Colton, Palmer & Preston Ltd v Allianz Australia Insurance Ltd - [2009] SASC 158

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
COLTON, PALMER & PRESTON LTD v ALLIANZ AUSTRALIA INSURANCE LTD
[2009] SASC 158
Judgment of The Honourable Justice Duggan
5 June 2009
INSURANCE - INDEMNITY AGAINST INDUSTRIAL AND LIKE RISKS
The plaintiff sought a declaration as to whether it is entitled to indemnity from the defendant insurer and if so, to what extent, in relation to a series of insurance policies it entered into providing indemnity for liability as an employer for personal injury.
Employee of plaintiff contracted mesothelioma in 2004 following exposure to asbestos dust and fibres during her employment from 1946 to 1959 inclusive – employee awarded damages against plaintiff in District Court action – whether plaintiff suffered “personal injury by accident” – consideration as to what event or events must fall within the period of insurance in order to give rise to indemnity – whether the policies in the years 1946-1959 inclusive require the defendant to indemnify the plaintiff to the extent of the total of the amounts set out as the ceiling in the policies.
Workers’ Compensation Act 1926 (NSW) s 6, referred to.
Orica Ltd & Anor v CGU Insurance Ltd (2003) 59 NSWLR 14; Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226, discussed.
Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342; C.E. Heath Underwriting & Insurance (Aust.) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535; Favelle Mort Ltd v Murray (1976) 133 CLR 580; GRE Insurance Ltd v Bristile (1991) 5 WAR 440; Martindale v Burrows [1997] 1 Qd R 243; Re Kerr [1943] SASR 8, considered.

COLTON, PALMER & PRESTON LTD v ALLIANZ AUSTRALIA INSURANCE LTD
[2009] SASC 158
Civil

DUGGAN J: Mrs Betty Roberts was the plaintiff in an action for damages for personal injury commenced in the District Court. The first defendant was Amaca Pty Ltd (“Amaca”), a successor to James Hardie & Co Pty Ltd. The second defendant was Colton, Palmer & Preston Ltd (“Colton”).
Mrs Roberts was employed by Colton as an accountant and bookkeeper from 1946 to 1959. In the District Court action she claimed that, during this time, she was exposed to asbestos dust and fibres. She also claimed that between 1967 and 1969 she was exposed to asbestos dust and fibres while her house was being renovated. She claimed that she contracted malignant pleural mesothelioma as a result of these exposures to asbestos fibres. The basis of her claim in the District Court action was that the mesothelioma was caused by the joint negligence of Amaca as the successor to the manufacturer of the asbestos and Colton, her employer.
On 17 February 2006 Mrs Roberts and Colton compromised the proceedings in the District Court and Colton agreed to pay her the sum of $178,750 inclusive of costs and interest in full settlement of the action.
The present proceedings between Colton and Allianz Australia Insurance Ltd (“Allianz”) have been brought to determine whether Allianz is liable to indemnify Colton in respect of the award of damages to Mrs Roberts and, if so, to what extent.
At a time which has not been identified in the proceedings Allianz acquired the assets and liabilities of MMI-CMI Insurance Ltd. Prior to July 1990 MMI‑CMI Insurance Ltd was called The Chamber of Manufactures Insurance Ltd (“the Chamber”). From 1946 to 1959 the Chamber issued policies of indemnity insurance to Colton.
The Chamber was a member of the Fire and Accident Underwriters Association of South Australia (“the Association”) and in the period relevant to the present matter the policies issued to Colton were in a standard contract approved by the Association.
The indemnity clauses in each of the policies were to the same effect. The relevant clause in the policy issued in 1946 was as follows:
NOW THIS POLICY WITNESSETH that in consideration of the payment to the Company of the above-mentioned Premium (which premium is subject to adjustment as hereinafter provided) for the following indemnity from the day of 19 until four o’clock in the afternoon of the day of19 it is hereby agreed that, if at any time during the said period or during the continuance of this policy by renewal any Employee in the direct service of the Assured shall sustain any personal injury by accident or personal injury by any of the diseases included in the second schedule to the “Workmen’s Compensation Act 1932-1944” at the date of the commencement of the indemnity hereby granted, while engaged in the service of the Assured in the business above-mentioned, carried on in the State of South Australia, then, in case the Assured shall be liable to pay compensation for such personal injury, either under the “Workmen’s Compensation Act 1932-1944” or the “Wrongs Act 1936-1944”, or any amendments to the before-mentioned Acts passed before the date of the commencement of the indemnity granted by this policy or any renewal thereof, or at Common Law, the Company shall (subject to the limitation of amount hereinafter expressed) indemnify the Assured against all sums for which the Assured shall be so liable, and will in addition, be responsible for all costs and expenses, incurred with its consent in connection with any claim for such compensation.
