Orica Ltd v CGU Insurance Ltd

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 liability was limited by the terms of the policy to one payment of $60,000.

The trial judge in his judgment of 7 June 2002 accepted the respondent’s first submission, holding that the respondent was not liable at all to indemnify the appellants in respect of the worker’s verdict and dismissed the cross-claim altogether. The appellants contend His Honour erred in so holding.

HELD

Per Spigelman CJ, Mason P and Santow JA:

The words “liable” and “liability” are protean and the ascertainment of their meaning must depend on the context in which they are used: Spigelman CJ at [12] and [17]. Mason P at [67]. Santow JA at [87].

The inhalation of asbestos fibres, during the policy period, was an “injury for the purpose of the policy. Spigelman CJ at [24]-[28]. Mason P at [63]. Santow JA at [136] and [141].

Per Spigelman CJ and Mason P (Santow JA in dissent):

Liability does not accrue or vest immediately on injury. For liability to accrue there must be “actual liability” in the form of damage. The language in the policy did not mean contingent, potential or inchoate liability. Without a cause of action in negligence completed by damage there is no corresponding liability on the behalf of the employer. Spigelman CJ at [28]-[33], Mason P at [70], [72], [75].

The vesting of liability, in respect of compensation under the Workers Compensation Act, is distinguished from common law damages. Spigelman CJ [29]-[33]. Mason P [76]-[78].

Per Spigelman CJ, Santow JA agreeing:

The amendments made by the Workers Compensation Amendment Act 1981 to s18(3)(a) of the Workers Compensation Act 1926 did not operate with retrospective effect. They were merely for the administrative purpose of correcting the otiose nature of s18(1) of the Act. Section 151AB of the Workers Compensation Act 1987 cannot be used retrospectively to amend a past policy of insurance issued in the statutory form and to which the new statutory provisions have no apparent application. Spigelman CJ at [34]-[43]. Santow JA at [175]-[191].

Per Spigelman CJ:

The penetration of the lung, based on the accepted aetiology of mesothelioma, only occurred in one year. This is sufficient basis to say that only one policy could have responded if the liability of the insurer had accrued on injury. Spigelman CJ at [48]-[49].

If the injury had occurred in each of the three years of different policies then only the one policy would respond. The “liability” arises only once. Spigelman CJ [51]–[57].

Per Santow JA (in dissent):

The policy is triggered by injury and an accrued or accruing liability; though the latter is yet to crystallise in the form of damage constituting a completed cause of action. Requiring both injury and damage to occur in the same year of a policy for indemnity to arise would produce a substantial gap in the statutory insurance cover and would be contrary to the commercial purpose of the policy in its statutory context to cover diseases of gradual onset, with unreasonable results. However, liability at common law and “exposure” to having to pay future damages must not depend on contingencies which make eventual payment less than probable but here upon the fatal ingestion mesothelioma is an unavoidable result unless some other trauma intervenes; Santow JA at [98], [161], [171].

The phrase “liable to pay” should take the same meaning for compensation at common law or under the Act. Santow JA [125].

Each of the three policies answers the claim, applying the analogy of solidary liability. There is no inconsistency between accepting that one cannot get mesothelioma “twice”, and the proposition that mesothelioma once triggered, is triggered by cumulation of asbestos exposure and fibre. Thus on the accepted expert medical evidence in a material contribution sense, each period of exposure is causative in its cumulative affect on the indivisible condition of mesothelioma though not affecting its severity. Santow JA at [198].

ORDERS

Appeal dismissed with costs.

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

Judgment

SPIGELMAN CJ: I have read the judgment of Santow JA in draft. His Honour sets out the facts, issues, submissions and relevant provisions. I gratefully adopt his Honour’s judgment in these respects.
The starting point must be the policy of insurance which is the basis of the cross-claim which the Appellant filed in the worker’s proceedings in the Dust Diseases Tribunal. The Appellant seeks indemnity under the policy.
The policy relevantly provides, with reference to each of the three periods of one year for which policies in the same terms was issued:
“If, between … and … 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 … amount not exceeding twenty thousand pounds in respect of his liability independently of the Act for any injury to any … 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 policy goes on to provide:
“the Insurer shall be … directly liable to any worker … to pay the … amount for which the Employer is liable and in respect of which the Employer is indemnified under this Policy.”
This policy is in the precise form required by Regulation 1 of the Workers’ Compensation Regulations under the Workers’ Compensation Act 1926 (“the Act”) and by the explicit terms of s18 of the Act. See especially s18(1) and s18(3)(a) set out by Santow JA.
The word “injury” in the policy, as in s18(1), must be given its statutory definition in s6(1) of the Act:
“’Injury’ 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.”
“Disease” is not relevantly defined.
The terminology of ‘liability’ occurs on four relevant occasions in the policy:

The employer has a “liability” at common law “for any injury to” a worker.
Between the two dates identified in the policy, the employer “shall be liable to pay” an amount with respect to the employer’s liability at common law.
The insurer indemnifies the employer against “sums for which the employer shall be so liable”.
The Insurer is “directly liable” to pay a worker “the amount for which the employer is liable” to the worker.

It is the second and third of the four instances which fall to be construed in the present proceedings.
In the worker’s proceedings against the employer, which were settled, the basic allegations, repeated by the Appellant in the cross-claim, were:

“In the course of his employment with ICI the Plaintiff was exposed to and inhaled asbestos dust and fibre.”
“As a consequence of his inhalation of asbestos dust and fibre, the Plaintiff has suffered and will continue to suffer injuries, loss and damage:
Particulars of Injury
(a) Mesothelioma;
(b) Loss of expectation of life;
(c)Nervous shock, anxiety, depression and other psychological sequelae.”

The only one of these particulars to which reference was made before this Court was (a), i.e. mesothelioma. This was the relevant damage for which the Appellant was said to be liable by the worker in the proceedings. There was never an allegation that, in some way, the original penetration of the fibre into the lung could be or was of itself damage which perfected the cause of action in tort.

Construing the Policy

Notwithstanding the origins of the policy in a mandatory statutory form, the policy must be constructed as a contract. That is the legal character of the relationship which the Parliament adopted. The approach to construction is reasonably well established:

The words of the policy must be construed, not the section of the Act which requires the policy to exist. (Sydney Turf Club v Crowley [1971] 1 NSWLR 724 at 732D; (1972) 126 CLR 420 at 426).
The provisions of the Act may assist in determining the proper construction of the policy, not least because they are expressly “incorporated and form part of the policy” and s18(1) of the Act is set out as the first recital of the policy. (State Mines Control Authority v Government Insurance Office of NSW (1964) 65 SR (NSW) 258 at 260-261; Dillingham Engineering Pty Ltd v National Employers’ Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 at 582E-F and 584F-585A; AMP Fire & General Insurance Co Ltd v Miltenburg [1982] 1 NSWLR 391 at 396-397).
The extent of the indemnity by the insurer to the employer must be found in the language of the policy, properly construed. (State Mines, at 261.)
There is no policy discernible in the legislative scheme to favour employers, as distinct from employees. (Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) 42 SR (NSW) 231 at 233.)
Neither party can be said to have proffered the contract and it cannot be construed contra proferentem. (Kodak v Retail Traders, at 233; Green v Windman [1964] VR 297 at 298.) Insofar as Nicholson J in GRE Insurance Limited v Bristile Ltd (1991) 6 ANZ Ins Cas 61-078 at 77,257 construed the policy contra proferentem. I believe his Honour erred. This Court should follow its own prior decision in Kodak.
The proposition that the legislative scheme, particularly by making the insurer directly liable to the worker, evinces an intention that the insurer should be liable whenever the insured employer is liable has not been adopted. (See Registrar, Workers’ Compensation Commission of NSW v National Employers’ Mutual General Insurance Association (1978) 141 CLR 462 at 490 and compare the analysis in MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23 at 25, 34.)
When is an Employer “Liable”?

