Commonwealth Steel Company Ltd v Certain Underwriters At Lloyds Comprising Syndicate Nos 130, 144, 208, 210, 214, 235, 250, 404, 469, 490, 677 and 870

Commonwealth Steel Company Ltd v Certain Underwriters At Lloyds Comprising Syndicate Nos 130, 144, 208, 210, 214, 235, 250, 404, 469, 490, 677 and 870 - [2010] NSWCA 31 - NSWCA 2010 case summary — Zoe

[21]

[(g1) The adoption of Professor Berry's report is an acceptance of the following relevant propositions: (a) The risk of mesothelioma is a consequence of a period of exposure to asbestos dust and increases as time passes since exposure. (b) The relative contribution of periods of exposure can be assessed by reference to exposure level (including type of asbestos) and duration of exposure. (c) The percentage contribution to the total risk of contraction of mesothelioma for Mr Kozaczynski (for whom risk came home) for each year are set out in the following table: Exposure Relative Elimination rate Start date End date Exposure Nil 10% 1) Apprentice 02-Dec-62 30-Jun-63 2 8.44 4.47 01-Jul-63 30-Jun-64 2 13.72 7.87 01-Jul-64 30-Jun-65 2 12.59 7.98 01-Jul-65 30-Jun-66 2 11.58 8.10 01-Jul-66 30-Jun-67 2 10.58 8.20 01-Jul-67 30-Jun-68 2 9.69 8.29 2) Tradesman 01-Jul-68 30-Jun-69 1 4.40 4.16 01-Jul-69 30-Jun-70 1 3.99 4.18 01-Jul-70 30-Jun-71 1 3.61 4.18 01-Jul-71 30-Jun-72 1 3.27 4.17 01-Jul-72 30-Jun-73 1 2.93 4.13 01-Jul-73 30-Jun-74 1 2.82 4.09 01-Jul-74 30-Jun-75 1 2.33 4.02 01-Jul-75 30-Jun-76 1 2.08 3.96 01-Jul-76 30-Jun-77 1 1.83 3.85 01-Jul-77 30-Jun-78 1 1.60 3.73 01-Jul-78 30-Jun-79 1 1.40 3.60 01-Jul-79 30-Jun-80 1 1.22 3.46 01-Jul-80 30-Jun-81 1 1.04 3.28 01-Jul-81 22-Nov-81 1 0.37 1.25 3) Foreman 23-Nov-81 30-Jun-82 0.25 0.13 0.46 01-Jul-82 30-Jun-83 0.25 0.19 0.72 01-Jul-83 30-Jun-84 0.25 0.16 0.67 01-Jul-84 30-Jun-85 0.25 0.13 0.61 01-Jul-85 30-Jun-86 0.25 0.11 0.58]

[25]

