Orica Ltd v CGU Insurance Ltd

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

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

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

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