The words “liable” and “liability” are protean and the ascertainment of their meaning must depend on the context, broadly defined, in which they are used. See particularly the review of the authorities by McHugh JA in Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at [136]-[147]. To the authorities there considered could be added Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200, esp at 206-211, Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 695; Australian Iron and Steel v GIO [1978] 2 NSWLR 59 at 62.
The essential character of liability insurance is well summarised in E.R. Hardy Ivamy General Principles of Insurance Law (6th ed) Butterworths, London, 1993 at 12:
“In liability insurance, in which the assured insures against liability to third parties arising otherwise than from the contract, the liability insured against is the real subject-matter of insurance. The assured has no direct interest in the safety of third persons or in the preservation of their property from harm. The loss against which he seeks protection is not the injury or damage caused by the accident. It is the consequence of the fact that he happens to be responsible for the accident in the circumstances in which it takes place.”
This is reflected in the policy here under consideration where the indemnity applies, relevantly, to liability to pay an amount because of liability for an injury.
There is a line of authority with respect to policies of liability insurance that 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.)
In AMP Workers’ Compensation Services (NSW) Ltd v QBE Insurance Ltd (2003) 53 NSWLR 35 at [9], Handley JA, with whom Mason P and Beazley JA agreed, applied this line of authority to a New South Wales workers’ compensation policy. However, at [15]-[16] Handley JA went on to refer to the consideration by Glass JA of the word “liability” in Australian Iron and Steel v GIO, where at 62, his Honour construed the word “liability” in the then third party motor vehicle policy. His Honour held that in that context – “against all liability … incurred by the owner” – the word did not require liability to be ascertained by judgment or settlement. ‘Liability’ arose at the time the cause of action arises which is when a defendant has incurred a liability in tort to pay damages.
The determination of the meaning of the word ‘liability’ will always turn on the precise words of the policy in their context. In Post Office v Norwich Union, Cacciola, and Distillers v Ajax, the policy words were to the effect: “against all sums which the insured shall become legally liable to pay”. The words “shall become” do suggest a process of establishing liability which is not inherent in the words “shall be so liable”, in the policy under consideration.
In the present appeal, Mr G F Little SC, who appeared for the Respondent, did not put forward a contention that the policy did not respond until ascertainment of damage by verdict or judgment. He propounded a construction that liability arose when there has occurred damage which would “justify the bringing of proceedings for damages” (written submissions par [5]) or “entitling those indemnified to bring an action” (T21 line 39). In substance, this submission propounded a test of enforceability, as distinct from enforcement.
Mr M Joseph SC, who appeared for the Appellant, contended that the policy responded at the time of “injury”. He submitted that injury occurred at the time of inhalation of the fibres. Alternatively, he submitted, if the test of liability required a complete enforceable cause of action there was sufficient damage at the time of inhalation.
The policy, upon payment of a single premium, extends indemnity for both an employer’s liability at common law and for its obligations under the Act. It does this by one use only of the word “liable”, applicable to both matters, i.e. “to pay compensation under the Act” and “to pay any other amount”. The word “liable” must have the same meaning in both applications. Similarly, the words of indemnity are made applicable to both categories by a single clause “all such sums for which the Employer shall be so liable”. Again the word “liable” is used in the same sense with respect to both matters.
The authorities establish that an employer’s liability under the Act accrues when injury occurs, not when consequential incapacity arises and, accordingly, compensation falls to be paid. The statutory policy responds at the time of injury, even if incapacity arises later. (See eg Australian Iron & Steel Ltd v Coal Mines Insurance Pty Ltd (1952) 52 SR (NSW) 47 at 50-51, 52, 55-6; Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 at 384, 404; Manufacturers Mutual Insurance Ltd v National Employers’ Mutual General Insurance Association Ltd (1991) 6 ANZ Ins Cas 61-038 at 76,964 (hereafter “MMI v NEM”); National & General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 334-335; State Mines v GIO at 264-265, 268; Dillingham Engineering at 586-587.)
In contrast, liability arose at the time of incapacity in the case of a disease of gradual onset, not at the time of receipt of the injury. (See Fisher v Hebburn Ltd (1960) 105 CLR 188 esp at 203; State Mines Control Authority esp at 261, 265.) Furthermore, a dependent’s death claim arose at the time of death, not injury. (Ogden Industries Pty Ltd v Lucas (1968) 118 CLR 32 at 38, 39 approving Ogden Industries Pty Ltd v Lucas (1967) 116 CLR 537.) Similarly, compensation under the Act turning on the worker’s election, arises upon the election, not at the time of the injury. (Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 esp at 394-395.)
If the policy responds at the time of injury, with respect to an employer’s liability to make payments under the Act, it is arguable that it should respond at the time of injury with respect to an obligation to make payments for liability at common law.
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.
The authorities which determine that a liability to pay compensation under the Act arises even before incapacity, do not, when properly understood, turn on the time when the injury occurs in and of itself. They turn on the fact that the statute creates a liability or right at the time of the injury.
Each of the cases turn on the particular provisions of the statute which fell to be construed. Under s7(1) of the Act, which determined many of the cases, “A worker who has received an injury … shall receive compensation from his employer in accordance with this Act”. The cases determine that the liability to pay compensation arose immediately upon injury, because s7(1), as properly construed, created a legal obligation arising at that time.
The rights of the worker, and the correlative obligations of the employer, were expressed in different terms in the various cases, but to the same effect. For example, “the rights and liabilities are vested” in the words of Rainbow J from Dwyer v Broken Hill South Ltd (1928) 2 WCR 209, quoted with approval by Street CJ in Australian Iron & Steel v Coal Mines Insurance at 50-51; and there is “a vested right to compensation” at the time of injury. (Ibid at 55.) The question is when can it be said that there are “rights in law” (Ogden Industries (Privy Council) at 38) or an “accrued right” or “accrued liability”. (Fisher v Hebburn at 202-203 esp at 203.9; Western Pastoral Company v Eyeington (1971) 125 CLR 342 at 352; Dillingham Engineering at 586C-587B; TNT Australia Pty Ltd v Horne (1995) 36 NSWLR 630 at 637B-F.)
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 appeal should be dismissed.
Was Liability Unlimited?
On the above analysis it is not necessary for me to consider the other issues that arise. As, however, the matter may go further, it is appropriate to do so.
The Workers Compensation (Amendment) Act 1980, by Schedule 4 cl 1 amended s18(1), so that the reference therein to the amount for which an employer was obliged to obtain insurance in respect of liability independently of the Act was deleted and the words “unlimited amount” inserted. That this amendment was prospective only was made plain by cl 2 of the transitional provisions found in Schedule 13 of that Act which stated:
“2(2)      Where a policy of insurance or indemnity against liability under the Principal Act that is being maintained in force on the date of assent to this Act does not insure the employer for an unlimited amount against his liability independently of the Principal Act, it shall be deemed to insure the employer during the currency of the policy for an unlimited amount against his liability independently of the Principal Act in respect of an injury to a worker that occurs on or after the date of assent to this Act.
(3)          Where a policy of insurance or indemnity against liability under the Principal Act -
(a)          was in force at the time of an injury that occurred before the date of assent to this Act; and
(b)          was not being maintained in force on that date,
the policy shall be deemed always to have insured the employer against any additional liability to which he may become subject on or after that date in respect of that injury by reason of any amendment made by this Act.”
The Appellant did not rely on this provision, nor could it have done so. The amendment to s18(1) did not constitute “any additional liability” to which an employer became subject with respect to a previous injury “by reason of any amendment made by this Act”. Section 18(1) was not one of the provisions that imposed an additional liability. It made provision for the content of policies of insurance to be issued in the future. Clause 2(2) extended the operation of existing policies to injuries that occurred on or after the date of assent.
The Appellant relied for its argument that the policy had, by retrospective legislation, become unlimited on, alternatively:
(i) The amendments made by the Workers’ Compensation Amendment Act 1981 to s18(3)(a).
(ii) The terms of s151AB of the replacement Workers Compensation Act 1987.
The 1981 amendment to s18(3)(a) was made to that part of the subsection which defined the word “other amount”. That definition was for the purpose of the immediately preceding paragraph of s18(3) which required every policy of insurance to provide that the insurer would be directly liable to an employee “to pay the compensation or other amount for which the employer is liable”. Prior to 1981 the definition of “other amount” had referred to “an amount not exceeding the amount for which the employer has obtained a policy of insurance”. After the 1981 amendment that part of the definition was replaced by the words “which the insured person is liable to pay”.
