Zurich Insurance plc v International Energy Group Ltd [2015] UKSC 33

An employer's liability insurer, Zurich, paid a mesothelioma claim and sought contribution from a previous insurer, IEG. The employee's asbestos exposure spanned both policy periods. The Supreme Court held that liability should be apportioned between the insurers based on 'time on risk'.

Facts

An employee, Mr Carré, was negligently exposed to asbestos dust while employed by C M C (Crossley) Limited in Guernsey between 1961 and 1988. He subsequently developed mesothelioma and died. Under the Employers’ Liability (Compulsory Insurance) (Guernsey) Law 1993, an employee suffering from a disease caused by exposure during employment can claim compensation from any insurer who was providing employer’s liability cover at any time during the period of that employment. This created a situation where multiple insurers could be liable for the full amount of the claim, regardless of when the disease manifested.

Zurich Insurance Plc (Zurich) was the employer’s liability insurer from 1992 to 1998. It settled the claim with Mr Carré’s estate for £250,000. Zurich then sought a contribution from International Energy Group Limited (IEG), which had insured the employer for a preceding period of approximately six years. The central dispute concerned the correct method for apportioning liability between the two insurers.

Issues

The primary legal issue before the Supreme Court was to determine the appropriate basis for contribution between successive employer’s liability insurers in a ‘long-tail’ disease case, specifically mesothelioma. The Court considered two main approaches:

1. The ‘equal shares’ basis: where liability is divided equally between all liable insurers.
2. The ‘time on risk’ basis: where liability is apportioned pro-rata, based on the duration each insurer provided cover during the period of negligent exposure.

Judgment

The Supreme Court unanimously allowed the appeal, holding that the correct basis for apportionment was ‘time on risk’. Lord Mance delivered the leading judgment, with which the other justices agreed.

The Basis for Contribution

Lord Mance affirmed that the right to contribution is an equitable remedy designed to prevent one party from being unjustly burdened with a liability that is also shared by others. He stated:

Contribution is a remedy to adjust the respective rights of parties who are subject to a common liability to a third party. Its object is to ensure that each party who is liable for the same debt bears a due and just proportion of the total burden… The basis of the entitlement is that it is unjust for a party to bear the whole of a liability for which another is also liable.

The Court reasoned that while an ‘equal shares’ approach might be appropriate where multiple insurers cover the same risk for the same period, it is not equitable in cases of successive insurance for a continuing injury. In such ‘long-tail’ cases, the longer an insurer is on cover, the greater the exposure to risk it has underwritten. An equal division would be arbitrary and would fail to reflect the different durations for which premiums were paid and risk was borne.

Apportionment by Time on Risk

The Court concluded that apportionment by time on risk was the most rational and fair method. This approach aligns the insurer’s contribution with its exposure to the underlying risk.

In my view, both principle and the weight of commonwealth authorities favour apportionment based on the insurer’s time on risk. As between insurers, this is the most rational and fairest basis of apportionment. It reflects the fact that the premium charged and received by an insurer will have been charged on a temporal basis. The longer the period of cover, the greater the premium, and the greater the exposure to risk.

Lord Mance clarified that the apportionment should be calculated based on the respective periods for which each insurer provided cover during the total period of negligent exposure. The fact that the employer was uninsured for part of the exposure period did not affect the calculation as between the insurers who were on risk. The liability was to be shared between Zurich and IEG in proportion to their respective periods of cover.

Implications

This landmark judgment provides definitive guidance on the apportionment of liability between insurers in long-tail industrial disease claims in the United Kingdom. By establishing the ‘time on risk’ principle as the default equitable method, the Supreme Court has created a clearer and more predictable framework than the previously arguable ‘equal shares’ model. The decision ensures that an insurer’s contribution is directly related to the duration of the risk it agreed to cover, which is seen as a fairer outcome for the insurance industry. It brings UK law into alignment with the position in other major common law jurisdictions, such as Australia and the United States, promoting consistency in this area of international insurance law.

Verdict: The Supreme Court allowed the appeal by Zurich Insurance Plc. The Court ordered that International Energy Group Limited should contribute to the sum paid by Zurich on a time-on-risk basis, calculated according to the respective periods of their insurance cover.

Source: Zurich Insurance plc v International Energy Group Ltd [2015] UKSC 33