FOCUS. Supreme Court decides on trigger date for Mesothelioma and Employers Liability policies

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1 FOCUS RISK MANAGEMENT THE QUARTERLY NEWSLETTER FROM GALLAGHER BASSETT ISSUE 47 JUL 2012 INSIDE IMPORTANT CHANGES TO INSURANCE CONTRACT LAW Supreme Court decides on trigger date for Mesothelioma and Employers Liability policies RISXFACS.COM WEBINARS DAMAGES FOR WOMAN WHO SLIPPED ON WET DANCE FLOOR DUTY OF CARE TO EX-EMPLOYEES COURT OF APPEAL CONFIRMS COUNCIL NOT LIABLE FOR TRIP OVER MANHOLE COVER COUNCIL LIABLE FOR CATASTROPHIC INJURIES FOLLOWING CARRIAGEWAY DEFECT This matter was reported in Focus after the first hearing in the High Court (January 2009) and the subsequent Court of Appeal hearing (December 2010). In April 2012 the wording of Employers Liability policies was considered by the Supreme Court. There were six actions dealing with nine different policy wordings covering a period from the late 1940 s to The Supreme Court found in favour of the claimants to those actions by a majority of 4 to 1. The dispute was whether the policies covered claims arising out of mesothelioma when the exposure actually occurred or when the mesothelioma actually developed (usually many years after the actual exposure). The Supreme Court has decided that, irrespective of the actual words used in the various policies under dispute, the trigger date for Employers Liability policies is the date of exposure to the disease and not the date the disease is manifest. The main points were: 1. The wordings, on their face, required in the course of employment to be contemporaneous with the sustaining of injury. 2. The wordings demonstrated a close link between the actual employment undertaken during a given period of insurance and the premium charged for that period. 3. There would be a potential gap in cover if an employer s breach of duty in one period of insurance which only led to an injury or disease in a later (possibly much later) period of insurance, particularly if, in the meantime, an insurer took a decision not to renew. 4. The only decision which would give effect to the protective purpose of the Employers Liability (Compulsory Insurance) Act 1969 is that it requires the insurance to be effective at the time the injury was caused. 5. Where a wording referred to injury sustained during the period of insurance (as opposed to injury caused ) the injury is properly said to be sustained in the period it was caused or initiated even though the disease or condition only developed or manifested itself subsequently. This ruling clears up one set of problems but local authorities and others insured by those defendant insurers in run off are likely to face a financial exposure if the insurers concerned have insufficient funds to meet their liabilities. The Association of British Insurers is keen to develop a pre-action protocol for mesothelioma cases so that claimants solicitors and insurers are held to strict timescales to ensure such cases are dealt with as quickly as possible. The main judgement was given by Lord Manse and emphasised the need to look at the whole issue and to avoid the over-concentration on single words and their meanings.