In my opinion, the 1981 amendment was simply tidying up an omission from the amendments of the previous year. Section 18(1) by then provided for an “unlimited amount” and the reference in s18(3)(a) to “not exceeding the amount” had no “amount” to refer to. The words had become otiose. Nothing in these amendments suggest that they were intended to operate with retrospective effect, contrary to the express provisions of the amendments of the previous year, with which the tidying up amendment of s18(3)(a) must be read.
Section 151AB of the 1987 Act is set out by Santow JA. The 1987 Act repealed the 1926 Act including s18(3)(a). Section 159(2) as then enacted stated:
“A policy of insurance shall provide that -
(a) the insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of a worker’s death, to the dependants or other persons to pay the compensation under this Act for which the employer is liable; and
(b) the insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable.”
Counsel for the Appellant conceded that s151AB had no direct relevance to the present case because it was concerned with a situation in which there are two insurers, one of whom is liable to pay the full amount of damage to a plaintiff suing for an occupational disease. However, in some manner, the Court was asked to construe s151AB and s159 to reach the conclusion that pre-existing policies had been amended with retrospective affect. The Appellant relied on the conclusion and reasoning of Curtis J in Di Cecco v Mercantile Mutual Insurance (Workers Compensation) Limited, (unreported, Dust Diseases Tribunal, 21 February 2002).
In that judgment Curtis J relied on the reasoning of Aickin J in Registrar, Workers’ Compensation Commission (NSW) v National Employers’ Mutual Insurance, esp at 490. However, his Honour’s reasoning was contrary to the reasoning of the majority in that case, as analysed by the Full Federal Court in MLC Insurance v FAI Traders Insurance.
I can see no proper basis by which the new provisions with respect to direct liability of an insurer to an employee, can be used to retrospectively amend a past policy of insurance issued in the statutory form and to which the new statutory provisions have no apparent application.
The Aggregate Limit
The Appellant contends that, as there was exposure to asbestos in each of the three years for which the Respondent issued policies to the Appellant, it is entitled to recover the maximum amount of $60,000 for the policy in each year on the basis that there had been an injury or injuries in each of the three years.
The factual material before this Court is limited. As the case of the worker against the employer was settled there were no relevant factual findings. The worker’s affidavit outlining the nature of his exposure was, however, tendered, without objection.
The parties agreed to proceed on the basis that the relevant facts relating to the aetiology of mesothelioma were as set out in pars [89]-[96] of the judgment of Justice Fitzgerald in Baldwin v Plane (1998) 17 NSWCCA 434. Santow JA summarises the effect of these paragraphs.
The determination of when a person becomes “liable to pay” an amount in respect of a common law liability is quite a different thing from deciding whether or not exposure to asbestos fibres has created a risk which made a material contribution to the worker contracting mesothelioma. Issues of causation for purposes of the law of negligence do not answer the question whether or not an event has occurred which causes a policy of insurance to respond.
The relevant event is, on the basis of the Appellant’s submissions, the penetration of fibre to the lungs. There is no evidence, including from Baldwin v Plane, that penetration of the lung, as distinct from inhalation, occurred in more than one year.
In my opinion this would be sufficient to dispose of the Appellant’s contention that it is entitled to recover the maximum amount in each of the three years. However, I proceed on the basis that, even in the absence of any direct evidence, an inference is available that, more probably than not, penetration of the lung by asbestos fibres occurred in each of the three years.
This is not a case involving contribution amongst employers, each of whom has exposed a single employee to asbestos fibres. Nor is it a case involving different insurers who were at risk in different years when an employee was exposed. The statutory construction of particular provisions of the Act and questions of equity arise in such situations. They do not arise in the present circumstance where a single insurer was liable under a policy to a single employer.
The issue that arises here is whether more than one policy responds. I proceed on the basis of an assumption that there was penetration of the worker’s lung in each of the three years, the cumulative effect of which was that he contracted mesothelioma.
The line of authority on which the Appellant relied on the issue of when the employer’s liability arose is relevant. That case law turned, in relevant respects, on the particular provisions of the statutory policies under consideration in each case. Nevertheless, the issue that was being determined was the effect, for purposes of compensation under the Act, where relevant incapacity arose from the cumulative effect of injuries that had occurred in more than one year.
Different views were expressed in this respect, but they were resolved by the judgment of this Court in MMI v NEM, approving the approach taken by Cole J in Manufacturers Mutual Insurance Limited v National Employers’ Mutual General Insurance Association Limited (1989) 5 ANZ Ins Cas 60-906 (“MMI v NEM at trial”), in which his Honour relied particularly on the reasoning of Deane J in National & General Insurance v South British Insurance, at 334-335.
This line of authority concluded that where incapacity results from a number of injuries sustained by an employee in the course of employment with the one employer, in the case of a single consequence, relevantly, “where partial incapacity has resulted from a number of separate injuries”, to use the words of Deane J in National & General Insurance v South British Insurance, at 335, applied by Cole J in MMI v NEM at trial, supra, at 75,793 and implicitly accepted by Samuels JA and Priestley JA on appeal in MMI v NEM at 76,965, the liability to pay compensation under the Act is “properly to be seen as flowing from the last injury and as having arisen at the time of that injury”. (See also 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)). For the respective purposes to which these authorities relate, only one ‘injury’ was found to have the requisite consequences.
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.
Orders
The appeal should be dismissed with costs.
MASON P: I have had the benefit of reading the judgments of Spigelman CJ and Santow JA. They set out the facts and legislation upon which this appeal turns.
In my view, the appeal should be dismissed because none of the policies respond.
I agree with Santow JA that the inhalation of asbestos fibres was an "injury". But each policy required the employer's liability to pay compensation/common law damages for the injury to accrue during the term of the policy.
The Chief Justice's analysis shows that the critical question is whether, between the two dates identified in each policy, the employer became "liable to pay" an amount with respect to its liability to the worker, being a liability "independently of the Act". The latter concept is commonly and loosely described as liability at common law. If such liability arose, the insurer was bound to indemnify the employer "against all such sums for which the Employer shall be so liable".
With respect to Santow JA, I do not read the policy as requiring injury and liability each to accrue in the year of cover. It is the liability (for injury) that must accrue.
The relevant interpretative principles are expounded by the Chief Justice.
That most protean of words, "liable", must be construed in its particular context. Usually the choice is between "actually liable" and "found to be liable" (Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 693 per Jacobs JA). I agree with my colleagues that the latter meaning must be rejected in the present situation. It would effectively rob the indemnity of content, because it would relegate the employer's cover to the vagaries and delays of the litigation process and would not even address the situation where the employer's legal responsibility was too plain to require the worker to sue. The reasoning in Dillingham Engineering Pty Ltd v National Employers’ Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 (discussed below) supports this conclusion.
Santow JA would however reject the alternative suggested by Jacobs JA and espouse something falling short of actual liability at common law as sufficient to cause the policy to respond. In his analysis, the policy does not require that sufficient events come to pass to establish a cause of action in negligence against the employer within the year(s) of cover.
"Liable" must have a common core of meaning (connotation) when used in a single phrase such as "liable to pay". But the circumstances in which that meaning come to be applied may cover a spectrum (ie have different denotations). Two different circumstances appear on the face of the policy, namely liability for compensation and for damages. Within the latter category are included damages stemming from direct or vicarious liability on the employer’s part and damages stemming from a common law tort or breach of statutory duty.
I do not consider that "liable" in this context can ever mean something falling short of an accrued legal liability. A premium has been paid for an insurance policy in the nature of an indemnity. That indemnity is, in turn, "against all sums for which the Employer is liable". The policy also provides that the insurer is "directly liable to any worker...to pay the...amount for which the Employer is liable and in respect of which the Employer is indemnified under [the] policy". This is the language of legal, not moral obligation; and it bespeaks present or accrued liability, not a liability that is contingent, potential or inchoate.
The law has concepts known as causes of action. These define the criteria capable of giving rise to a liability recognised and enforced at law. A cause of action tells a plaintiff what must be proved as a bare minimum, when proceedings may first be brought, and when the time commences to run for limitation purposes. In relation to a right of indemnity against liability, it prescribes the matters capable of triggering a claim. The concept also forms the basis of res judicata. See generally Letang v Cooper [1965] 1 QB 232 at 242-3, Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597, 611; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527, 558; Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (receivers and managers appointed – in liquidation) (1993) 43 FCR 510 at 521; Clarke v Bailey (1993) 30 NSWLR 556 at 564; Judamia v State of Western Australia, Supreme Court of Western Australia, unreported, 1 March 1999.

