Case in Brief ENGLISH COURT ALLOWS SECTION 69 APPEAL ON POINT OF LAW AGAINST AWARD ISSUED BY JUDGE-ARBITRATOR CLAUSE By Nicholas Peacock and Aaron McDonald In the recent decision of Equitas Insurance Limited v Municipal Mutual Insurance Limited [2019] EWCA Civ 718 (available here), the Court of Appeal allowed an appeal on a point of law under section 69 of the Arbitration Act 1996 (the “Act“) against an award rendered by Flaux LJ as judge-arbitrator.
The award concerned a dispute between an insurer, Municipal Mutual Insurance (“MMI“), and its reinsurer, Equitas Insurance (“Equitas“), about how employer’s liability (“EL“) mesothelioma insurance claims should be handled at a reinsurance level. The Court of Appeal held that although employers may “spike” their EL claims 100% into a single policy year as against their insurer, an insurer may not “spike” its own claims 100% into a single policy year as against its reinsurer. A detailed analysis of the case can be found here.
Given the relatively low number of cases which obtain permission to appeal under section 69 of the Act (let alone succeed), it is instructive to revisit the earlier decision of the Court of Appeal in which permission to appeal was granted. Background Mesothelioma is a fatal lung disease caused by asbestos. English law recognises a special rule of causation in mesothelioma claims (known as the “Fairchild enclave”) which permits a claimant employee to recover in full from a single employer who had exposed them to asbestos, even if the employee had been exposed over a period of time spanning multiple employers. The reason is that exposure to a single strand of asbestos can cause mesothelioma, and it may be impossible to prove on the balance of probabilities which employer’s exposure caused the disease.
English law also allows an employer to “spike” its insurance claims 100% into a single policy year, so that an EL insurer who provided cover for only part of the period of exposure to asbestos is required to bear the whole of the employer’s liability. The insurer can then seek contribution from other insurers who provided cover for other years.
The courts had not previously considered, however, whether an insurer may “spike” its claims against a reinsurer.
In the present case, MMI provided EL policies to numerous public authorities between 1950 and 1981. MMI reinsured its liabilities under these policies with Lloyd’s syndicates, whose liabilities have since been transferred to Equitas. MMI’s employer insureds have faced a large number of mesothelioma claims from their employees, and MMI paid the claims without attempting to apportion the claims to individual policies or periods.