Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd. & Anor

Under public liability insurance covering bodily injury occurring during the policy period, asbestos exposure and the body’s initial defensive reactions do not themselves constitute injury. Injury occurs only when actionable physical damage develops, whether at the creation of a malignant tumour or the later manifestation of symptoms.

Waiver by election requires a choice between inconsistent or mutually exclusive courses. An insurer which rejects a claim on one coverage ground does not thereby waive another pre-existing defence, such as late notification, unless its conduct gives rise to an estoppel.

A local authority settled a mesothelioma claim brought by the widow of a worker exposed to asbestos on its premises between 1960 and 1963. It sought indemnity from Municipal Mutual Insurance Ltd, which insured it when malignancy probably developed, and alternatively from Commercial Union Assurance Company Ltd, whose predecessor insured it during the exposure period.

His Honour Judge Kershaw QC held that Municipal Mutual was liable because bodily injury occurred during its policy period. Commercial Union was not liable because injury had not occurred during its period of indemnity and because the authority had failed to give immediate notice as required by a condition precedent.

The principal issues were when bodily injury occurred, whether an exposure-based or multiple-trigger approach applied, whether Commercial Union had waived its notification defence, and how the costs should be allocated.

1. Municipal Mutual’s appeal and the authority’s contingent appeal against Commercial Union were dismissed. The authority’s appeal concerning costs was allowed. Hallett LJ and Auld LJ agreed with Longmore LJ.

2. The Municipal Mutual policy responded because the relevant bodily injury occurred while that insurer was on risk. Exposure to asbestos fibres, and the body’s initial processes for destroying or neutralising them, did not constitute actionable injury. At that stage the worker was well and had no personal injury claim. Injury arose only much later, whether upon creation of the first malignant cell or upon the manifestation of identifiable symptoms; the distinction did not affect the result.

3. The word “accidental” did not require the accident and bodily injury to occur simultaneously. It was sufficient that bodily injury occurred during the policy period and had been caused accidentally. Nor did limitations concerning employment or geographical location alter the meaning of the principal insuring clause.

4. The Commercial Union policy did not respond because it covered bodily injury occurring during its period of indemnity, whereas it was on risk only during exposure. The Court declined to adopt the American multiple-trigger theory for public liability policies containing the wording before it. Consequently, there was no other applicable insurance and Municipal Mutual could not rely upon its other-insurance condition.

5. Commercial Union also had an additional defence based on late notification. Waiver by election arises only where a party chooses between inconsistent or mutually exclusive courses. Reliance on lack of coverage and reliance on late notification were consistent because both resulted in denial of liability. Rejecting a claim on one ground did not waive another existing ground, absent reliance or detriment sufficient to establish estoppel.

6. The competing authorities on contribution between insurers did not require determination because there was no double insurance. Longmore LJ nevertheless preferred, obiter, the approach which determines contribution by reference to the insurers’ contractual liabilities, including applicable conditions precedent.

7. The costs order below rested on a false assessment of the most important issue. Municipal Mutual had comprehensively lost the central coverage issue and had caused Commercial Union to be joined. Municipal Mutual was ordered to pay the authority’s costs against it and Commercial Union’s costs, subject to recovering 20% of Commercial Union’s costs from the authority by set-off.

• Court of Appeal (Civil Division): Municipal Mutual’s appeal and the authority’s contingent appeal against Commercial Union were dismissed. The authority’s appeal concerning costs was allowed: [2006] EWCA Civ 50.
• High Court, Liverpool Mercantile Court: His Honour Judge Kershaw QC held Municipal Mutual liable to indemnify the authority, dismissed the claim against Commercial Union on coverage and late-notification grounds, and ordered the authority to bear 75% of Commercial Union’s costs.