2 02 FOCUS RISK MANAGEMENT Important Changes to Insurance Contract Law: CONSUMER INSURANCE (DISCLOSURE AND REPRESENTATIONS) ACT 2012 As all students of insurance law know, under the Marine Insurance Act 1906, there is a requirement for any person taking out an insurance contract to disclose all material facts to insurers. A material fact is one that a prudent insurer would consider to be relevant. This can lead to harsh outcomes as: the consumer may not know what a prudent insurer would consider to be relevant; the consumer may answer all the questions asked honestly; the insurer can avoid a claim it would have met even if it had been provided with the information; and if the answers on the proposal form are stated as forming the basis of the contract the insurer has the right to treat the policy as though it does not exist and can refuse all claims, even if the mistake was not important. To mitigate the harshness of this position a number of consumer codes of practice have been developed, leaving a confused situation. The Consumer Insurance (Disclosure and Representations) Act 2012 brings clarity to the current position. The main features of the Act are: Scope it will apply only to consumers (defined as individuals insuring wholly or mainly for purposes not related to their trade business or profession) and will deal only with the issue of what a consumer must tell an insurer before entering into or varying an insurance contract; and it will abolish the consumer s duty to volunteer material facts. Instead, consumers must take reasonable care to answer those questions made by their insurers fully and accurately. Remedies for misrepresentation The insurer s remedy will depend on the consumer s state of mind but can be summarised as: if the misrepresentation was honest and reasonable, the insurer must pay the claim. The consumer is expected to exercise the standard of care of a reasonable consumer, taking into account a range of factors including the type of insurance policy and the clarity of the insurer s question; if the misrepresentation was careless, the insurer will have a compensatory remedy based upon what the insurer would have done had the consumer taken care to answer the question accurately. If the insurer would have excluded a certain illness, for example, the insurer need not pay claims which would fall within the exclusion but must pay all other claims. If the insurer would have charged more for the policy, it must pay a proportion of the claim; and if the misrepresentation was deliberate or reckless, the insurer may treat the policy as if it never existed and may decline all claims. It will also be entitled to retain the premiums, unless there is a good reason why they should be returned. In addition the Act: abolishes basis of contract clauses, bringing the law into line with recognised good practice; establishes a statutory code to determine for whom an intermediary (an agent or broker) acts when arranging insurance; and includes special provisions for group schemes and for insurance taken out on the life of another. The new Act received Royal Assent on the 28 March 2012 and is expected to come into force in a year s time. News in Brief RISXFACS.COM WEBINARS Following on from the previous success of the Risxfacs.com training by webinar, Gallagher Bassett is continuing to provide these on a monthly basis. As before, clients will be able to join, listen to and watch a demonstration of the Risxfacs.com system from their own computers. The demonstration covers the basics all the way through to the creation of reports in Excel. The sessions will, therefore, be ideal for both initial and refresher training needs. Each session lasts up to two hours and numbers will be limited to 22. Clients will be asked to log on through a secure website and dial a conference phone number. The next Risxfacs.com webinars will be held on: Wednesday 11th July at 10.30am Tuesday 21st August at 2.30pm Further dates will be released each quarter. To join a Risxfacs.com webinar please submit your details on: management.com DAMAGES FOR WOMAN WHO SLIPPED ON WET DANCE FLOOR SHAKESPEARE v BOURNE LEISURE LTD High Court March 2012 In the December 2011 edition of Focus, we reported on the case of Hufton v Somerset County Council where the Council was found not to be liable for a school pupil who was injured following a slip on a wet floor in the school hall. By way of a contrasting outcome we now report on a case where 6,000 was awarded by the High Court following a slip on a wet dance floor at a holiday camp. In October 2010 the County Court ruled that Bourne Leisure was liable for Ms Shakespeare s injuries and this ruling was confirmed by the High Court in March Bourne had claimed that it had done all it could reasonably be expected to do to keep the dance floor dry, given that the venue was packed with around 1,900 people. However the High Court found that the drink spillage was significant and upheld the County Court decision that Bourne Leisure should have checked the dance floor up to 3 times per hour.