With the benefit of hindsight we know as a fact (because it is shown as more probable than not) that the worker, Mr Dunstan, suffered the disease-inducing injury between 1959 and 1961 when he was employed at the ICI plant. I agree with Santow JA's analysis as to the process whereby it was established that the risk of injury to which he was negligently exposed came home during this period, with the consequence that the negligent employer fell under a potential liability to compensate the worker, his estate and dependants according to tort law. But that liability remained inchoate, in the eyes of tort law, because damage is the gist of the relevant cause or causes of action.
The worker did not sue or recover damages on the debatable bases that the chance or fear of contracting mesothelioma was the damage suffered (cf GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440 at 442, 6 ANZ Ins Cas 61-078 at p77,254 per Pidgeon J and contrast Metro North Commuter Railroad Co v Buckley 521 US 424 (1997) Scarcella v Lettice (2000) 51 NSWLR 302 at 306, Segal v Fleming [2002] NSWCA 262).
Mr Dunstan might have suffered devastating injury or been killed, perhaps due to a third party's negligence, before the ingested asbestos fibre triggered the manifestation of his disease that is recognised as the accrual of his tortious cause of action stemming from the negligent exposure at the ICI plant. This did not occur. But if it had done so, the worker or his estate might not have had to look to ICI for damages. Indeed, had death been caused by tortious accident occurring after 1961 but before the diagnosis of mesothelioma, Mr Dunstan's estate or dependants could not have sued the ICI companies under the Law Reform (Miscellaneous Provisions) Act 1944 or the Compensation to Relatives Act 1897. This is merely to restate the proposition that any tortious cause of action against the ICI companies required proof that damage recognised in law had been caused by ICI's negligence. But it does indicate the unusual and somewhat unworkable nature of the indemnity asserted by the appellant.
Not only could the worker not have claimed negligence damages without damage, the employer could not point to any corresponding liability on its part. The same principles are at work at both phases.
Santow JA sees a close analogy between the way that the policy responds as regards liability in respect of compensation and liability in respect of damages. As the Chief Justice points out, a long line of cases establish that the statutory policy responds (qua compensation) at the time of injury, even if future events have to occur before the worker's enjoyment of various statutory entitlements that are compendiously described as compensation "fructify".
These cases turned upon the construction of the workers compensation legislation. For example, s7 of the Workers' Compensation Act 1926 (NSW) provided that a worker who received an injury was entitled to receive compensation in accordance with the Act. Later provisions defined the events that triggered the enjoyment of particular benefits. Leaving aside diseases contracted by gradual onset, s7 was construed as generating liability in the employer as at the date when the work-related injury was suffered. For example, in Fisher v Hebburn Ltd (1960) 105 CLR 188 Kitto and Menzies JJ said (at 202-3):
"What has to be identified...is the point of time at which a right to receive or a liability to pay compensation in accordance with the Act accrues in the case of a disease of gradual onset. In other cases the point of time is shown by s. 7 (1) to be the date of receipt of the injury [cases cited] the reason being that immediately upon the happening of that event the worker's employer comes under a statutory liability to pay compensation in accordance with the Act, to the worker if incapacity for work results and to his dependants if death results. It is nothing to the point that the liability thus arising does not entail any payment unless and until incapacity or death supervenes: the liability exists none the less."
Merely because liability to pay compensation accrues upon the suffering of an employment injury does not suggest any reason why a similar approach should be taken as regards tortious claims. The common search for the event triggering liability produces different answers for different types of claim. The law of negligence gives a different answer to the law of workers compensation, because the former requires proof of damage as an essential element before "liability" arises.
At first blush, the reasoning of this Court in Dillingham Engineering appears to contradict my conclusions. The decision establishes that, as regards a worker engaged inside New South Wales but injured outside it, the workers’ compensation insurer under the Workers’ Compensation Act 1926 is liable to provide indemnity in respect of a claim for damages at common law. The worker had received workers’ compensation payments in Queensland. It was argued by Mr Yeldham for the insurer that this discharged its obligation to indemnify in respect of common law liability because “the two indemnities go hand in hand” (at 581). The Court rejected this argument and held that receipt of Queensland compensation affected the employee’s liability for compensation in New South Wales but not in its liability at common law.
In this context, Moffitt JA (with whom Holmes JA agreed and Asprey JA substantially agreed) said (at 586-7):
The obligation of the insurer to indemnify the employer, attaches as soon as a compensable injury occurs [he cited the line of cases, including Fisher v Hebburn Pty Ltd to which the Chief Justice and I have referred] …
It follows that liability of the employer for workers' compensation under the Act, being that in respect of which the obligation to indemnify then arises under the policy, attaches in respect of any injury which falls within s7(1A), as it does with an injury which falls within s7(1), at the time the injury occurs. It is at this point of time that the operation of the policy in respect of common law liability must be considered. Liability of a negligent employer arises upon the happening of the injury. At that time the words "worker" and "injury" are applicable to the circumstances. Hence these words of the policy serve to extend the indemnity to this liability at common law and not to exclude it. Any question of receiving workers' compensation payments can of necessity only arise after the injury is received. Liability for workers' compensation and at common law attach, if at all, when the injury occurs. At that time the right to be indemnified arises. It would be difficult to see how the time limits of the indemnity cover could operate if it were otherwise. There is no ground in principle or by reason of the terms of s7(1A) to infer that the liability of the employer under the Act or at common law in a case within the initial part of s7(1A) or the indemnity in respect of either is suspended until it is determined whether the worker will choose to receive workers' compensation elsewhere in terms of s7(1A)(a). The consequence of provisions such as s7(1A)(a), in common with other provisions such as s53 or the last provision in 64(1)(a) in the case of workers' compensation payments and in common with provisions such as s63(3) in the case of damages at common law, is that they or the lapse of time serve to vary or even extinguish or render unenforceable the particular liability. They do not retrospectively nullify the liability which formerly existed, and they do not extinguish an obligation to indemnify which has arisen under an insurance policy.
This passage confirms that the liability with which the policy is concerned is not confined to liability “found”, in the sense of being established by agreement or order. But the passage does not support the view that injury without damage is enough to cause the policy to respond to a negligence claim. This is because the worker in Dillingham Engineering was immediately incapacitated by the injury he suffered at work. Just before the passage quoted above, Moffitt JA said (at 586):
The question of when liability of an employer for workers' compensation payments arises has been dealt with in a number of decided cases, some of which have had to deal with the particular problems which arise where the injury is a disease of a progressive nature or where the incapacity, for this or some other reason, is separated from the happening of the injury. Those particular problems do not exist in the present case because of the coincidence of the injury and the incapacity. However, it is clear, when, as here, a worker receives an ordinary injury with accompanying incapacity, that a liability in the employer to pay compensation then accrues and, in particular, that the liability which then accrues is that which is referred to and indemnified under a workers' compensation insurance policy which is in the terms prescribed by the Act.
Nothing in the reasoning even hints at the right of indemnity descending in advance of circumstances giving rise to a fully-constituted cause of action in respect of an actual liability that is presently enforceable.
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.
For my part, I reach a different conclusion on the meaning of that many-shaded term “liability”. I do so because I consider that, read in context, the narrower meaning of “liability” (an actually accrued legal liability) is not the sense in which the policy uses that term. That narrower sense produces an unreasonable, even oppressive result which would defeat the main commercial object of the policy. That object is to ensure that employers have the financial wherewithal to meet workers’ negligence claims under a comprehensive scheme for compulsory insurance also giving direct rights to workers, and itself mandated by a workers’ compensation statute for the benefit of workers. By denying insurance cover to workers suffering diseases like mesothelioma, simply because injury in temporal terms occurs well before damage, would leave a large gap in that insurance safety net, contrary to the evident purpose of the legislation and the policy. Indeed while no-one could have anticipated in 1926 or in the period of insurance the potentially catastrophic effect of mesothelioma claims, there is no doubt that the intention was to include diseases of gradual onset; see s7(4) and (5) of the 1926 Act (quoted later). Such temporal separation could be even as short as a year. It could occur even between two consecutive insurance years, where there is a fresh policy for each year. That is so, though here damage happened to occur when there was no insurance policy, many years later. Yet on the narrow meaning of liability that would be fatal to insurance coverage. Thus if injury occurs in year 1 and damage in year 2 or subsequently, and even though there be a separate policy for each year, that will on that construction be fatal, as injury and liability, so defined, have not coincided but straddle two policies. I conclude that construction is not how the policy terms should be read, when their context is properly considered.
Indeed such a result also involves a further anomaly. It appears accepted in the reasoning of Spigelman CJ and implicitly of Mason P that such a gap would only occur in common law negligence claims, but not in statutory compensation claims. The statutory policy would evidently cover the latter. This is because the authorities establish that an employer’s liability under the Act accrues when injury occurs, not when consequential incapacity arises. Accordingly, while compensation in a practical sense could hardly be claimed before any damage is suffered (how could it be quantified?) a declaratory judgment could perhaps be sought though in NSW that practice (based on Privy Council authority in Ogden Industries v Lucas (1969) 118 CLR 32) had long fallen into disuse; see Mills “New South Wales Workers’ Compensation (Butterworths, 1979) at 192-3. This is because the statutory policy has nonetheless been held, correctly in my view, to respond at the time of injury, even if incapacity arises later for what is, in reality also a liability yet to manifest itself in any damage. See for example Australian Iron & Steel Ltd v Coal Mines Insurance Pty Ltd (1952) 52 SR(NSW) 47 at 50-51, 52, 55-6; Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 at 384, 404; Manufacturers Mutual Insurance Ltd v National Employers Mutual General Insurance Association Ltd (1991) 6 ANZ Ins Cas 61-038 at 76,964 (hereafter MMI v NEM); National General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 334-335; State Mines Control Authority v Government Insurance Office (NSW) (1964) 65 SR(NSW) 258 at 264-265, 268; Dillingham Engineering Pty Ltd v National Employers’ Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 at 586-587.
These questions must ultimately turn on the proper interpretation of these policies according to their contractual terms as embodied in statute, namely the Workers Compensation Act 1926 (NSW) and its regulations. That requires first establishing when “injury” occurred. The policy then requires that in addition there be “liability” on the part of the employer in the dual sense of liability to pay compensation and liability independently of the Act. The central issue is whether the latter requires an actual legal liability by way of completed cause of action against the employer, or is satisfied by something less, namely a liability accruing due, but yet to manifest itself in onset of incapacity. Indeed in one sense, damage in the sense of injury has occurred, by reason of the ineluctable progress towards mesothelioma.
Answering these questions is made more difficult by the fact that mesothelioma is a disease whose aetiology of cause, behaviour and prognosis is still not completely understood, though our knowledge has expanded over time. The question of its causation is sometimes expressed in terms of whether particular exposure, or its prolongation, has brought about a material increase in risk of injury. But in Australia more is required. The risk must come home so as to implicate the defendant, by showing on the balance of probabilities that the defendant at the least “materially contributed” to the injury suffered; Mason P in Bendix Mintex Pty Limited v Barnes (1997) 42 NSWLR 307 at 312-320. While we do not know precisely why it is that one employee suffers mesothelioma but not another under similar conditions, nor when precisely that employee suffered a fatal ingestion of fibre, the law nonetheless accommodates a degree of imprecision in these matters. It does so by what Mason P calls a “robust and pragmatic approach” to proof of causation.
“It can be demonstrated that the common law is not unsympathetic to the plight of plaintiffs who are faced with multiple defendants yet uncertain as to which of them was legally responsible, where it appears that not all of them were. First, proof that any defendant caused or contributed to injury or damage by negligent breach of a duty of care will suffice to impose liability on that defendant. In other words, the law readily embraces the notion that several persons may bear legal responsibility for the one injury. Secondly, the trier of fact is entitled (indeed encouraged) to take a "robust and pragmatic approach" to proof of causation. The inability to call lay or expert evidence that shows the precise way in which something has happened is not fatal: see Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538 at 563-564, 569; Tubemakers of Australia Ltd v Fernandez. Thirdly, slight evidence may suffice to persuade the trier of fact that liability has been sheeted home to a defendant where the facts are particularly within the knowledge of that party: Parker v Paton (1941) 41 SR (NSW) 237; 58 WN (NSW) 189; Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371-372. Fourthly, a plaintiff who has sued multiple defendants one or more of whom may be liable is entitled, upon showing prima facie that at least one defendant may be responsible, to insist that the court hear the whole of the evidence before entertaining submissions by any other defendant that no case has been established against that defendant: Broken Hill Proprietary Co Pty Ltd v Waugh (1988) 14 NSWLR 360 at 372. This principle may be vital to a plaintiff who needs to seek an extension of time in which to bring proceedings against a number of defendants: see Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549. Fifthly, there is a special "rule" relating to a pre-existing medical condition, although it probably reflects little more than a commonsense or lay approach. It is that:
‘... where a plaintiff has ... made out a prima facie case that incapacity has resulted from the defendant's negligence, the onus of adducing evidence that his incapacity is wholly or partly the result of some pre-existing condition or that incapacity, either total or partial, would, in any event, have resulted from a pre-existing condition, rests upon the defendant.’ (Purkess v Crittenden (1965) 114 CLR 164 at 168.)