PROVIDED ALWAYS that the liability of the Company in respect of all claims under the “Wrongs Act 1936-1944”, and at Common Law, for such personal injury by accident or disease to or of any one Employee is limited to the sum of One thousand five hundred pounds (₤1500) which sum shall include all damages, costs and expenses.
It was acknowledged at the hearing of the present matter that mesothelioma was not a disease included in the second schedule to the Workmen’s Compensation Act. However the plaintiff claims that it is entitled to indemnity in respect of the common law liability which it conceded in the District Court action.
The first question for decision is whether Mrs Roberts suffered a “personal injury by accident” within the meaning of that description in the policy.
It is convenient to commence this discussion by referring to the uncontested medical evidence provided by way of two reports prepared by Professor Douglas Henderson.[1] Professor Henderson is a professor of pathology and a recognised expert on malignant mesothelioma.
[1] Exhibits D1 and D2.
Professor Henderson stated in his reports that malignant mesothelioma occurs as a consequence of the inhalation of asbestos fibres which are deposited in the bronchopulmonary tissues. The fibres are subsequently translocated to the pleura which forms a covering on the lung. The target site is the parietal pleura. The precise mechanism involved and the rate at which translation occurs are unknown. Eventually cancerous properties are conferred on mesothelial cells resulting in progressive and irreversible cell replication and the destructive invasion of tissues.
In a case in which exposure takes place over an extended period of time, the earlier exposures are more significant than later exposures. This was demonstrated by Professor Henderson in the case of Mrs Roberts by taking each year of her exposure to asbestos fibres from 1946 to 1958 inclusive and attributing a percentage proportional causal effect to each year. Although Professor Henderson stated that the method used could not guarantee accuracy, he said that, applying an accepted formula, the percentage proportional causal effect in 1946 would have been approximately 12 per cent and this would have decreased gradually each year to 4.5 per cent in 1958. He stated that each annual exposure ranging from 4.5 per cent to 12 per cent would have represented a significant proportional causal contribution. He added:
Had any one of those annual periods of exposure taken place without the other, it would still have been of a class, character and magnitude appropriate for causal attribution of mesothelioma to it.
Professor Henderson stated in his reports that the mean lag time between first exposure to asbestos and a diagnosis of mesothelioma is about 35 to 40 years. He said that mesothelioma as such comes into existence about 5 years before diagnosis.
Mr Little SC, for the defendant, argued that the relevant injury for the purposes of the policy was the onset of mesothelioma and, on the medical evidence and the plaintiff’s own case, this did not occur until about December 2004. The defendant argued that liability to indemnify under the policy does not arise unless the injury is suffered during the currency of the policy. This, so it was said, did not occur in the present case. According to the argument, although the inhalation of asbestos dust and fibres may have taken place during the currency of the policy that, of itself, did not constitute an “injury” for the purposes of the policy. The mesothelioma which, in the defendant’s submission was the relevant injury, did not occur until well after the policy had expired.
Mr Whitington QC, for the plaintiff, submitted that both legal authority and the evidence in the case supported the proposition that the inhalation of asbestos fibres and the lodgement of those fibres in the lungs constituted an injury for the purposes of the policy and that beyond doubt this occurred during and after the currency of the first policy.
The question whether any aspect of the aetiology of mesothelioma and, if so what aspect, can be described as an injury has been discussed in a number of authorities. Two of the leading authorities are decisions of the New South Wales Court of Appeal, Orica Ltd & Anor v CGU Insurance Ltd[2] and Vero Insurance Ltd v Power Technologies Pty Ltd.[3]
[2] (2003) 59 NSWLR 14; [2003] NSWCA 331.
[3] [2007] NSWCA 226.
In Orica Mr Dunstan, the worker, was exposed to asbestos dust and fibres in the course of his employment between April 1959 and August 1961. Symptoms of mesothelioma were observed in August 2001.
Mr Dunstan settled a common law negligence claim against his employer who was insured by CGU Insurance Ltd (“CGU”). Mr Dunstan was awarded $240,000 inclusive of costs. Orica Ltd (“Orica”), the employer, claimed indemnity under three insurance policies issued by CGU in 1959, 1960 and 1961. CGU refused to indemnify Orica asserting that liability arose when the onset of mesothelioma occurred in August 2001. This event was outside the period of insurance. CGU successfully argued that, on a proper construction of the policy, the employer’s liability must occur within the period of insurance for the indemnity to apply.
The indemnity clause in each policy provided that:[4]
…the employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such employer or to pay any other amount not exceeding £20,000 in respect of his liability independently of the Act for any injury to any such person, THEN, and in every such case the insurer will indemnify the employer against all such sums for which the employer shall be so liable; the Insurer will pay all costs and expenses incurred… in connection with the defence of any legal proceedings in which such liability is alleged...
[4] (2003) 59 NSWLR 14 at [102].
