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"Accidental"
means "unintended" but "bodily injury or illness"
does not include the inhalation of potentially harmful asbestos fibres
but relates to when a cell becomes malignant during the onset of Mesothelioma.
The appropriate public liability policy to respond to asbestos-related
disease is the one in force when the disease first occurred; not the
policy at the time of exposure to asbestos.
Between 1960 and 1965 Bolton MBC had in place public liability insurance,
the liabilities under which were later assumed by Commercial Union Assurance
Co Ltd ("CU"). Between 1979 and 1991 Bolton MBC's public liability
insurance was provided by Municipal Mutual Insurance Limited ("MMI").
Demolition and building work was carried out on behalf of Bolton MBC
by sub-contractors, one such firm employing Mr Green. Due to the negligence
of Bolton MBC Mr Green was exposed to asbestos fibres during the period
of cover provided by CU. In November 1991 Mr Green died of Mesothelioma,
as a result of inhaling asbestos fibres. His widow sued Bolton MBC.
The claim was settled and Bolton MBC sought an indemnity from insurers.
The insuring clause of the relevant MMI policy provided for an indemnity
in respect of all sums which Bolton MBC became "legally liable
to pay as compensation arising out of accidental bodily injury or illness…
when such injury illness loss or damage occurs during the currency of
the policy…".
The CU policy provided an indemnity against "all sums which the
insured shall become legally liable to pay for compensation in respect
of bodily injury or illness to any person… as a result of an accident…".
At first instance, MMI submitted arguments in relation to timing and
the meaning of "injury". MMI submitted that the policy provided
an indemnity where the negligent act or omission and the injury were
simultaneous and where the negligent failure continued for a period
of time up to an accident which resulted in an immediate injury. However,
MMI submitted that the policy did not cover a situation where the damage
occurred long after any careless act or omission.
MMI argued that the stage between inhalation and the development of
Mesothelioma "is not an accident, but the inevitable (or at least
unalterable) workings of the human body in the presence of asbestos
fibres. The only time that an accident has occurred has been at the
stage when the fibres were allowed to enter the body".
Each party called experienced and distinguished expert witnesses on
the effects of asbestos fibres. There was no disagreement between the
experts conclusions that although the body's defence mechanisms are
brought into play immediately asbestos fibres are inhaled, the development
of Mesothelioma cannot be said to have commenced until genetic changes
allow malignant cells to become established - usually after a period
of about 10 years.
HHJ Kershaw QC, in the Manchester District Registry, held that the word
"accidental" in the MMI policy meant "unintended"
and not simply something which happened without blame of any kind. Further
"bodily injury or illness" did not include the inhalation
of fibres which were potentially harmful. The injury or illness
had to occur during the currency of the policy. It was still accidental
because once fibres had been inhaled injury was a direct consequence.
Mr Green became fatally ill in or about 1980 and MMI was liable to indemnify
the Local Authority accordingly.
The Court of Appeal upheld this decision and dismissed the appeal. The
court declined to make CU liable for policy reasons. The court also
held that MMI should pay all of Bolton MBC's costs and all of CU's costs,
on the basis that it was entitled to recover 20% of those costs from
Bolton.
The Court of Appeal also examined CU's additional defence and stated
that if an insurer, in this case CU, rejected a claim on the ground
of lack of cover, it did not thereby waive the possibility of pleading
a breach of condition (late notification) at a later stage, provided
that breach occurred prior to the rejection.
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