The term 'Ultimate Nett Loss' as used herein shall be understood to mean the sum actually paid in cash in the [settlements] of claims of which the Assured is liable after making proper deductions of all recoveries, salvages and other insurance and excluding office expenses and salaries of employees of the Assured. Legal costs shall be paid as hereinafter provided. The Assured shall notify the Underwriters of any claim or claims of which they may receive [advice] and which appear likely to interest the Underwriters under this insurance and shall provide the Underwriters with all information relative thereto and with copies of all papers relating to such claims or that may be required by the Underwriters. The Underwriters shall be given every opportunity of co-operating with the Assured in the settlement of or defence of all claims in which the Underwriters are likely to become interested. In the event of a claim being settled before it is adjudicated upon by the Workers Compensation Commission or other Tribunal, on account of any one accident for not more than $[amount] then no costs shall be payable by the Underwriters. Should, however, the sum required for adjustment of the claim on account of any one disaster exceed $[amount], then the Underwriters shall contribute to the costs in the proportion that their interests in the claim to be adjusted or paid in accordance with the award of the Workers Compensation Commission or judgment of any other Tribunal bears to the whole amount paid for adjustment, or in satisfaction of the Award [or judgment] . No appeal from an award of the Workers Compensation Commission or award of any other Tribunal shall be made by the Assured without the consent of the Underwriters (unless time does not allow) and if they consent to the appeal, they shall contribute to the costs thereof in the proportion that their interest in the claims prior to the Appeal bears to the whole amount of the claim prior to the Appeal... Twenty-four months after the expiry of this Policy the Assured shall advise the Underwriters of any claims which may remain unsettled and which may cause a claim under this Policy. The Underwriters may then or at any time thereafter demand that the Assured make a final claim on the Underwriters in respect of such unsettled claims. In that event the Assured and the Underwriters shall mutually appoint an actuary or appraiser who shall investigate, determine and capitalise any such unsettled claims and the sum so determined shall be considered the amount of the losses and the payment l by the Underwriters of their proportion of this sum shall constitute complete release of the Underwriters for such loss so valued. It is noted that subject to the conditions, stipulations and limitations of the Policy, the [indemnity] is to extend to include and cover the liability of the Assured for compensation and/or damages in any of the Australian States or Federal Capital Territory under any Act, Law or Ordinance in force at inception date of Policy equivalent or of similar nature to those contemplated by Indemnities (a) and (b) of the Policy, Provided that in the event of any amendment of such Act, Law or Ordinance after such inception date, the Assured is to be held covered against any additional liability created by any such amendment subject to and pending adjustment of premium by Underwriters. DISASTER - The word 'disaster' shall mean an accident or series of accidents arising out of the one occurrence. SALVAGE AND RECOVERY CLAUSE - All salvages, recovers and payment recovered or received subsequent to a loss settlement under this Policy shall be applied as if recovered or received prior to the said settlement and all necessary adjustments shall be made by the parties hereto. Notwithstanding anything contained in the wording to the contrary, it is hereby understood and agreed that where the sum required for adjustment of a claim on account of any one disaster exceed $[amount] up to $[amount] then the Underwriters hereon shall bear the whole of such costs and expenses which may be incurred in the settlement of such claim. The Policy includes workers compensation claims under the terms of this Policy where the aggregate of any lump settlement exceeds $[amount], subject to prior approval by Underwriters of any lump settlement. (o) The plaintiff claimed indemnity for the loss under all of the policies by letter dated 4 November 2003. A copy of this letter is at document 34 of the Court Book.

[47]

12 The Chief Justice's reference to the various cases in [53] and [54] that dealt with the operation of workers compensation legislation (the Workers Compensation Act 1926 (NSW) (the "1926 Act") and the Workers Compensation Act 1987 (NSW) (the "1987 Act")) was related to his Honour's statement in the last sentence of [54] that only one injury was found to have the requisite consequences. It is unnecessary to examine all these cases in detail. They raise, at times, complex issues in the operation of the relevant workers compensation legislation over the years, in particular in dealing with the consequences of successive injuries in respect of incapacity for work and the legislative responses to such issues. Disputes over the operation of provisions, such as s 7A of the 1926 Act and ss 16 and 22 of the 1987 Act, require close attendance to the development of case law and legislative intervention: see for example Insurers' Guarantee Fund - NEM General Insurance Association Ltd (in liq) v GIO General Ltd (1994) 33 NSWLR 247 and MLC Insurance Ltd v Pinto [1994] NSWCA 206; 10 NSWCCR 101. 13 From these cases it can be taken that since Morris v George [1977] 2 NSWLR 552, a single incapacity, total or partial, may result from separate injuries. There are references, however, to the likely rarity of such a conclusion: see for example Pinto at 104 per Clarke JA. This may flow from the distinction in the jurisprudence sometimes drawn between a finding that an injury was a contributing cause of an incapacity and a finding that the incapacity resulted from the injury, as referred to by Clarke JA in Pinto at 104: Morris v George at 566-568 per Moffitt P; National Employers' General Insurance Association Ltd v Calver [1983] 3 NSWLR 107 at 109; and Pinto at 104. These distinctions need not be explored here. 14 It is necessary, however, to say something more of three decisions referred to by the Chief Justice in Orica and upon which the defendants placed some weight in argument in the present appeal: National & General Insurance Company Limited v South British Insurance Company [1982] HCA 62; 149 CLR 327; MMI v NEM [1989] NSWSC 6; 5 ANZ Insurance Cases ¶60-906 (Cole J) and MMI v NEM (1991) 6 ANZ Insurance Cases ¶61-038 (Court of Appeal).