The Workers’ Compensation Act 1926 (NSW) provides that “injury” for the purposes of such a policy:
… means personal injury arising out of or in the course of employment, and includes -
(a)a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor; and
(b)the aggravation, acceleration, exacerbation or deterioration of any disease, where the employment was a contributing factor to such aggravation, acceleration, exacerbation, or deterioration.[5]
[5] Workers’ Compensation Act 1926 (NSW) s 6(1).
Spigelman CJ referred to a line of authority with respect to policies of liability insurance which establishes that:[6]
…the liability of the insurer arises only as and when the liability of the insured is established in the sense of being crystallised by settlement, arbitration or verdict. (See Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 esp at 373-374, 377-378; Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 695; Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 25-26; Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 at 964-966.)
[6] (2003) 59 NSWLR 14 at [15].
Counsel for CGU argued that liability under the policy in the case arose when the damage which was relied upon occurred. Counsel for Orica argued that the policy responded at the time of injury and this occurred upon the inhalation of the asbestos fibres.
Spigelman CJ addressed these issues in the following passage of his judgment:[7]
[7] Ibid at [24]-[28].
There is authority for the proposition that injury occurs upon inhalation of fibres. The reasoning in Favelle Mort Ltd v Murray (1976) 133 CLR 580, as Santow JA shows, is to the effect that the entry of a virus into the body is itself an “injury” within the meaning of the Act and, therefore, of the policy. In GRE, the Full Court of the Supreme Court of Western Australia applied this reasoning and concluded that the inhalation of asbestos fibres into the body was the “injury” and not the subsequent commencement of mesothelioma. (See at 77,260-77,261.)
Older authorities suggest that the injury constituted by the initial penetration of the lungs by asbestos fires is not sufficiently material to constitute damage for purposes of determining whether a cause of action in negligence is complete. (See e.g. Cartledge v E. Jopling & Sons Ltd [1963] AC 758 at 774.1 and 779.3 (a pneumoconiosis case) and Footner v Broken Hill Associated Smelters Pty Ltd (1983) 33 SASR 58 at 74.3.) It is not necessary to decide any such question here.
The Appellant’s case depends on when an “injury” has occurred within the meaning of the policy, not when damage has occurred for purposes of the law of negligence. It may be that an injury has occurred at the time of inhalation and penetration of the lungs, even if the disease of mesothelioma can only be said to have commenced at a later date, when the malignancy develops on the lung. (See American Home Assurance v Saunders (1987) 11 NSWLR 363 at 378 and 384 (cf 372) and Martindale v Burrows [1997] 1 Qd R 243 at 245.)
The policy, relevantly, relates to the occurrence of the injury in the following formulation:
“… the Employer shall be liable … to pay any other amount … in respect of his liability independently of the Act for any injury to any … worker.”
I accept, for present purposes, that there may be an “injury” within the policy at the time of inhalation of the fibres. It does not follow that at that time, an employer is ‘liable to pay an amount in respect of his liability’ at common law ‘for that injury’. Some of the observations of Santow JA are directed to rejecting a construction of the policy that would require an injury and damage to occur in the same policy period. I wish to make it clear that that is not how I construe the policy. The relevant insured peril is ‘liability’ rather than the occurrence of the injury.
(Emphasis in original)
Later the Chief Justice said:[8]
If the words of the policy – “liable to pay” – mean the same with respect to the two circumstances to which they apply – i.e. “compensation under the Act” and “in respect of his liability independently of the Act” – then the policy responds in the latter case only if the employer’s liability has, within the relevant period, ‘vested’ or ‘accrued’. In my opinion, that does not occur earlier than the time of onset of mesothelioma. Damage is the gist of the action in negligence. The “injury” occasioned at the time of penetration of the lung by a fibre, if it be injury within the meaning of the policy at all, which I doubt, is so negligible in and of itself, as distinct from its potential, that it does not constitute damage that is compensable at common law.
Accordingly, the policy did not respond during its currency.
The other members of the Court, Mason P and Santow JA, did not share the Chief Justice’s doubt as to whether the penetration of the lung by a fibre could amount to an “injury” for the purposes of the policy.
[8] Ibid at [32]-[33].
Santow JA undertook an extensive review of the authorities relevant to this aspect.[9] I refer to some of the cases which he discussed.
[9] Ibid at [136]-[153].
In Favelle Mort Ltd v Murray[10] a worker made a claim under the Workers’ Compensation Act 1926 (NSW) after contracting a virus which developed into meningo-encephalitis. An issue arose as to whether the entry of the virus into his body was an injury for the purposes of the legislation. Section 6(1) of the Workers’ Compensation Act 1926 (NSW) is set out at [19] of these reasons:
[10] (1976) 133 CLR 580.
