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Orica Ltd v CGU Insurance Ltd

Orica Ltd v CGU Insurance Ltd

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NEW SOUTH WALES COURT OF APPEAL

CITATION: Orica Limited & Anor v CGU Insurance Limited [2003] NSWCA 331

FILE NUMBER(S):
40559/02

HEARING DATE(S): 13 May 2003

JUDGMENT DATE: 11/11/2003

PARTIES:
Orica Limited and Orica Australia Pty Limited (Appellants)
CGU Insurance Limited (Respondent)

JUDGMENT OF: Spigelman CJ Mason P Santow JA

LOWER COURT JURISDICTION: Dust Diseases Tribunal of New South Wales

LOWER COURT FILE NUMBER(S): DDT 454 of 2001/1

LOWER COURT JUDICIAL OFFICER: Curtis J

COUNSEL:
M Joseph, SC (Appellants)
G Little, SC/ D Morgan (Respondent)

SOLICITORS:
Phillips Fox (Appellants)
PriceWaterhouseCoopers Legal (Respondent)

CATCHWORDS:
INSURANCE - definition of "liability" - definition of "Injury" - latent diseases - mesothelioma - "trigger" of cover - exposure theory - retrospective legislation

LEGISLATION CITED:
Workers' Compensation Act 1926 (NSW); s6; s7(4) and (5); s18;
Workers' Compensation (Amendment) Act 1960
Workers' Compensation (Further Amendment) Act 1975
Workers Compensation (Amendment) Act 1980
Workers' Compensation (Amendment) Act 1981
Workers' Compensation Act 1987; s151AB; s159

DECISION:
Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40559/02
SPIGELMAN CJ
MASON P
SANTOW JA
11 NOVEMBER 2003

ORICA LIMITED and ORICA AUSTRALIA PTY LIMITED v CGU INSURANCE LIMITED

CATCHWORDS

INSURANCE – definition of “liability” – definition of “Injury” – latent diseases – mesothelioma – “trigger” of cover – exposure theory – retrospective legislation

FACTS

John Beaumont Dunstan (the worker) was employed by the insurers between April 1959 and August 1961 (three years). He was exposed to asbestos dust and fibre in such employment and contracted mesothelioma. The disease was only diagnosed in October 2001, though derived from the much earlier exposure, between 1959 and 1961 in course of his employment. No symptoms of the disease were present until August 2001. There was no sufficient evidence to infer greater exposure at any one period rather than another in the three years.

On 15 May 2002 the appellant employers settled the worker’s common law negligence claim for a verdict of $240,000 inclusive of costs.

The appellants were insured by the respondent CGU Insurance Limited (“CGU”) throughout the period of the worker’s employment, such period being spanned by 3 policies for one year each, and each providing an indemnity limit of $60,000 (plus costs). The policies were in the statutory form required by the Workers Compensation Act 1926 (“the 1926 Act”):

The appellants by cross-claim claimed indemnity from the respondent CGU in respect of the worker’s verdict and its costs. Orica based its claim to an indemnity on the three policies issued in 1959, 1960 and 1961 pursuant to the 1926 Act. In the alternative Orica sought an indemnity from CGU up to the fixed policy limit for each policy current in each policy year of exposure ($60,000 for each policy or $180,000 in aggregate). The respondent asserted it was not liable to indemnify the appellants at all as liability arose only when the worker suffered damage, namely August 2001 and that had occurred outside the period of insurance. Alternatively it posited that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] NSWCA 331
Decision Date: 11 November 2003

CaseChat Overview and Summary

Orica Ltd (the appellant) sought indemnity from CGU Insurance Ltd (the respondent) under three insurance policies issued between 1959 and 1962. The dispute arose from a common law claim by a former employee, Mr Dunstan, who had contracted mesothelioma due to asbestos exposure during his employment with Orica. Mr Dunstan's diagnosis and subsequent claim occurred long after his employment and the currency of the policies. Orica argued that the policies covered its liability to Mr Dunstan, and that subsequent legislative amendments to the Workers' Compensation Act 1926 (NSW) removed monetary limits on cover, providing unlimited indemnity. The Court of Appeal considered whether any of the policies responded to the claim and, if so, the extent of the cover.

The central legal issues before the Court of Appeal were: (a) whether any of the three insurance policies responded to Orica's liability for Mr Dunstan's mesothelioma, given that the common law liability had not accrued until after the policies had expired; (b) if policies did respond, whether retrospective legislative amendments removed the monetary limits on cover; and (c) if the limits remained, whether all three policies aggregated to provide the indemnity, or if only one policy responded. The court had to determine the meaning of "liability" and "injury" within the context of the policies and the nature of mesothelioma as a cumulative disease.

The majority of the Court of Appeal, comprising Santow JA, found that each of the three policies did respond to Orica's claim. Santow JA reasoned that mesothelioma, unlike traumatic injuries, is a continuing injury resulting from cumulative exposure, and it was inappropriate to apply rules derived from multiple trauma or industrial deafness cases to determine the trigger of cover. He concluded that the policies accommodated a continuing liability as long as there was injury during the policy term, and that it was not an unconventional result for each policy in a series to respond. However, Santow JA determined that the monetary limits of $60,000 per policy remained applicable, as the subsequent legislation was not retrospective in its operation on the policy terms.