3 FOCUS RISK MANAGEMENT 03 DUTY OF CARE TO EX-EMPLOYEES Two recent cases highlight the importance of the need for employers to exercise caution when giving references and, indeed, all communications regarding ex-employees. Jackson v Liverpool City Council was heard in the Court of Appeal in June Mr Jackson had worked for Liverpool City Council for 12 years. He was offered a job elsewhere but the contents of a reference provided by the Council led to the job offer being withdrawn. The reference referred to allegations made after his employment with the council had ended. The allegations had not been investigated or substantiated in any way but it was said that had they been looked into, they would have led to Mr Jackson being subject to a formal improvement plan. There was a subsequent telephone conversation between the Council and the prospective employer which indicated that it was difficult to answer the questions of the prospective employer, either in the positive or negative. Mr Jackson brought an action for damages as, following the withdrawal of the job offer, he was unemployed for about a year. The High Court found against the Council as, whilst the reference had been true and accurate, it was found to be unfair as it referred to allegations made without an investigation and that Mr Jackson had not been given the opportunity to respond to the allegations. The Council appealed to the Court of Appeal and was successful. The Court of Appeal found that the reference was true and accurate and, taken together with a subsequent telephone conversation, was not unfair. The Court of Appeal disagreed with the High Court s view that the Council could have refrained from providing a reference. In this case the Council made it clear that there had been no investigation into the allegations and the reference, in so far is it went, was entirely accurate. The case of McKie v Swindon College was heard at the High Court in February This case centred around allegations some years after Mr McKie left Swindon College in 2002 to take up a post at Bath City College. In 2008 he started work at the University of Bath in a role that involved visiting other colleges, including Swindon College. After he started in the new post, Swindon College wrote to the University saying it would not allow Mr McKie on the premises as it had safeguarding concerns about the students and there were relationship problems with his former colleagues. As a consequence, the University of Bath summarily dismissed Mr McKie and he brought an action against Swindon College in the High Court. The College claimed that the issues had been raised by students although nobody was willing to raise a formal complaint. Of the College s witnesses, only one had worked with Mr McKie and the worst allegation put forward was that he moved mail from one pigeon hole to another. The Court found that the allegations made by Swindon College were untrue, although there was no evidence of malice to support a claim for defamation and the case did not involve a negligent misstatement in an employment reference. Nonetheless the Court found that there was a sufficient proximity between the parties to impose a duty of care on the part of the College to Mr McKie despite the lapse of time. The communications between Swindon College and the University of Bath represented a breach of the duty of care and allowed a claim for compensation against the College to be successful. These cases both highlight the duty of care needed in making any comment about exemployees whether in a formal reference or otherwise. There are cases where, on the grounds of public policy, the giving of a reference on purely factual grounds only may not be sufficient. The Liverpool case gives scope for this course of action provided that it is made clear whether or not any allegations referred to have been thoroughly investigated. Court of Appeal confirms council not liable for trip over manhole cover LAWRENCE v KENT COUNTY COUNCIL Court of Appeal March 2012 We reported on this case in the December 2011 edition of Focus. The circumstances of the case are that in 2006 Josie Lawrence tripped over a manhole cover which protruded above the surrounding pavement. When the case was first heard in the County Court it was found in favour of Ms Lawrence. The Council appealed and in June 2011 the High Court overturned the decision of the County Court and found in favour of the Council. Ms Lawrence took the case to the Court of Appeal which upheld the view of the High Court and dismissed the appeal. Although the Court of Appeal disagreed with some parts of the High Court judgement it decided that there was, nevertheless, no evidence from which the County Court Judge could have concluded that the protruding manhole was so dangerous that it imposed a duty on the Council to undertake a repair.

