RSA Insurance Plc v Assicurazoni Generali SpA

An insurer’s liability under an insurance indemnity is a claim sounding in unliquidated damages, rather than debt, where established authority treats the indemnity as an obligation to hold the insured harmless against loss.

Accordingly, a contribution claim between insurers falls within Civil Liability (Contribution) Act 1978, section 1(1), where the insurers are liable in respect of the same damage. Any corresponding equitable contribution right is superseded by section 7(3). The contribution claim is therefore subject to the two-year limitation period in Limitation Act 1980, section 10(1).

RSA insured an employer for six months during a ten-year period in which an employee was exposed to asbestos and later developed mesothelioma. RSA settled the employee’s claim for £173,741 and sought an equitable contribution from Generali, another insurer on risk for part of the exposure period.

Generali contended that the claim was governed by section 1(1) of the Civil Liability (Contribution) Act 1978 and was statute-barred under section 10(1) of the Limitation Act 1980. The central issue was whether the employer’s claim under RSA’s insurance indemnity sounded in debt or damages. The court also considered, although strictly unnecessarily, the reasonableness and appropriate basis of any contribution.

1. The claim was statute-barred. RSA’s claim for contribution fell within section 1(1) of the Civil Liability (Contribution) Act 1978. It was brought more than two years after the right to contribution accrued and was therefore barred by section 10(1) of the Limitation Act 1980.
2. The agreed issue was whether the company’s claim against RSA under the employers’ liability policy sounded in debt or damages. The distinction depends on the substance of the promise. A promise to pay a sum on the occurrence of specified events may create a debt. A promise to ensure performance or hold another harmless against loss gives rise to damages for breach.
3. The court accepted that the authorities establish a long line of authority treating liability under an insurance indemnity as a claim for unliquidated damages. This included the reasoning in F & K Jabbour v Custodians of Israeli Absentee Property [1954] 1 WLR 139, Forney v Dominion Insurance Co Ltd [1969] 1 Lloyd’s Rep 502, Edmonds v Lloyds Italica & L’Ancora Compagnia di Assicurazione e Riassicurazione S.P.A. [1986] 1 WLR 492, and Firma C-Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1.
4. The comments of Lord Mance and Lord Sumption in International Energy Group Ltd v Zurich Insurance UK Branch [2015] UKSC were obiter. They were made without detailed submissions on the debt-or-damages issue and did not determine it. The court therefore did not regard either speech as resolving the present question.
5. On the authorities, RSA’s liability to indemnify the employer was a damages indemnity liability. The contribution claim consequently came within section 1(1) of the 1978 Act, and the action against Generali was dismissed as statute-barred.
6. It was unnecessary to decide the settlement issue. In any event, the court rejected the proposed reduction for RSA’s failure to pursue other employers or occupiers. A broad equitable approach to contribution in a Fairchild case did not justify an uncertain, rough-and-ready redistribution based on possible claims against third parties.

First-instance decision. No earlier appellate decision is stated in the judgment.