Barwick CJ said:[11]
Apart from any effect of the extension effected by par. (a) of the definition, an external excitement initiating a morbid condition of the body would, in my opinion, be an injury within the meaning of that word in the context of a workers' compensation law. It must be remembered that at the outset of such legislation, i.e. in the original English Act, the injury had to be by accident or, perhaps more accurately expressed, the worker had to suffer or receive an injury by accident. Consequently, the universal character of the word "injury" was to an extent limited by its conjunction with the word "accident". But English courts held that the contraction of a disease by external cause could be the reception of an injury by accident. Brintons Ltd. v. Turvey and cases which followed that case sufficiently evidence that course of decision. The same view has been adopted in New Zealand--see Storey v. Wellington Hospital Board. The removal of the word "accident" from the expression "injury by accident" did not, in my opinion, reduce the connotation of the word "injury". Rather, it increased the occasions on which that connotation could be given effect... It may thus be concluded, as I would conclude, that in its normal meaning the word "injury" in the Act itself embraces an externally excited disease.
(Footnotes omitted)
[11] Ibid at 587.
McTiernan J held that an injury occurred when the brain was affected by a virus. He said the disease did not originate from a cause within the body.[12]
[12] Ibid at 593.
Mason J held that, but for the presence of para (a) in the definition of “injury”, he would have had no doubt that the disease was a “personal injury arising out of or in the course of” employment, although it was not associated with some external wound.[13]
[13] Ibid at 595.
Stephen J agreed with Mason J.[14]
[14] Ibid at 593.
Jacobs J said:[15]
It would appear to me that the entry of a virus into the human body is an injury within the first words of the definition. By the infection of more and more body cells the injury leads to what may be described as a disease in the sense that it is a pathological condition in the body cells which results in a morbid physical condition of the body. The minuteness of the initial entry or invasion of a body cell does not change its essential nature.
Jacobs J added:[16]
The actual injury may be the tiniest lesion which allows the entry of bacilli. It may be even less. It may be the entry into a cell or cells of the body of the bacillus or the virus itself. It is sufficient to prove that the entry occurred in the course of the employment. The entry of the virus was the actual injury in the present case which led to the disease of meningeal encephalitis. This entry of the virus occurred in the course of the respondent's employment.
[15] Ibid at 600.
[16] Ibid at 601.

Santow JA also referred to GRE Insurance Ltd v Bristile[17] where asbestos fibres inhaled during the period of employment eventually caused mesothelioma. The insurance policy provided indemnity for “personal injury”. Nicholson J (Pidgeon and Murray JJ concurring) held that such injury could be attributed to the fatal ingestion of fibres although the onset of mesothelioma did not take place until a much later time. He said:[18]
It follows in my opinion that when the plaintiff inhaled fibres he suffered an injury because the inhalation was the external excitement of the disease of mesothelioma. That was a compensable disease under the legislation referred to in the policy. The requirements of the policy in this respect are therefore met. It is not open to the appellant to apply the provisions of the policy to the inhalation of fibres as if that were a separate occurrence from the disease of mesothelioma.
[17] (1991) 5 WAR 440.
[18] Ibid at 451.
Santow JA then referred to the judgment of Derrington J in Martindale v Burrows.[19] When commenting on the potential causative effect of the inhalation of asbestos dust Derrington J said:[20]
…although the harm in this case was in fact caused from that exposure, not everyone would have suffered the same result. It is irrelevant that in some cases there is no progress to the malignant transformation. It is relevant that in those cases where it does so, its course can be traced back through the harm that has led to it by a natural progression in that case. It is necessary only to note that the results may differ in other cases and that they are unpredictable until they manifest themselves, so that, when the plaintiff suffered the initial harm that with further continuing harm was to lead to the present result, it could not then be predicted that what was going to happen would happen. The tendency to refer to hypothetical alternatives that may possibly have occurred with someone else can lead into error if it is used for more than to mark the unpredictability of the plaintiffs condition in its early stages.
Later in his judgment Derrington J said:[21]
While vulnerability to injury or the potential for harm does not itself amount to an injury (Wardley Australia Ltd v Western Australia (1992) 66 ALJR 839, 843), that is different from the position where a morbid condition is initiated, leading naturally to more serious developments at a later stage. It is not a matter of potentiality in such a case simply because in other cases such a consequence might not follow. In Wardley, no harm whatever was done at the earlier stage and it was only when another event in the form of a trigger occurred that any harm followed.
…
It does not follow that if it is established that the condition has developed into mesothelioma, there will have been no relevant injury until the commencement of that development. The appearance of that condition establishes that the earlier morbid changes were indeed so serious as to be productive of mesothelioma at the later stage and were not merely potentially so. This means that the early changes did cause harm substantial enough to amount to injury at law.
[19] [1997] 1 Qd R 243.
[20] Ibid at 245.
[21] Ibid at 246.
In Orica Mason P agreed with the conclusion of Santow JA that the inhalation of asbestos fibres was an “injury” for the purposes of the indemnity clause.[22]
[22] (2003) 59 NSWLR 14 at [63].
This issue was also discussed in Vero. Orica was distinguished from Vero on the ground that the indemnity clause in Vero required the occurrence of the injury to fall within the period of insurance. There was no requirement that liability be established during that period.
