Supreme Court confirms insurers' right of recoupment in mesothelioma claims - DAC Beachcroft

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Supreme Court confirms insurers' right of recoupment in mesothelioma claims

Published On: 22 May 2015

In a judgment handed down on 20 May 2015, the Supreme Court confirmed that insurers have an equitable right of recoupment from other insurers and, for periods where there are no other insurers, the insured in mesothelioma actions.

Zurich Insurance Plc v International Energy Group Limited involved a claim presented by a former employee of IEGL, who developed mesothelioma after 27 years of employment through which he was exposed to asbestos. The case originated in Guernsey where the Compensation Act 2006 has no application.

IEGL settled the claim and sought to recover its outlay from Zurich whose predecessor, Midland Assurance Limited, had provided employers liability insurance for 6 of the 27 years. The only other known insurer was Excess Insurance which had provided cover for 2 years.

Although Midland's cover was for 22.08% of the period of exposure, the Court of Appeal found that Zurich was required to indemnify IEGL for the whole of the claim, the judgment in Barker v Corus having been rendered past history by the Compensation Act 2006 and the Supreme Court's decision in Durham v BAI. The Supreme Court overturned this decision and held that the common law rule of proportionate compensation applies in Guernsey and, therefore, that IEGL should only be indemnified for 22.08% of the damages and costs payable to the Claimant. Zurich was liable to pay the costs of defending the claim in full as these would have been incurred whether Zurich was paying 22.08% or 100% of the claim.

Of wider interest, the Supreme Court considered the implementation of the Compensation Act 2006 and indicated that, if this had applied, while Zurich would have had to meet the Claimant's claim in full in the first instance, it would have been entitled to claim pro-rata contributions toward the damages and costs payable to the Claimant from any other insurer (such as Excess) and, in respect of any period where there was no known insurer, from IEGL itself.

The judgment, which may be summarised by Lord Mance's phrase that "conventional rules need to be adapted to meet unconventional problems arising from the principles recognised and applied in Fairchild and Trigger" will be of assistance to the courts when considering apportionment in lung cancer and other asbestos cases, including the forthcoming appeal in Heneghan v Manchester Dry Docks Limited.