4 04 FOCUS RISK MANAGEMENT Council liable for catastrophic injuries following carriageway defect AC and DC v TR v DEVON COUNTY COUNCIL High Court April 2012 This case arises out of a road traffic accident on 20th November TR was driving a Land Rover on the C25 road between Honiton and Smeathrape. TR overtook a Vauxhall Vectra and encountered difficulties on the off side of his vehicle; he hit a rut and swerved across the road hitting trees on the other side of the ditch on the edge of the nearside verge. The Vauxhall Vectra was not involved in the collision. The claimants, being the passengers in the Land Rover, suffered catastrophic injuries. The Court granted them anonymity. TR admitted liability for the claims made by the passengers but brought a claim against Devon County Council under Part 20 of the Civil Procedure Rules for breach of duty under Section 41 of the Highways Act This allows a defendant to join another party in the action as a defendant. It was agreed in Court that the rut was 51 metres long, at its greatest width it measured 550mm and the greatest intrusion into the carriageway was 400mm. The depth of the rut was approximately 80mm. The highway had a white centre line and white edge lines and the defect only intruded by 150mm into the carriageway beyond the edge lines. However, there was photographic evidence that suggested a series of potholes rather than one continuous rut. The Council accepted that, if it had been aware of the defect it would have repaired it, even though their normal intervention level for a carriageway defect was 100mm. There had been a history of defects and repairs along this stretch of road and, indeed, the only inspection not to record the need for a repair, was the inspection prior to the accident in July The road had been patched and re-dressed just before the pre accident inspection which may have accounted for the lack of reportable defects at that inspection. The road in question was a small distributor road and Devon County Council applied a 6 monthly inspection regime to this road although the 2005 Highways Code of Good Practice (a National Code of Practice) recommended a monthly inspection regime for roads of this type. In defending the decision to adopt a 6 monthly inspection cycle the Council claimed reasons of high cost, low traffic flows, low incidence of accidents and low number of defects. However, no formal risk assessment of this stretch of road had taken place. The Court determined that the Council was liable as: this was a dangerous defect within the context of Section 41 of the Highways Act 1980; and the Council had not put forward sufficient evidence as to why they had departed from the monthly inspection cycle recommended by the Code of Good Practice; and in particular, there was no risk assessment to support the decision not to inspect monthly. The driver, TR, was found to be not guilty of contributory negligence. The main points in this decision are: 1. Unlike a pavement tripping claim where the precise location of the accident must be considered dangerous for a claim to be made out (James v. Preseli), when a defect causes a car accident at speed, the state of repair of the stretch of road rather than any one particular spot must be considered. 2. Whilst a highway authority can depart from the National Code of Practice in relation to inspection frequency (and, by inference, other matters), it must be able to justify any such departure if it is to make out a defence under Section 58 of the Highways Act Highway authorities ought to be keen to explore the question of whether or not compliance with the Code of Practice would have made any difference. If they can prove that it would not have done, they have a potential defence. The Council have been given leave to appeal and we will report on the outcome of the appeal after it has been heard. Information If you would like further information on any of the articles contained in this issue, need guidance on whom to contact or just wish to pass on any comments, please call, Hannah Denne Telephone +44 (0) Hannah_Denne@gbtpa.com New Loom House 101 Back Church Lane London E1 1LU Telephone +44 (0) Facsimile +44 (0)

5 JUMPING THE OLYMPIC HURDLE Maintaining Business as Usual at Gallagher Bassett during the London Olympic and Paralympic Games The London Olympic and Paralympic Games will soon be upon us. It is widely predicted that transport networks will be exceptionally busy during the Games, affecting people and businesses across London and other parts of the country where events are being held. Although the majority of the Gallagher Bassett offices in the UK are located in relatively unaffected areas around the country, our two London offices could potentially be affected by the anticipated travel disruption. Measures implemented in order to achieve Business as Usual include: Affected GB Staff Altered work patterns, alternate modes of travel to / from work, home working (where appropriate) etc. Business Travel Minimising employee business travel, rescheduling meetings, increasing use of ITC etc. Because of this, Gallagher Bassett has undertaken an assessment of how the Games could adversely impact upon our employees, customers, deliveries, visitors, suppliers, and ITC systems, using all information available, and is implementing a plan to manage these impacts effectively. Gallagher Bassett is seeking to achieve Business as Usual during the Games. This means that our offices will be open and operating throughout normal business hours. Customers and Visitors Minimising visits, rescheduling meetings, increasing use of ITC etc. Deliveries and Collections Rescheduling important deliveries and collections, increasing storage of essential office supplies etc. Information Technology and Communications ITC plan to manage predicted increased demand for internet and mobile communications. If you have any questions or comments related to our response to the predicted travel disruption, please contact the relevant Branch Manager or Head of Department for further information and advice. Gallagher Bassett maintains a Business Continuity Plan which is regularly tested and updated. New Loom House 101 Back Church Lane London E1 1LU Telephone +44 (0) Facsimile +44 (0)