Although it was conceded that the worker in that case inhaled fibres which were responsible for mesothelioma occurring many years later, the appellant submitted that “injury” for the purposes of the indemnity clause in the insurance policy did not occur until “the genetic changes in the pleural cells became irreversible”.
Beazley JA (Campbell and Harrison JJ concurring) referred to Martindale v Burrows and Favelle Mort Ltd v Murray and, after discussing the judgments in Orica, said:[23]
As is apparent from an examination of the judgments of both the Chief Justice and the President, the comments made in respect of the time at which a cause of action accrues for the purposes of determining liability was a consideration that had to be undertaken in the context of a policy which indemnified for liability incurring in the period of the policy. It becomes, therefore, almost trite to point out that the policy in this case which provides indemnity for sums that the respondent “shall become legally liable to pay for compensation in respect of bodily injury occurring during the period of insurance” is a policy which responds in respect of a bodily injury which occurs during the period of insurance and in respect of which the insured shall become legally liable to pay compensation. In that regard, the judgments in Orica Ltd, including that of Santow JA, to which I have made only passing reference, were to the same effect, namely that, in the case of mesothelioma, it is accepted that ‘injury’ occurred at the time of inhalation and penetration of asbestos fibre.
(Emphasis in original)
[23] [2007] NSWCA 226 at [177].
In the present case Professor Henderson attributed the highest potential causal effect of asbestos exposure to the first year, 1946. It is to be inferred from this expression of opinion that the asbestos fibres had not only been inhaled, but there had been penetration by the fibres and the first step on the path to mesothelioma had taken place.
In these circumstances and in light of the discussion in the authorities referred to above, it is established, at least on the balance of probabilities, that an event answering the description of an “injury” took place in 1946 when the first policy was afoot.
I should add that the policy refers to “personal injury by accident”. In the passage quoted above from the judgment of Barwick CJ in Favelle Mort Ltd v Murray, [24] His Honour referred to the English and New Zealand authorities to the effect that the contraction of a disease by external cause could amount to injury by accident.
[24] Supra at [25].
The indemnity clause in the policy in Vero referred to “bodily injury… occurring during the Period of Insurance as a result of an accident”.
In my view it can be said that the injury in the present case was the result of an accident.
Another question arises as to what event or events must fall within the period of insurance so as to give rise to a right to indemnity.
In Orica it was held by Spigelman CJ and Mason P (Santow JA dissenting) that the claim for indemnity failed because the wording of the indemnity clause required that the liability of the assured must occur during the period of the cover provided by the policy. Although the injury may have occurred during the period of the cover, liability did not arise until the onset of mesothelioma. Spigelman CJ noted that damage and not the injury is the gist of the action in negligence.
The indemnity clause in the present case can be distinguished from that in Orica. Here the words which limit, in a temporal sense, the liability to indemnify the assured provide that:
“if at any time during the said period or during the continuance of this policy any employee in the direct service of the Assured shall sustain any personal injury by accident…”
The policy goes on to refer to the further condition which must be met for indemnity to apply by providing:
“…then, in case the Assured shall be liable to pay compensation for such personal injury, … the Company shall (subject to the limitation of the amount hereinafter expressed) indemnify the Assured”
It is clear as a matter of construction that this event is not governed by the temporal restriction which applies to the occurrence of the injury.
In this respect the indemnity clause has the same effect as the clause in Vero. In order for the indemnity to arise the injury must occur within the period of the insurance cover, but the onset of mesothelioma and the subsequent liability to pay compensation may occur after the expiration of the policy.
The remaining issue concerns the plaintiff’s submission that, as Mrs Roberts suffered personal injury by accident in each of the years from 1946 to 1959 inclusive, the policy for each year responds and the defendant is required to indemnify the plaintiff to the extent of the total of the amounts set as the ceiling in each policy.
Mr Little submitted that there was only one policy which was renewed annually. Mr Whitington submitted that the renewals resulted in a fresh contract coming into existence each year. The distinction between these two situations was discussed by the High Court in C.E. Heath Underwriting & Insurance (Aust.) Pty Ltd v Edwards Dunlop & Co Ltd[25] in which Dawson, Toohey and McHugh JJ referred to the distinction between the renewal of a policy and the extension of a policy and quoted the following passage from the judgment of Mayo J in Re Kerr:[26]
Strictly, a ‘renewal’ is descriptive of a repetition of the whole arrangement by substituting the like agreement in place of that previously subsisting, to be operative over a new period, whereas an `extension' betokens a prolongation of the subsisting contract by the exercise of a power reserved thereby to vary one of its provisions, that is, by enlarging the period. Upon a renewal similar rights revest ... A contract reserving continuous rights of renewal will, if these be exercised, lead to succeeding contracts in a series, the identity of each contract [being] separate and distinct. On the other hand, the exercise of the right of extension augments the length of time over which the contract operates, without changing its identity.
[25] (1993) 176 CLR 535.
