International Energy Group Ltd v Zurich Insurance Plc UK Branch

Under a standard employers’ liability policy, an insurer must indemnify the employer for the whole liability for mesothelioma where negligent asbestos exposure during the policy period provides a legally sufficient causal link to the disease. The employer need not prove that exposure during that period was the exclusive or but-for cause. The policy is construed by reference to its commercial purpose and its promise to indemnify against all sums for which the insured is liable in respect of the disease. Without an apportionment clause, the indemnity cannot be reduced by reference to uninsured exposure in other periods. Equitable contribution or unjust enrichment cannot be used to alter the contractual result merely because it appears unfair.

International Energy Group Ltd sought indemnity from Zurich under successive employers’ liability policies after settling an employee’s mesothelioma claim. The employee had been exposed to asbestos throughout 27 years of employment, but Zurich’s predecessor insured the employer for only the final six years. Cooke J held that IEG had a proportionate indemnity for the substantive liability, but a full indemnity for defence costs: [2012] EWHC 69 (Comm).

IEG appealed. Zurich cross-appealed on the defence costs and argued alternatively for an equitable contribution from IEG for uninsured years. The central issues were whether the policy responded to mesothelioma caused during the insurance period and whether the indemnity was limited to a proportionate share.

1. IEG’s appeal allowed; Zurich’s cross-appeal dismissed. The insurer was liable to indemnify IEG for the whole of its outlay in respect of the employee’s mesothelioma claim.
2. Durham v BAI (Run off) Ltd, the Trigger litigation, [2012] UKSC 14, established that disease is sustained or contracted when the pathological process leading to mesothelioma is initiated during the policy period. Manifestation of the disease need not occur during that period.
3. The Fairchild principle supplies a sufficient weak or broad causal link between negligent asbestos exposure during the insurance period and the eventual mesothelioma. Proof that exposure during that period was the but-for cause is unnecessary.
4. Once that causal requirement was satisfied, the policy’s promise to indemnify against all sums for which the insured was liable in respect of the disease required Zurich to pay the whole damages liability, not merely the proportion corresponding to its six years on risk. Other effective exposures were irrelevant on the policy wording.
5. Zurich’s proposed equitable contribution, unjust-enrichment and natural-justice arguments failed. The relationship was contractual, and the court had no power to adjust the contractual consequence merely because it appeared unfair. Treating the employer as a self-insurer for untraced periods could itself produce injustice.
6. The absence of Guernsey legislation equivalent to section 3 of the Compensation Act 2006 did not alter the result, which followed from common-law causation and construction of the policy.

• Court of Appeal (Civil Division): IEG’s appeal was allowed and Zurich’s cross-appeal was dismissed.
• Commercial Court: Cooke J held that IEG had a full indemnity for defence costs but only an aliquot indemnity for the substantive mesothelioma liability: [2012] EWHC 69 (Comm) .