Consequently, the Court of Appeal allowed the appeal, setting aside the verdict for the respondent on the cross-claim. In its place, the court entered a verdict for the appellants on the cross-claim in the sum of $180,000 (representing the aggregate of the three $60,000 policy limits) plus an amount equal to the costs and expenses incurred by Orica in defending Mr Dunstan's claim. The respondent was ordered to pay Orica's costs of the appeal and in the court below.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

SPIGELMAN CJ

I accept that my conclusion fits no more elegantly into the words of the policy than Spigelman CJ’s, as he fairly recognises. But I believe it more appositely deals with a continuing injury having the cumulative but here long delayed effect of mesothelioma. In that context I do not consider it right to single out the first or last policy by an arbitrary rule derived from multiple trauma or industrial deafness cases. With those cases, unlike mesothelioma, you can identify the last straw which breaks the camel’s back and you do know that back was broken in or around the last year of insurance cover. There is therefore no incongruity for the last policy to bear the whole burden when dealing with trauma and like cases. But not so with mesothelioma, where (i)there is no identifiable last straw, nor indeed a probable first and only straw but a cumulative effect (here over three years) with increased exposure to employer liability each year as a result. (ii)no once and for all injury but continuing injury spanning the term of each policy, (iii)no propinquity between onset of incapacity and the last exposure, and (iv)the policy terms accommodate a pre-existing and continuing liability (in the two senses used) so long as there is, as here, injury during the policy term. Here the relevant event is covered by more than one policy in a series. It is not an unconventional result that each policy answers. That is why, typically, insurance policies, though not these three policies, provide specifically for how “double insurance” is to be dealt with, as by rateable proportion and excess provision; see ch 12 of “Principles of Insurance Law in Australia and New Zealand” by Kelly and Ball (Butterworths, 1991). OVERALL CONCLUSION I conclude that each of the three policies do answer the appellants’ claim but on the basis that their limit remains $60,000. They answer, each to their limit of $60,000, the employer’s claim for indemnity. They therefore make available by way of indemnity an aggregate sum of $180,000 for that purpose plus a sum equal to the costs of the employer’s defence. ORDERS I would propose orders as follows: (1) Appeal allowed. (2) Verdict for the respondent on the cross-claim set aside. (3)In lieu thereof verdict for the appellants on the cross-claim in the sum of $180,000 plus an amount equal to the costs and expenses incurred by the appellants in connection with the defence of any legal proceedings in which liability of the respondent was alleged by the employee Mr Dunstan. (4)The respondent to pay the appellants’ costs of the appeal and in the court below.********

Ratio Decidendi

Legal Principle Established

Established by: SPIGELMAN CJ

Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422 and Rheem Australia Ltd v Manufacturer’s Mutual Insurance Ltd [1984] 2 NSWLR 370 demonstrate that the liability need not be one owed directly to the worker. The former case involved liability to contribute as a joint tortfeasor and the latter case related to a common law claim for loss of consortium by the injured worker’s spouse. But nothing in the reasoning of those cases suggests that the employer seeking indemnity need not establish an accrued liability. Indeed, the reasoning of Glass JA (at 373) and Mahoney JA (at 376-7) in Rheem strongly infers that their Honours would confine “liability…for injury” to liability in the sense that I construe the policy. SANTOW JA:INTRODUCTION The present case in its essentials comes to this. Did the negligent employer’s statutory insurance answer at all a settled common law claim to compensate an employee who, long after that insurance and employment had ceased, was diagnosed with mesothelioma? There were three insurance policies, one for each year of employment, dating back to 1959. Each provide cover limited in amount, that limit being well below the employer’s liability. This is unless subsequent legislation operated retrospectively to remove the limit and provide unlimited cover. Mesothelioma resulted from the employee’s exposure to asbestos fibre at the hands of the negligent employer during that earlier period of insurance and employment. We do not know with any certainty which year during this period of three years the fatal ingestion occurred. But we do know that cumulative exposure increases the risk of contracting the disease but has no effect on its severity. Then there are two further questions in the event that one or more of these policies does answer. Taking into account the Workers’ Compensation Act 1926 (NSW) (“the 1926 Act”), including subsequent amendments in 1981 and 1987 removing monetary limits: (a)does each policy now answer for an unlimited amount, so that it does not matter which of the three policies answers, or if the limit still remains because the later legislation is not retrospective, then (b)(i) do all three policies answer so as to aggregate the monetary limit in each available to meet the appellants’ claim, or (ii)does only one policy answer, so limiting the claim to its monetary limit? In answering these questions and the earlier question, I have had the advantage of reading the judgments of Spigelman CJ and Mason P in draft. I do differ on the first and third questions (whether any policy answers at all and if so, do all three answer) though not on the second (retrospective operation of subsequent legislation). Spigelman CJ and Mason P both conclude that no policy answers. This is essentially on the basis that, while injury may have occurred during the policy period, no “liability” in the sense that term is used in the policy had yet occurred. This was because, in contrast to statutory liability under the Workers Compensation legislation, which vests or accrues immediately on injury, liability at common law neither vests nor accrues until damage is suffered. That occurred only upon later onset of incapacity, when employment and insurance cover had ceased.