[26] [1943] SASR 8 at 16.
I am satisfied that in the present case there was a fresh contract each year. It appears that the policy was renewable only by mutual consent. Furthermore the premium and the cap on indemnity changed from year to year.
When considering the plaintiff’s argument that each policy responds to the circumstances it is necessary to recall the course which the mesothelioma took. As I have pointed out, according to Professor Henderson’s evidence each of the annual exposures would have represented a significant proportional causal contribution to the resulting mesothelioma. I repeat a passage from his supplementary report. He said:
I would consider each of the annual percentage causal contributions, ranging from 4.5% to 12% to have been significant and non-trivial. Equally, had any one of those ‘annual’ exposures occurred alone, without any of the others, it would still have been of a ‘class, character and magnitude’ appropriate for causal attribution of mesothelioma to it.
(Emphasis in original)
The plaintiff’s case on this issue is summarised in its outline of submissions:[27]
Insurance was taken out annually;
In each annual period of insurance, Mrs Roberts sustained “personal injury by accident” by the inhalation of asbestos fibres and their lodgement in her lungs. These conclusions are supported by the case law on the meaning of “personal injury by accident”;
Professor Henderson’s evidence as to the causative character of such annual periods of exposure, explained above, demonstrates that the ingestion of asbestos fibres during each annual period caused damage and therefore liability requiring the insurer on risk to indemnify the employer; and
Therefore in respect of each year, each annual insurance contract responds on its terms to the set of circumstances for which it, as an annual contract of insurance went on risk, namely the sustaining of personal injury by accident in the course of that year – that was causative of the loss and damage ultimately suffered by Mrs Roberts.
(Emphasis in original)
[27] [64.1]-[64.4].
In Orica Spigelman CJ discussed the question whether, in a case where there is more than one policy issued by the same insurer throughout the period of exposure, each policy responds. It was unnecessary for him to resolve this issue because on his consideration of the indemnity clause he found that it was necessary for liability to arise during the period of insurance. It was for that reason that he found the policies did not respond. It must also be acknowledged that the resolution of this issue depends upon the construction of the particular policy. However, Spigelman CJ’s discussion of the principles, albeit by way of obiter dicta, is helpful to a consideration of the present case.
After discussing various authorities,[28] the Chief Justice said:[29]
Although each of the cases turns on the particular section of the statute in issue, a similar result appears appropriate in the present case. The ‘liability’ arises only once. My conclusion fits no more elegantly into the words of the policy than the cases to which I have referred fit into the various statutory contexts where the result has been as I have indicated. Nevertheless this is, in my opinion, the proper construction of the policy.
The employer becomes “liable to pay” upon a single penetration with respect to the whole of “his liability” at common law. When another penetration occurs the employer’s “exposure” or “risk”, and therefore “liability”, is not changed. I refer, of course, to “liability” where appearing in the second and third points set out in par [7] above, i.e. “liable to pay an amount” and “for which the employer shall be so liable”. It may be that the employer’s “liability independently of the Act” has become more likely to come home, because of the cumulative effect of the exposures, but that is a different matter. Establishing the state of affairs in which the employer is “liable to pay” occurs only once. That state of being “liable” is not affected by other exposures.
Only one cause of action will arise at common law against the employer for the development of mesothelioma, despite there having been multiple “injuries” within the meaning of the policy. There will be only one occasion on which the employer will become “liable to pay”. It does not matter in the present case when that occurs.
On this basis also, the Appellant’s case that more than one policy responded should be rejected.
Accordingly, if the view I have expressed above that no policy responded is wrong, in my opinion, only one policy would respond.
[28] Manufacturers Mutual Insurance Ltd v National Employers’ Mutual General Insurance Association Ltd (1989) 5 ANZ Ins Cas 60-906; National & General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 334-335; NEM General Insurance Ltd (in liq) v GIO General Ltd (1994) 33 NSWLR 247 esp at 264-265; MLC Insurance Ltd v Pinto (1994) 8 ANZ Ins Cas 61-211 esp at 75,341; Insurers’ Guarantee Fund – NEM General Insurance Association Ltd (in liq) v Manufacturers Mutual Insurance Ltd (unreported, 12 August 1994, NSW Court of Appeal, Handley, Sheller and Powell JJA)).
[29] (2003) 59 NSWLR 14 at [55]-[59].
The plaintiff relies on the dissenting judgment of Santow JA who considered that each of the policies in the case responded. His Honour referred to the medical evidence and proceeded on the basis that it could be assumed that the level of exposure was evenly distributed over the years covered by the policies. He said:[30]
[30] Ibid at [200].
