Tag Archives: Long-Tail Claims

The Supreme Court handed down judgment in the employers’ liability policy trigger litigation on 28 March 2012. This overturns the Court of Appeal’s judgment of 08 October 2010 regarding the meaning of “disease sustained” policy wording in employers’ liability (EL) cases and reinstates the market practice that policy cover for mesothelioma claims is triggered by the date of exposure to asbestos and not by the deemed date of injury many years later.

This Adviser provides a recap on the developments leading up to this judgment and what effects the Supreme Court’s decision has on businesses.

Background

Bolton v Municipal Mutual Insurance (MMI) set the scene in 2006. This was a public liability (PL) case in which it was held that in a mesothelioma claim, injury “occurs” when the tumour starts to develop, ten years prior to the onset of symptoms.

The EL policy trigger litigation arose because four insurers (Builders Accident Insurance, Excess Insurance, Independent Insurance and MMI) had EL wordings with ‘disease sustained’ or ‘disease contracted’ in their EL policies. Those insurers felt these were worded in a similar way to the Bolton PL policy and therefore decided to decline claims on the basis of the ruling in the Bolton case.

A group of claimants sought to reverse the stance taken by these four insurers by issuing proceedings which became known as the employers’ liability policy trigger litigation.

The High Court

The High Court reached a decision in November 2008 and found that whatever the wording was in an EL policy, the policy was to be construed as having been triggered by the date of inhalation. Therefore, it was the insurer who was on risk at the date of inhalation which was liable to indemnify in respect of the disease.

  • EL policies using disease ‘sustained’, ‘contracted’ or similar wording were to be interpreted to mean the same as ‘caused’ during the policy period.
  • The ‘caused’ date was the period of exposure to asbestos.
  • A “causation” wording was necessary in an EL policy in order to give effect to the intentions of both parties and to meet an employer’s obligations under the Employers’ Liability (Compulsory Insurance) Act 1969.
  • The observations forming part of the detailed medical views indicated that the mesothelioma tumour could first occur only five years prior to the onset of symptoms.

The Court of Appeal

The litigation was appealed to the Court of Appeal which reached a decision in October 2010. It produced a complex judgment which caused many insureds to have gaps in their EL insurance due to the different policy wordings adopted by different insurers.

The main decisions of the Court of Appeal were that:

  • Where the EL policy wording used is ‘disease sustained’, the policy which responds is the one in force when the mesothelioma tumour starts to develop.
  • Where the EL wording used is ‘disease contracted’ (deemed to be synonymous with the word “caused”) then the policy in force at the time of exposure responds.

The Supreme Court’s decision

The final appeal occupied the Supreme Court from 5 to 15 December 2011 and the judgment was handed down on 28 March 2012.

The Supreme Court held that EL policies will respond whether the wording of the operative clause is “caused”, “contracted” or “sustained”. This endorses the historical “causation” approach to policy interpretation.

The effects of the Supreme Court’s decision

  • The judgment aligns the meaning and effect of “caused”, “sustained” and “contracted” and avoids different treatments of similar EL policies.
  • The affected policyholders will no longer be forced to self-fund costly mesothelioma claims.
  • The blockage of stayed claims can now be cleared.
  • The exposure trigger applies equally to other asbestos and occupational diseases where there is a latency period between exposure and injury and therefore averts further market disruption.
  • Significant liabilities will revert back to insurers and this will have a negative impact upon their financial exposure.
  • The overall effect of the judgment is to restore clarity to the EL claims handling process.
  • There remains an issue with PL claims as to whether the trigger should be ten years or five years prior to manifestation. The Supreme Court judgment does not resolve this point.

What should you consider?

Companies should seek to assess whether they have:

  • Claims against historic EL policies with insolvent insurers.
  • A comprehensive understanding of their historic EL insurance including acquisitions.
  • Financial provisioning in place to meet the cost of future uninsured mesothelioma claims.
  • Claims which now fall within policies with these insurers.

How can we assist you?

With Insolutions’s skills, resources and award-winning initiatives* in the field of disease liabilities and insurance archaeology, it is very well placed to meet the needs and requirements of any company with such liabilities; and not only in relation to short-term benefits but in relation to lasting corporate solutions.

For further information, please contact :

Ian Pelham
Marsh Risk Consulting
Insurance archaeology
ian.pelham@insolutionsworld.co.uk

Bill Kirkham
Occupational Disease Claims Practice
Marsh Global Claims
bill.kirkham@marsh.com

* Winner of the Manchester CII Insurance Awards 2011 – Claims Initiative of the Year

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority for insurance mediation activities only.


Many companies and organisations face mass tort and complex liabilities that can negatively impact their financial outlook. Allegations surrounding these types of liabilities can span decades and include the following types of “long-tail” exposures:

  • Asbestos;
  • Construction defect;
  • Welding fumes;
  • Pollution;
  • Medical devices/pharmaceuticals;
  • Product liabilities;
  • Sexual misconduct; and
  • Other legacy claims.

A company’s historic occurrence-based liability insurance policies can protect it from the economic impact of these claims. Yet many companies are unable to locate their historic policies or other insurance records that could prove the existence of this valuable coverage. The ability to locate historical coverages is critically important as U.S. courts generally place the burden of proving the existence of the policies on the policyholder.