Establishing causation in Australia for diseases of gradual onset, though aided by this approach, nonetheless requires more of the claimant than merely to establish that “a particular matter [exposure to asbestos] cannot be excluded as a cause”; per Beazley JA in Bendix Mintex Pty Limited v Barnes (supra) at 339.
That warning is apposite when it comes to considering the extent of the evidentiary gap allowed to be overcome for the employee who suffered mesothelioma in the United Kingdom in Fairchild v Glenhaven Funeral Services Ltd [2002] 3 WLR 89. The House of Lords had to deal, not with several successive insurance policies and insurance periods, but with several successive careless employers and employment periods. Under the current state of medical knowledge, onset of the disease could not be attributed exclusively to one of several successive employers, all equally careless. The evidence, given the limitations of medical knowledge, did not enable the Court to establish which employer was responsible for the employee’s fatal ingestion of asbestos fibre leading to his mesothelioma, though it did establish that any one of these employers must have been responsible. Fairchild held that in those special circumstances the claimant need not prove on the balance of probabilities that a particular employer’s tortious conduct, being one of several employers who carelessly exposed the employee to asbestos fibre, caused or materially contributed to the claimant’s injury. It suffices if the claimant can prove on the balance of probabilities that the defendant chosen to be sued, materially contributed to the risk of the injury (mesothelioma) that the claimant suffered (as distinct from materially contributing to the injury itself). Such an elision (from causing injury to merely causing its risk) is not permitted under Australian authority to overcome difficulty in establishing causation.
The present case, as I have said, does not involve multiple employers or different insurers over an extended period. Rather it involves the one insurer’s successive insurance policies, one for each year over three years, each with its own monetary limit on cover. If under the statutory wording, the policies can answer at all, the further questions posed by their financial limits are fundamentally temporal problems of causation. They concern when the relevant event or events have occurred which render the policy liable to answer. In each or any of the three years, did the events in question cause both injury and employer liability, within the meaning of those terms in the policy? Is there any basis for apportionment between the three policies, given that there was only one insurer throughout? Problems of apportionment were left unsolved by Fairchild as Professor Stapleton explains, in her article “Lords a’leaping evidentiary gaps” in (2002) 10 Torts Law Journal 1 at 24-30. If there were no retrospective removal of these monetary limits, the question turns on whether the first year’s policy for 1959 did meet the total claim, if it meets any claim at all; or whether the three policies combine in aggregate to meet the total claim in the amount of $180,000. If the former, then only $60,000 is available under that policy’s monetary limit. If the latter, then $180,000 is available, by aggregating the monetary limit of $60,000 per policy (for 1959, 1960 and 1961 respectively).
In determining whether the policy answers at all, under its statutory terms both “injury” and “liability” of the employer must occur and coincide with the term of the one policy. The term “injury”, like “liability”, has its own range of possible meanings, to which the effect of cumulative exposure is relevant. Does “injury” in the sense used in the policy, occur when the fibre is first ingested or only after a sufficient cumulative exposure over time, or when the disease first manifests itself? What can we conclude as a matter of probability, though our knowledge is incomplete? When, following injury to the worker, is the employer “liable to pay” in respect of the employer’s “liability” to the worker independently of the Act? Has that occurred during the currency of the policy? The answers to these questions bear on which policy answers, if any policy does, or whether all do. While we know that the minimum exposure to asbestos dust capable of triggering its occurrence can be the ingestion of one fibre, the expert evidence of Professor Henderson has been accepted in other cases, including an important case in the Dust Diseases Tribunal which went on appeal to this Court. According to his evidence in that case, which was accepted, prolonged exposure to asbestos fibre does accentuate the risk of its occurrence (“the cumulative effect” theory); E M Baldwin & Son Pty Limited v Plane & Another (1998) 17 NSWCCR 434 at [95-6] per Fitzgerald A-JA. No argument was put to the contrary of that proposition in the present case. It was accepted in argument there was a practical need to draw upon expert evidence accepted in other cases in the Dust Diseases Tribunal (or on appeal therefrom) in this specialised area of its jurisdiction; compare s25(3) of the Dust Diseases Act 1989 (NSW). During oral submissions (T, 26) the parties agreed that insofar as the court needed to have before it evidence of the cause of mesothelioma in relation to the inhalation of asbestos dust and fibre, it could assume that the evidence of Professor Henderson as set out by Fitzgerald AJA in Baldwin & Son Pty Limited v Plane (supra) at [89] to [96] was accepted by the Tribunal and should be accepted by this Court, including in particular the cumulative effect theory. I shall return to this aspect later.
This present case also poses the question whether the negligent employer’s “liability”, as that term is used in this policy, is limited to the actual crystallised liability when the disease manifested itself, or does it extend back to the time when the asbestos fibres were first ingested, as would lead inexorably to the onset of mesothelioma, assuming the worker did not die from other causes? The time of onset of symptoms is conventionally said to be when the employee’s cause of action is complete, as only then is damage said to occur. The respondent therefore contends that that is when “liability” first occurs, within the meaning of the policy, as it is only then that the employer can invoke the policy to seek indemnity for that liability. The respondent then relies on this event being outside the policy period.
On the other hand the appellants contend that the trial judge was in error in accepting that narrower meaning of “liability”. The appellants contend that “liability” for the purposes of the policy arises when it is inchoate or merely potential. Alternatively, I consider whether it arises
(i)when the liability, though yet to crystallise, is essentially unavoidable following sufficient ingestion, or
(ii)when the employer is exposed to, or at risk of, liability to make (future) payment to the worker.
One might compare the first kind of liability to the liability to tax which is yet to accrue, but inevitably will fall upon the tax-payer at the close of the year of income, when the tax can then be calculated and an assessment issue; compare Newton v Federal Commissioner of Taxation [1958] 98 CLR 2 at 7 (Privy Council). Such a liability is not a contingent liability in the sense of it depending on any uncertain contingency. Here too we know, though in retrospect, that there was no further uncertain contingency required. Onset of disease was, we now know, unavoidable after the fatal ingestion. Though it took many years to come home, it worked its inexorable way to that outcome.
That intermediate sense of “liability” picking up claims accruing due is in no way strained. It aptly fits the context of a compulsory insurance scheme comprehending, for the benefit of worker, diseases of gradual onset. If such a gap exists in the insurance coverage, this would be as oppressive as a new authority succeeding to the assets and liabilities of the old, but not those liabilities by way of claims accruing but not yet accrued; see Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1, discussed later. It is wrong to treat this case as the paradigm, for in many situations the period between injury and damage may be much shorter. Moreover if there be a second policy only when damage manifests, it will not answer either, as injury pre-dates. Thus in Kelly v Norwich Union Fire Insurance Ltd (1990) 1 WLR 139 a policy was held not to answer which was in force when damage to a building occurred as the relevant event bringing that about (incursion of water) pre-dated the policy. Importantly the Court of Appeal emphasised that the crucial event triggering policy cover was the event of incursion of water, not the later damage. That is an approach which applies by analogy here, where the event of injury from exposure to asbestos fibre is the essential trigger, not the advent of damage from later established legal liability, as distinct from an earlier accruing liability. That of course needs to be tested by reference to the precise policy wording of the policy here under consideration and I deal with that later in this judgment. Essentially I conclude that the policy is triggered by injury and an accrued or accruing liability, though the latter be yet to crystallise in the damage that constitutes a completed cause of action. This has the beneficial result that statutory compensation and common law liability independently of the Act are not artificially differentiated, based on statutory compensation supposedly not requiring damage, in terms of qualifying for insurance cover.