Here there is but one employer and one insurer. So consideration of material contribution relates not to which multiple defendant (employer or insurer) was responsible, but which policy or policies must answer, with no statutory basis of attribution or apportionment to call in aid. It is true that we do not know for certain whether sufficient exposure occurred by the first year to trigger the physiological changes that inexorably led to mesothelioma. Nor do we know for certain if that triggering occurred only by the second or third year. But we do know that it was more probable than not that each of the three years of exposure represented, in its cumulative effect, a material contribution to the mesothelioma that later resulted. Thus each year’s policy saw a coincidence in that year of both injury and material contribution to the ultimate onset of the disease with liability (accruing but not yet accrued) in each year. We can reasonably assume that the level of exposure was evenly distributed over the three years of employment, based on the earlier affidavit evidence to which I have made reference. We also can accept from Professor Henderson’s conclusions that the development of the disease is related to the cumulative effect of the continuing exposure, even if earlier exposure may have the greater effect.
(Emphasis in original)
Later in his judgment he said:[31]
[31] Ibid at [210]-[211].
It was not illogical in the line of cases cited therefore to attribute the greatest significance to the last trauma injury rendering liable the insurer at the time. Each trauma was cumulative, but in a different sense to ingestion of asbestos fibre in mesothelioma. In the trauma case, each injury augmented the previous one, making the extent of the injury cumulatively worse, culminating in the last trauma which finally tips the balance. In the case of mesothelioma, each ingestion was added to each previous one, till they reached the cumulative point where one or other fibre penetrated the lung and started the genetic mutations leading inexorably to mesothelioma. But the critical point is that we do not know which fibre or fibres so penetrated; we only know that they had cumulative effect “from the fibre burden in the lungs”. We certainly cannot assume that fibre penetration occurred in the first year (or the last) it being on the Henderson cumulative effect theory, more probable that each year contributed.
The difference with the successive traumas is that each is added to the previous injury culminating in the last one. The last trauma becomes “the straw which breaks the camel’s back”. Whereas with each ingestion “one will normally not know which asbestos fibre caused the mesothelioma. It could be an asbestos fibre inhaled during any time over a lengthy period of exposure”; WorkCover Authority of NSW v Chubb Australia Limited (supra) at [26] per Stein JA.
(Emphasis in original)
His Honour then referred to what he regarded as an analogy with joint tortfeasors. He said:[32]
[32] Ibid at [202]-[203].
The result which I reach is, as I have said, analogous to each of three defendants, each providing one consecutive year of employment, being separately and individually liable “in solidum” to the plaintiff for the entire indivisible disease, with apportionment or contribution determined between defendants but of no concern of the plaintiff’s; compare Stapleton “Lords a’leaping evidentiary gaps” (supra) at 24 and most recently Amaca Pty Ltd v State of New South Wales ([2003] HCA 44, 7 August 2003, unreported).
While that analogy is incomplete, because there are not multiple defendants but a single defendant insurer with three policies of a year each, I consider that the analogy of solidary liability is nonetheless helpful. Liability and causation only arise in a temporal sense in answering the question, has the triggering policy “event” occurred. The question concerns which policy or policies answer, by reference to the events of their respective years. There is here no competition between insurers, but that is an accident of circumstance. I conclude that each of the events of 1959, 1960 and 1961 caused injury and made a material contribution to the onset of the disease and thus to the employer’s liability to the employee. The employer was exposed to an accruing liability to make payment to the worker following that onset. That suffices each year as the event to trigger the policy for that year. Each policy is then required to answer, like one of three defendants facing liability in solidum with the others.
Later His Honour said:[33]
It is for these reasons that I do not consider the analogy compelling, based on statutory compensation for cumulative traumas where only the last insurer is liable. With mesothelioma, I prefer the analogy of solidary liability. I do so because its occurrence does not correlate with the time of first or last exposure in either a temporal or causal sense and because we are here dealing with a continuing injury other than a distinct set of injuries.
It is true that, as Spigelman CJ says that “[E]stablishing the state of affairs in which the employer is “liable to pay” occurs only once. That state of being “liable” is not affected by other exposures. This is so even if the probability of contraction of the disease is increased by cumulative exposure, so in that sense legal liability is more likely to come home. I would respectfully accept those propositions, but they do not to my mind end the matter.
This is because I consider that “liability” (in both the sense of exposure to pay and “liability independently of the Act” for negligence) does not have to occur for each policy during that policy’s term. It suffices if there is a liability (in the two senses), pre-existing or not, which subsists during the period of each policy along with a continuing or repeated injury. Each policy focuses for its trigger on whether the Employer “shall be liable” not, shall become liable, during each policy period. The employer is here exposed (liable) to having to make eventual payment to the worker suffering injury. This is by reason of his original carelessness leading ineluctably to onset of incapacity from the mesothelioma and thus to an accruing liability to pay compensation.
Solidary liability presupposes that, for the plaintiff’s benefit, there is a plurality of legally responsible persons who are collectively responsible. That result is usually accompanied by the capacity to obtain contribution between that plurality of responsible persons but not at the cost of the plaintiff. Here as it happens there is only one insurer to answer so contribution does not arise, but the result should not depend on that. That is why I consider that each and every insurance policy is required to answer, as each policy is triggered in the events that happened.