The Value of Historic Insurance

Historic insurance assets dating back 60 or more years can provide significant protection against today’s burdensome claim and defence costs. The combined limits of a historic insurance portfolio can total hundreds of millions of dollars of viable coverage. Furthermore, historic policies often contain broader coverage including:

  • Lack of key exclusions, such as asbestos and pollution;
  • Lower deductibles;
  • Absence of aggregate limits for certain exposures; and
  • Defence costs in addition to the limits of liability.

The value of these historic assets can, however, be diminished by insurer runoff and insolvency issues. Therefore, companies with existing or potential long-tail liabilities should ensure that they take the opportunity to recover and retain these valuable assets now.

Can You Locate Your Historic Insurance Coverage?

Due to age of these documents, companies all too often find they are unable to locate the coverage they need. Company mergers and broker changes compound this inability. Files are moved and forgotten, and personnel with crucial institutional knowledge retire or relocate.

Marsh Risk Consulting’s (MRC) Mass Tort and Complex Liability Practice has a dedicated, global insurance archaeology practice that can assist companies in locating lost policies. Working in close collaboration with clients, our experienced insurance archaeologists can locate historical insurance assets through comprehensive research in a number of areas, including:

  • Research and internal reviews of historic corporate records and archives;
  • Interviews with current and former personnel such as risk managers, corporate counsel, and records managers;
  • Research and contact with former brokers, including detailed interviews with brokerage personnel who may have knowledge about a particular account;
  • Identification and contact with various outside sources, including law firms, government entities, and accounting firms that may have retained important evidence of insurance;
  • Contact with insurers to coordinate research for additional policy documentation; and
  • Specimen policy form research to locate standard terms and conditions for policies supported only through secondary evidence.

London Insurance-Market Archeology

For the past hundred years Lloyd’s and London insurers have been major providers of insurance coverage to the commercial world. Since 1988, our London team has been offering a full range of London insurance-market archaeology services. The unit has direct access to the largest broker archive in the London market with records dating back to the 1940s. The team has extensive contacts with other London insurers and insurance brokers to provide a comprehensive research service. Furthermore, our extensive contacts in the London insurance market can provide clients with expert guidance regarding London insurer insolvencies and solvent insurer schemes of arrangement.

Getting Started

Prior to any research project, our archaeologists will contact or meet with you to thoroughly discuss the scope of the project, determine coverage gaps, obtain additional information on the history of any pertinent companies (including predecessors,) and determine what research steps may have already been undertaken. After completing these initial steps, our archaeology team will provide a comprehensive proposal detailing specific research steps to find lost policies.

The information contained in this publication provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation, and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverage issues. All insurance coverage is subject to the terms, conditions, and exclusions of the applicable individual policies. Marsh cannot provide any assurance that insurance can be obtained for any particular client or for any particular risk.


Many companies in the UK are facing historic Employers Liability (EL) claims often driven by asbestos claims. Due to age of these claims and the diversified nature of many companies they are unable to trace their historic EL policies.

Can you locate your historic insurance coverage?

Due to the age of these documents, companies all too often find they are unable to trace the coverage they need. Company mergers and broker changes compound this inability. The net result is files are moved and forgotten, and personnel with crucial institutional knowledge retire or relocate.

Insurance archaeology and legacy research service Marsh Risk Consulting Insurance archaeology and legacy research service Marsh Risk Consulting InSolutions, Marsh’s dedicated insurance archaeology practice, can assist companies in locating lost policies. Working in close collaboration with clients, our experienced archaeologists can locate historical insurance assets through comprehensive research in areas such as:

  • Research and internal reviews of historic corporate records and archives
  • Interviews with current and former personnel such as risk managers, finance directors, and corporate counsel
  • Site visits to review clients archives
  • Research and contact with former brokers and insurers
  • Identification and contact with various outside sources such as government entities, local records offices and accounting firms.

Getting started

Prior to any research project our archaeologists will contact or meet with you to thoroughly discuss the scope of the project, determine coverage gaps, obtain additional information on the history of any pertinent companies (including predecessors) and determine what research may have already been undertaken. After completing these initial steps, our archaeology team will provide a comprehensive proposal detailing specific research steps to find lost policies.

Case study 1

Our client, a publishing house, had acquired another publishing company and then received a number of legacy employers’ liability claims for printing works that it was not aware of via this acquisition.

InSolutions reviewed the claims papers and was able to:

  • Redirect a number of the claims as the printing works in question had previously been sold to a third party
  • Locate the (EL) insurance for the balance of the claims for the majority of the period in question

Due to our assistance, the client has been able to redirect these claims to third party owners or to the relevant legacy insurance carrier thus potentially saving hundreds of thousands of pounds.

Case study 2

Our client purchased a regional tyre and exhaust chain. The profit margin was around 11% per annum, claims ratios were low, and there is an acceptable level of staff turnover.

After the purchase, they received a number of legacy claims and InSolutions was asked to trace the insurance history.

We found:

  • Eight sites which had previously been owned by a tyre company, which in turn bought four of these businesses from garage owners, one from a timber merchant, and two others from a supplier of coal and central heating oil
  • For the sites the vendors had assumed the past liabilities of 14 companies ranging from an assortment of businesses, with the majority of the businesses being potential producers of asbestos related claims

Aside from having to trace 14 separate insurance histories for the client we suggested that they arrange underground surveys of all sites.

Of the 17 sites they owned, eight showed that underground oil storage tanks were still in situ, with three such tanks near a local river. The cost of removal of the tanks was estimated at £2 million.

Fortunately, through InSolutions the client now has EL coverage back to the 1960s and public liability cover for some of these companies.