The starting point to elaborate on the answer to these questions must be the contractual terms of the statutory policy in its statutory context. Account must be taken of subsequent amendments or re-enactments, but only to the extent, if at all, that they have retrospective effect. The terms so construed must then be applied to the present circumstances. While legal principles and authority have determined in other cases when “liability” and “injury” occur, those terms ultimately depend for their interpretation on the policy terms themselves. I turn, however, first to the salient facts, which are not in dispute.
THE PRESENT APPEAL
The Salient Facts
(a)          John Beaumont Dunstan (the worker) was employed by the appellants then named ICI Limited and Imperial Chemical Industries of Australia and New Zealand Limited (subsequently re-named Orica Limited) and Orica Australia Limited (both referred to collectively as “Orica”) between April 1959 and August 1961 (three years). He was exposed to asbestos dust and fibre in such employment and contracted mesothelioma. This was in course of his duties in a supervisory capacity (Shift Superintendent) at the ICI plant. It was diagnosed only in October 2001, though derived from the much earlier exposure, between 1959 and 1961 in course of his employment. His evidence is contained in an affidavit of 14 May 2002 (black, 45 and following). It attests to
(i)the lack of precautions against asbestos dust and fibre taken by his employer,
(ii)          its apparent state of knowledge of the dangers,
(iii)         his own lack of knowledge of such dangers,
(iv)his various exposures to asbestos dust and fibre in unprotected conditions throughout the three years of his employment, there being no sufficient evidence to infer greater exposure at any one period rather than another in the three years (though he describes a particular incident involving exposure to asbestos dust and fibre over 4 or 5 days for several hours in the first few days of his employment (at para [50])),
(v)absence of any likely exposure outside that period of employment, whether before or after,
(vi)that he was in good health until August 2001 when he experienced his first symptoms, leading to extensive treatment and extreme pain, and
(vii)        finally, diagnosis in October 2001 of mesothelioma.
(b)Mr Dunstan subsequently brought proceedings in the Dust Diseases Tribunal by statement of claim against the appellants seeking damages in respect of his condition which he alleged was due to the negligence of the appellants. On 15 May 2002 the appellants settled the worker’s claim for a verdict of $240,000 inclusive of costs.
(c)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”) quoted below.
(d)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 in its written defence to the cross-claim admitted that it issued the three policies and admitted liability but limited to the sum of $60,000. Subsequently, whilst admitting it insured the appellants, it 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 liability was limited by the terms of the policy to one payment of $60,000. It thus asserted that (as recorded by the trial judge Curtis J):
“(a)It is not liable to indemnify Orica because the policy indemnified only against a liability of Orica that arose during the period of insurance. Because the liability of Orica arose only when the plaintiff suffered damage; that is in August 2001, the policy issued by CGU does not respond.
(b)In the alternative the indemnity was limited by the terms of its policy to $60,000.”
(iv)The trial judge in his judgment of 7 June 2002 accepted the respondent’s first submission, holding that the respondent was not liable at all to indemnify the appellants in respect of the worker’s verdict and dismissed the cross-claim altogether. The appellants contend His Honour erred in so holding. They seek on appeal in the alternative
(a)full indemnity for $240,000 plus costs (on the basis that the $60,000 limit was removed retrospectively by later amendments in 1981 and 1987 to the 1926 Act),
(b)indemnity limited in aggregate to $180,000 plus costs (on the basis that all three policies apply), or
(c)indemnity limited to $60,000 plus costs (on the basis that only one policy could answer).
In addressing those issues and the contentions of the parties, it is necessary to consider the precise terms of the statutory policy of insurance issued at the time, and the relevant legislative provisions.
THE WORKERS’ COMPENSATION LEGISLATION AND THE STATUTORY POLICY
Terms of Statutory Policy
The statutory policy of insurance in force for each year between 1959 to 1961 was mandated by regulation 1 of the regulations to the 1926 Act. Regulation 1 required the policy “to contain only such provisions relating thereto as are contained in the form of policy in the Appendix hereto”. The appendix, relevantly, provided as follows:
“Whereas by virtue of the Worker’s Compensation Act 1926, as amended (hereinafter called the Act), it is provided that every employer shall obtain from an Insurer licensed under the Act to carry on business in the State a policy of insurance or indemnity for the full amount of its liability under the Act to all workers employed by him and for an amount of at least £20,000 in respect of its liability independent of the Act for any injury to any such worker and shall maintain such policy in force and…
Now this policy witnesseth that in consideration of the payment by the employer to the insurer of the above-mentioned premium .., if between the …… day of ……………. And 4 o’clock on the afternoon of …… day of …………. And thereafter to 4 o’clock on the afternoon of the last day of any subsequent period in respect of which the premium shall have been paid to and accepted by the insurer, 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 ….” [emphasis added]
The policy goes on to provide:
“the Insurer shall be directly liable to any worker … to pay the … amount for which the Employer is liable and in respect of which the employer is indemnified under this policy”
There is a proviso finally that
“this Policy shall be subject to the Act and the Rules and Regulations made thereunder, all of which shall be deemed to be incorporated in and form part of this Policy”.
The policy provides for a single premium based on the amount of “wages, salaries and all other forms of remuneration” (cl 9 and introduction). The premium is subject to adjustment based on inspection of the wages book (cl 11), but not, evidently, so as to extend the insurance period. That period can be taken ordinarily to be of a year, as these three policies were, though no doubt capable of being for a longer period if a larger initial premium were paid (see reference to “subsequent period”). The case proceeded on the basis that each policy was a separate policy and not simply an extension of the previous one.
There is some possible significance in the fact that the policy proceeds on the basis that the employer may in some circumstances know of the injury, but not of “any incapacity arising therefrom”. Thus under cl 2, “claims” it is provided that:
“Claims.
2. The Employer shall give notice to the Insurer of any personal injury as soon as practicable after information as to the happening of such, or of any incapacity arising therefrom, comes to the knowledge of the Employer or of the employer’s representative for the time being, and shall forward to the Insurer forthwith after receipt thereof, every written notice of claim or proceedings, and all information as to any verbal notice of claim or proceedings.”
Finally, I should note that regulation 1(a) of the regulations containing the policy terms in an appendix requires that “every policy of insurance or indemnity shall contain only such provisions as are contained in the form of policy” there found. I refer below to s18 of the Workers Compensation Act and the relevant definitions.
The legislation – Workers’ Compensation Act 1926 as amended
The policy issued by CGU was issued pursuant to the 1926 Act. “Injury” is an essential requirement for indemnity under the policy. Section 6 of the 1926 Act contains a definition of “injury” which was subsequently amended on several occasions. In 1942 the original definition of injury was repealed and replaced with the following:
“’Injury’ means personal injury arising out of or in the course of employment and includes 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 ….”