(Emphasis in original)
This reasoning led His Honour to the conclusion that each of the three policies responded to the appellant’s claim and that they made available by way of indemnity an aggregate sum of the maximum amounts payable under each policy.
[33] Ibid at [216]-[219].

In Vero it was not argued that each policy responded so as to provide an aggregate sum by way of indemnity. However the appellant, who was the insurer, submitted that if it was required to indemnify the assured, liability should be restricted to the policy on foot when the worker first suffered injury by inhaling asbestos. This submission was accepted by Beazley JA. Her Honour said:[34]
In my opinion, the appellant’s submission must be upheld. There was no suggestion in this case that the policies in each of the years of cover responded so as to provide indemnity up to the amount of the policy in each year. It is in this regard that I consider that the conclusion at which I have arrived in respect of the last issue determines the question as to which policy responded. The liability that was covered by the policy was in respect of sums for which the respondent “shall become liable”. That was a liability that arose once only. On the construction which I have given to this policy, that liability arose upon the first exposure, because that was the injury in respect of which the respondent came under a legal liability to pay compensation and to which the policy responded. It is apparent from the received medical knowledge in this area, by which I mean “received” in the authorities, that the greater the exposure, the more likely it is that the risk will come home: see Spigelman CJ at [56] of Orica Ltd. But that is not the question which arises under the policy.
(Emphasis in original)
Her Honour went on to consider the medical evidence in that case and concluded:[35]
However, the question whether it could be said whether Mr Barlow was one of the persons who would develop mesothelioma is not at issue in this case. He fell within that class of persons who did develop mesothelioma. The question for determination was, on the probabilities, which exposure was likely to have caused the mesothelioma which Mr Barlow in fact contracted. As I have said, I consider this question has been determined by my finding that injury occurred at the time of initial exposure. Consistently with that, having regard to the dicta in Orica to which I have referred and having regard to Professor Tattersall’s evidence, the likelihood is that it was the initial exposure which caused the mesothelioma in circumstances where in this case, the initial exposure was significantly heavier than the later exposure.
[34] [2007] NSWCA 226 at [181].
[35] Ibid at [185].
I reject the submission that the plaintiff is entitled by way of indemnity to the aggregate of all the amounts specified in the insurance policies over the years when Mrs Roberts was exposed to asbestos fibres.
The indemnity provided by the policies is conditional upon an injury occurring in respect of which the assured shall become liable to pay compensation. It is inappropriate to view the injury or injuries as being the subject or subjects of the indemnity. The policy provides that the insurer shall “indemnify the Assured against all sums for which the accused shall become so liable”.
I respectfully agree with the view expressed by Spigelman CJ in Orica[36] that issues of causation do not answer the question whether an event has occurred which causes a policy of insurance to respond. I am also of the view that his further observation that “liability arises only once” is apposite.[37]
[36] (2003) 59 NSWLR 14 at [48].
[37] Ibid at [55].
In my view the concept of joint tortfeasors being separately and individually liable “in solidum” does not assist the plaintiff’s case by way of analogy. If anything, the concept of contribution underscores the fact that the judgment sum is not increased in the event of joint and several liability. In Albion Insurance Co Ltd v Government Insurance Office of New South Wales,[38] a case in which double insurance was discussed, Kitto J quoted Lord Mansfield’s statement that:
If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy the loss against which they have all insured.
[38] (1969) 121 CLR 342.
In this case I am satisfied on the balance of probabilities on the evidence of Professor Henderson that Mrs Roberts ingested asbestos fibres during the first year of exposure although this amounted to a significant causal contribution to the end result of mesothelioma. In Professor Henderson’s view the percentage of contribution to the disease in this year was higher than in the subsequent years. But what is important is the fact, as I accept it to be, that this exposure alone without any of the others would have been of a “class, character and magnitude appropriate for causal attribution of mesothelioma to it”.[39] Of course, liability did not arise until the onset of mesothelioma many years later.
[39] Supplementary report of Professor Henderson (D2) at 4.
In my view it is not to the point that the exposure in each of the succeeding years was also capable of giving rise to the mesothelioma if it occurred in the absence of any of the other years of exposure. Nor is it to the point for present purposes that the exposure in other years had a cumulative effect. Once it is recognised that the exposure during the term of the first policy was causative of mesothelioma, without the need for further exposures, it can be said that the indemnity clause in the first contract of insurance responded to it. I do not think that the liability which arose as a result of the exposure in the first year can be taken in conjunction with contributing injuries during the course of subsequent periods of insurance so as to give rise to further rights to indemnity in respect of the same incidence of liability.
The plaintiff seeks declaratory relief.
There will be a declaration that the plaintiff is entitled to indemnity under the 1946 policy to the extent of the maximum amount provided for in that policy, but that there is no right to claim any amount by way of indemnity under the subsequent policies.