not when the malignancies occurred.
This case tested the interpretation of the operative clause under public liability policies in respect to disease claims. It may result in public liability claims being passed to the insurer on risk when the malignancy occurred.
It is important to bear in mind that the decision relates to public liability policy wordings. Other policies may be written on a different basis. Insurers would be advised to check their policy wordings, and insurers and brokers should understand the precise basis on which they intend to give cover. IT
' Rachel Barbenel is an associate in the Injury Risk Group at national commercial law firm, Beachcroft Wansbroughs