Here “injury” occurred before 28 May 1981, namely during the course of employment when the fibre was ingested that was to cause the disease. When one looks at “this Act”, that of 1981, to see what “additional liability to which he [the employer] may become subject on or after [28 May 1981] in respect of that injury by reason of amendment made by this Act” the answer is clear. Additional liability of the employer was imposed on the employer by the 1981 Act for liability under the Act (see in particular schedule 2 listing specific (increased) amounts payable for “loss of arm” etc). Additional liability of the employer was not imposed by the Act for “an amount which that insured person is liable to pay independently of this [1981] Act for any injury to such work”.
The whole point of the amendments to s18 was not to impose further liability on the employer independently of the Act but “under” the Act. What the employer was required to do by the Act with respect to his separate extra-statutory common law liability for future negligence was to take out insurance which covered the employer’s liability, whatever that amount may be, plus covered any compensation payable under the Act. The Act elsewhere provides for employee election between the two remedies. True it is that s18(3)(a) says that the policy shall provide that the employer is directly liable to any worker insured, “to pay the compensation or other amount” (the latter being the common law liability). But that is not to evince an intention to impose any additional liability by the Act for past events. Rather it operates for future events.
Conclusion on retroactive operation of 1981 Amendments
In my judgment, the 1981 amendments did not, as a matter of their plain language, have the retroactive operation contended for by the appellants. This is without calling in aid the presumption against such retroactive operation, or invoking fairness. Certainly any intention retroactively to alter the insurance indemnity so it became unlimited does not appear with any “reasonable certainty” so as to overcome the evident unfairness to insurers if it did. That result is consonant with giving proper primacy to the terms of the policy.
The 1987 Act – retroactive operation?
That leaves for consideration the 1987 Act, which repeals and replaces the 1926 Act. I do not consider that s151AB of the 1987 Act and in particular subs (5), can have the effect contended for by the appellants. Those provisions are directed to determining which insurer is liable for an occupational disease “among a number of insurers under policies of insurance obtained by the employer for different periods”, where “an employer is liable independently of the Act for an occupational disease contracted by the worker”. The appellants place reliance on the following words “which insurer is liable to indemnify the employer for the amount of damages to the worker or which is liable to pay the full amount of damages to the worker …”.
Conclusion on retroactive operation of 1987 Act
I agree with the respondent that when s151AB(5) there provides that “[T]his section applies to any liability arising before or after the commencement of this Act and to any policy of insurance issued before or after that commencement” it does so only for the particular purpose of the section, namely attribution of responsibility to a particular insurer amongst multiple insurers. It is true that the section presupposes a liability to indemnify for the full amount of damages to the worker in respect of previously issued policies (as well as policies issued after 1987). But that is explicable by the fact that there was since 1980, full indemnity under policies issued from 1980 on, so that s151AB(5) does have need to refer to pre-existing policies in that category. Neither s151AB nor s159 (which provides in subs (2) that the liability of the insurer to the employer is the same as the liability of the employer to the worker) nor any other provision of the 1987 Act provide for retroactive operation of those provisions which introduced unlimited indemnity, starting in 1980. I agree with the respondent’s submissions on the 1987 Act.
OVERALL CONCLUSION ON RETROACTIVE OPERATION
Even without resort to any interpretive presumption the language of the 1987 Act, like the that of the 1981 legislation, does not readily comport with a retroactive operation. The interpretive presumption against retroactive operation and fairness considerations reinforce that result. It follows that the three policies are each subject to an individual $60,000 limit that has not been replaced by an indemnity obligation for an unlimited amount. In so concluding, I agree with the observations of Spigelman CJ on the issue of retrospectivity.
Aggregate limit under policies?
The final question is whether resort may be had to all three policies for an aggregate cover of $180,000, or whether cover is only available under one of these, for $60,000.
Here no statutory apportionment or contribution may be called in aid. The appellants’ argument for aggregation is encapsulated in these propositions in the written submissions:
“Alternatively, the Appellant submits it is entitled to indemnity in the sum of $60,000 for each policy period giving rise to a total indemnity entitlement of $810,000 plus costs as:
(a)The period of the worker’s employment was spanned by 3 policies each providing an indemnity limit of $60,000 and costs;
(b)Each exposure to asbestos makes a material contribution to the injury – Stevenson v James Hardie & co Pty Ltd 15 NSWCCR 568;
(c)The worker inhaled asbestos fibres during the whole of the period of employment;
(d)Bodily injury was occasioned during the period covered by each policy.”
The respondent’s answer is encapsulated in its written submissions in these terms:
“In the event that the Respondent’s argument as to the limit of indemnity contained in the policy is accepted, it is submitted that is a liability to pay damages independently of the Act. The damages in this case are for a one and indivisible sum for mesothelioma i.e. one liability and in such case there is no evidentiary basis for finding a separate and distinct liability in each of the three successive years. Accordingly, it is submitted that the policy, renewed as it was, was limited to the sum of $60,000.”
The starting point is the aetiology of mesothelioma, summarised in these six propositions (paragraph references corresponding to the judgment of Fitzgerald AJA in E M Baldwin):
(a)The development of the disease is related to the cumulative effect of all asbestos fibre inhaled in the period which ends about 10 years prior to its first diagnosis [90],
(b)There is no single “mesothelioma cell” in the early stages. A protracted series of genetic mutations occurs in the lungs. Eventually there is a clonal growth, which invades tissue and results in mesothelioma [90];
(c)Earlier exposures to asbestos are more significant than later equivalent exposures [90];
(d)Multiple factors are relevant to the development of mesothelioma: the potency of the form of amphibole inhaled, the duration of the exposure period, the heaviness of the exposure and of the fibre burden in the lungs, and the time lapse between each exposure period and a diagnosis of mesothelioma [93];
(e)It is incorrect to suggest that the inhalation of more than one form of asbestos fibre raises a number of separate, independent, possible causes of the disease [95];
(f)The inhalation of one form of asbestos fibre may materially contribute to the development of the disease, even though in the absence of prior inhalation of other asbestos fibres, mesothelioma would probably not have resulted [96].
In Stevenson v James Hardie & Co Ltd (1997) 15 NSW CCR 568 O’Meally J was dealing first with the liability of each of two defendants to the plaintiff, who had been exposed negligently, but to substantially different degrees, to their asbestos products. Second, he was dealing with apportionment between two defendants inter se. They were James Hardie & Co Ltd – who exposed the plaintiff to its products between 1960 to 1971 and Wunderlich who exposed the plaintiff to its products but only between 1970 and 1971 (that is, 1.5 years for Wunderlich out of the total exposure of around 11 years), so the greater bulk of exposure was the former’s. Both were however held liable in solidum on the basis that “each exposure made a material contribution to the plaintiff’s injury and so each defendant is liable in respect of the same damage” (at 575). The apportionment of liability between defendants reflected broadly the relative level of exposure, with the principal employer bearing most of the damage. Any more precise mathematic basis was eschewed. At 575, O’Meally J concluded that
“It [mesothelioma] is not the result of successive deteriorations. In a case of mesothelioma his injury was one and indivisible. This is because mesothelioma is a form of cancer to which all asbestos exposure contributes. It is a disorder quite distinct from asbestosis and other fibrosis-inducing diseases caused by exposure to fibrosis-inducing substances, which produce increasing fibrosis with continued exposure. Mesothelioma is not a cumulative process such as occurs in cases of asbestosis or silicosis. It is not the result of successive deteriorations. In a case of mesothelioma, a plaintiff is suffering from an injury that is one and indivisible”
O’Meally J relied on Professor Henderson’s expert evidence given also in that case. His opinion is consistent with the evidence he gave in Baldwin and is quoted by O’Meally J (at 573]
“… it is my opinion that his mesothelioma is attributable to his total cumulative asbestos exposure: it is also my view that each of the episodes of exposure has contributed to the development of the mesothelioma taking into account lag times between each period of employment and onset.”
O’Meally J’s conclusion that each defendant was liable to the plaintiff for the whole injury, before considering apportionment or contribution as between the two defendants must rest on two propositions. The first is that mesothelioma, which “you cannot get twice” is nonetheless an “indivisible injury” to which more than one person or entity and set of events may in a causal sense, make material contribution; doing so by reason of the cumulative effect of each year’s negligent exposure to which each, or both, have contributed. There is no inconsistency between accepting that one cannot get mesothelioma “twice”, or in different parts of the lung, or otherwise in severer form from prolonged exposure, and the proposition that mesothelioma once triggered, is triggered by cumulation of asbestos exposure and fibre (here over 3 years). Thus in a material contribution sense, each period of exposure is causative in its cumulative effect of the indivisible condition of mesothelioma.
The second proposition is that “Any person liable for a causative exposure which made a material contribution to an indivisible injury is liable to compensate for the whole injury”; Dingle v Associated Newspapers [1961] 2 QB 172 per Devlin LJ at 188. Essentially the two defendants in Stevenson were concurrent tortfeasors, who in the words of Glanville Williams in “Joint Torts and Contributory Negligence” (1951) at 1, “are tortfeasors whose torts concur (run together) to produce the same damage”. They are “solidary wrong-doers; indicating that each is liable in full for the damage collectively done”. This is where, as here, “the concurrence is exclusively in the realm of causation”. Thus (at 3) “concurrent tortfeasors are, unlike other tortfeasors, liable in full for damage done by all …”. That enables the plaintiff to be protected should any defendant lack the wherewithal to meet the full claim and is analogous to more than one insurance policy providing similar assurance.
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.
To elaborate, I consider that, on the reasoning in Bendix Mintex Pty Limited v Barnes (supra) and the earlier stated six propositions, coupled with a “robust and pragmatic approach” to proof of causation, where inability to show the precise way something happened is not fatal, allows the following conclusion to be drawn, on the balance of probabilities. It is that each year’s exposure over the three years materially contributed to the outcome of mesothelioma and not merely its risk, with the insurance for each year being thus called upon to answer the employer’s claim. Had there been three employers each would have been liable by reason of their material contribution to the outcome of mesothelioma. Likewise, if there were three insurers, unless statute or policy wording produced a different result (as it later did by s151AB of the 1987 Act). In that context, we do know that mesothelioma did eventuate and that the same employer materially contributed to that outcome. Moreover, the same insurer offered annual cover on the same terms each year for the three years. There is no evidence pointing to triggering earlier than three years as against the more probable result that mesothelioma was caused by the cumulative effect of three years of exposure, with each year playing its part. Had the period of exposure been longer and had there been such evidence pointing to a different result, that same result would not necessarily follow. That is a matter for future consideration in a case that poses that issue.
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.
Nor is Fairchild being applied by analogy, for Australian law currently does not permit causation to be so easily satisfied by reference only to risk despite the hardship this may entail. But, as I have explained, the law is nonetheless not unsympathetic to plaintiffs in such a situation. Here we have one insurer which provided three years of continuous insurance, under three obligatory statutory policies in identical terms. There is no basis in the evidence for treating one policy, last or first, as solely required to answer the outcome of this cumulative exposure which spanned the term of all three. Such a result would be quite arbitrary. A simple way of testing this is to hypothesise different sub-underwriters for each policy of the three. Why should only one group of sub-underwriters have to meet the result of the whole claim? It would be even more unfair to say no policy answers, because we are only able to say on the balance of probabilities that the exposure had a cumulative effect over the three years.
Spigelman CJ concludes first that no policy answers, but also that if one policy did answer, it is only one policy; there is no cumulation. It is convenient that I set out his reasoning as elaborated in [56] to [57] of his judgment. It proceeds first on the basis of an assumption that there was penetration of the worker’s lung in each of the three years, which if made out, would be based on inference rather than any evidence.
“[56]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.
[57]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.”
There is a line of authority to which Spigelman CJ refers, which appears at first sight against any cumulation from liability under the Workers’ Compensation legislation. The statutory policy, in its reference to “liability” and “liable to pay”, applies equally to an employer’s statutory obligation to a worker and his common law obligation. That line of authority could be cited in support of the proposition that “where partial incapacity has resulted from a number of separate injuries” the liability of the insurer to pay compensation under the Workers’ Compensation legislation is “properly to be seen as flowing from the last injury and as having arisen at the time of that injury” per Deane J (Mason, Murphy, Wilson, Brennan JJ agreeing) in National & General Insurance v South British Insurance (1982) 149 CLR 327 at 335. The present case might then be said to be analogous.
Those cases (to which I have earlier made reference) are National & General Insurance v South British Insurance (supra) at 335, applied by Cole J in Manufacturers Mutual Insurance Ltd v National employers Mutual General Insurance Ltd (1989) 5 ANZ Ins.Cas 60-906 at 75,792-3 at trial (“MMI v NEM”) and implicitly accepted by Samuels JA and Priestley JA on appeal in MMI v NEM (1991) 6 ANZ Ins Cas 61-038 at 76,965; 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 61-214 esp at 75,341; Insurers Guarantee Funds – NEM General Insurance Ltd (in liq) v Manufacturers Mutual Insurance Ltd (unreported, 12 August 1994, NSW Court of Appeal).

They were however all cases where successive injuries were found to exist which were a series of trauma injuries (typically to back and/or neck). These successive trauma injuries had a consequent cumulative effect on the worker’s capacity to work. They gave rise under the Statute to an employer obligation of one kind or another such as to find suitable alternative employment or make a compensatory statutory payment.
I consider that in attributing critical significance to the last of a series of “tortious insults” by requiring only the last insurer to pay or for that matter the first, the Court in each case is implicitly recognising a case of the first of the two kinds identified by Stein JA in WorkCover Authority of NSW (supra):
“there is a significant difference between a closed claim for industrial deafness and a claim in respect of mesothelioma. The former is a succession of completed tortious insults whereas the latter because of its aetiology is not complete until the disease of mesothelioma strikes”
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.
Importantly, in National & General Insurance Co Limited v South British Insurance Co Limited (supra) there are several factors which are distinguishable from the present case. The first I have already noted, is the inability to relate a particular injury to the “excitation” which produces the mesothelioma, unlike each blow to the back which is a separate and discrete injury so that the last blow can be identified as finally resulting in the partial incapacity. A more accurate description of ingestion of asbestos fibre over three years is that it is a continuing injury occurring in each year of the policy though no less an injury in each year for that.
A further distinguishing feature is that in the case of s11(2) of the Workers’ Compensation Act, the provision in question in National & General Insurance Co Limited, the critical requirement is that following partial incapacity, which we know only occurred after the final trauma, the employer must fail to provide suitable employment. That then exposes that employer (and if more than one, the last employer) to liability to pay compensation. It is that compensation which the insurance policy was required to indemnify. That consideration clearly directs attention to the last injury, for it is that last injury which is coincident with the consequent liability on the employer. There is certainly no counterpart to that consideration here. As an analogy it suffers from the fact that there is no real rationale for relating that authority, and the cases which followed it to a situation where only the first policy answers, with no sense of a last straw, breaking the camel’s back.
In the present case, as I have said, one cannot say that it was necessarily the first or the last ingestion over the three year period, or indeed the first or the last year’s ingestion which caused the mesothelioma. Nor can one assume that each ingestion penetrated the lung. What one can infer, consistent with Professor Henderson’s findings, is that more probably than not, each ingestion has a cumulative effect and has thus contributed to the “protracted series of genetic mutations” which lead to “a clonal growth which invades tissue and results in mesothelioma”; and also that relevant causal factors include “the fibre burden in the lungs” from whence penetration occurred. So in that distinct sense each ingestion constitutes part of a continuing injury, spanning the three years. One cannot, unlike a series of traumas, relate a particular ingestion to a particular injury at a particular time. Thus the logic of attributing greater significance to the first or the last injury, in rendering the insurer at that time liable to answer the claim does not apply with mesothelioma. Nor is the disease any more severe from one exposure or multiple exposures, unlike a series of traumas or industrial deafness. It is just that multiple exposures are more likely to bring about the disease.
Indeed the long delayed onset of mesothelioma, not untypically here nearly 40 years after the last exposure, weakens the case even further for attributing any special significance to the first year of exposure, as justification for rendering only the first insurer liable (or for that matter the last insurer). Compare this to a series of traumas culminating in the last. That last trauma becomes not only the straw that breaks the camel’s back, but it is coincident in time with the compensable injury.
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.
Again this result is consistent with a line of US authority referred to in the yet to be published second edition of Derrington and Ashton (save that loss is apportioned between policies according to the time on risk method). This is on the basis that one treats each year’s exposure through the employer’s negligence as the proximate cause of the eventual mesothelioma. I quote:
… When the policy is more complex or when there are related policies, there may be an anti-stacking provision1, but, depending on the language used, it may be found that in a particular case there is no clear exclusion of stacking, or it may be limited in its operation. When it is applied, the number of occurrences is determined by reference to the number of proximate causes2. When there is a continuing harm over a number of periods of cover, there may be stacking of the limit for each relevant period when the limit is framed as “per occurrence per year”; and this will not be affected by a term of the policy deeming damage from repeated or continuous exposure to be one occurrence3. When the harm extends over several policy periods that are covered respectively by policies of different insurers, then, if the progress of the harm is constant, the liability of each insurer will depend on its time on risk, and the total liability will be apportioned accordingly.4 This is subject to any variation produced by the terms of a particular policy.
1 See this condition in Chapter 9.
2 In Flemming v Air Sunshine Inc 2002 US App LEXIS 23785, for example, it was held that the policy’s words put a limit on the amount of any claim and a further limit on the total amount payable on all claims arising from one occurrence, but within that limitation it would have permitted stacking in respect of separate claims by one claimant based on multiple discrete occurrences arising out of one occasion. In the circumstances of that case, however, it found that there was only one occurrence. See the topics, Occurrences and Causation in this chapter.
3 Stonewall Insce Co v City of Palos Verdes Estates 46 Cal App 4th 1810; 54 Cal Rptr 2d 176 (1996); Alpha Therapeutic Corpn v The Home Insce Co 90 Cal App 4th 1330: 109 Cal Rptr 2d 698 (2001); Employers Insce of Wausau v Granite State Insce Co 2003 US App LEXIS 11111. This reasoning does not apply to self-insured retentionsion, as to which see that topic in this chapter; and the result may be different if the limit is expressed on a “per occurrence” basis.
4 Owens-Illinois v United Insce Co 138 NJ 437; 650 A 2d 974; Olin Corpn v Insce Co of North America 221 F 3d 307; Stonewall Insce Co v Asbestos Claim Management Corpn 73 F 3d 1178 (2nd Cir 1995); 85 F 3d 49 (2nd Cir 1996); Mayor & City Council of Baltimore v Utica Mutual Insce Co 145 Md App 256; 802 A 2d 1070; Matter of Wallace & Gale Co 284 BR 557 –asbestos; Consolidated Edison Co of NY v Allstate Insce Co 98 NY 2d 208; 746 NYS 2d 622; 774 NE 2d 687; Quincy Mutual Fire Insce Co v Borough of Bellmawr 172 NJ 409; 799 A 2d 499; Champion Dyeing & Finishing Co v Centennial Insce Co 355 NJ Super 262; 810 A 2d 68 – pollution; Scottsdale Insce Co v American Empire Surplus Lines Insce Co 811 F Supp 210 (D Minn); NL Industries v Commercial Union Insce Co 926 F Supp 446 (DNJ);Serio v Public Service Mutual Insce Co 2003 NY App Div LEXIS 4431 – lead paint; Silicone Implant Insce Coverage Litigation 652 NW 2d 46 (Minn) – silicone breast implants.
Summing Up
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.
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LAST UPDATED: 14/11/2003

[2003] NSWCA 331

11 November 2003