[59]

29 In the Court of Appeal, Samuels JA, who gave the leading judgment, recognised the clear proposition from the authorities that the expression in the standard form policy, "If … the employer shall become liable to pay compensation", contemplates liability which vests on the happening of a compensable injury. The risk against which the insurer undertakes responsibility "is the payment of compensation for incapacity in respect of the employer's liability for an injury occurring during the currency of the insurer's engagement": MMI v NEM (1991) at 76,964 (Samuels JA) (emphasis added). This led to the conclusion that the insurers were underwriting different risks. Thus, it was concluded, there was no double insurance. 30 Samuels JA also dealt by way of obiter dicta with a single incapacity and multiple injuries. Samuels JA said at 76,965: "Apart from the doctrine of double insurance, it was put by Mr Grieve that when incapacity results from more than one injury and cannot be said to result solely from one particular injury, liability to indemnify arises and attaches to each of the insurers on risk when any one of the injuries occurred to the extent that that injury contributed to the ultimate incapacity. That certainly is not an illustration of the doctrine of double insurance, and with all respect I do not know what authority there is for a proposition in those terms. There is no such express stipulation in the statutory contract of insurance, and no room for any implication. Indeed, I did not understand MMI to contend for any such implied term. The submission is met by the matters to which I have already referred." 31 Samuels JA then rejected as wrong in principle what Yeldham J had said in Layne & Bowler (Australasian) Pty Ltd v Pearson Machine Tool Company Ltd (unreported, 25 November 1983, Yeldham J). Cole J had also rejected what Yeldham J said. Yeldham J had concluded that two policies responded for liability to pay workers compensation for a single indivisible capacity if two injuries in two policy periods each causally contributed to the single incapacity. Yeldham J also concluded that there was double insurance and so contribution lay. 32 The rejection of Yeldham J's conclusion of the availability of contribution was founded on the ratio of the judgments of both Cole J and Samuels JA that the policies in question covered separate risks. Nevertheless, both Cole J and Samuels JA rejected Yeldham J's views that both policies responded. The reasoning of both Cole J and Samuels JA is, with respect, unexplained. Both statements are obiter. The underpinning of the opinion expressed by Samuels JA cited earlier can perhaps be seen to be his views concerning causation in insurance law. These views were most clearly expressed in National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86 at 97-98 where Samuels JA quoted R Colinvaux The Law of Insurance (4th ed, 1979, Sweet & Maxwell) at [4.32] as follows: "A loss may be the combined effect of a whole number of causes, but, for the purposes of insurance law, one direct or dominant cause must in each case be singled out." 33 This proposition has since been rejected by this Court: HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc [1998] NSWSC 436; 43 NSWLR 601; and by the Full Court of the Federal Court: McCarthy v St Paul International Insurance [2007] FCAFC 28; 157 FCR 402 at 421 [56]-[57], 422 [58], 429-438 [88]-[116] especially 429-31 [88]-[92]; and see also the English Court of Appeal in JJ Lloyd Instruments Ltd v Northern Star Insurance Co ('The Miss Jay Jay') [1987] 1 Lloyd's Rep 32. 34 Priestley JA rested his decision that there was no contribution on the fact that the policies covered different risks. 35 It is necessary now to turn to Orica. The policy with which the Chief Justice was concerned in Orica required that both injury and liability occur within the policy period. This is an important distinction from the present policies, in particular by reference to the discussion in [55]-[57] of the Chief Justice's reasons. At one level of generality it can be said that liability in respect of a single condition can only arise once. In particular, if it arises and engages a particular insurance policy, the employer may, as a matter of meaning of the following year's policy, perhaps not be seen as liable again for the engagement of the succeeding policy or policies. No detailed argument was put forward on this point or on the extent to which separate actions can, or cannot, be brought for separate damage suffered: cf Brunsden v Humphrey (1884) 14 QBD 141; and Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223. 36 It may also be legitimate to say, as the Chief Justice does at [57], that there will be only one occasion on which an employer will become "liable to pay"; but, with respect, it is not at all clear that this is by reference to only one cause of action. There may have been multiple injuries over the years attributable to a series of tortious acts or omissions which might properly be understood as separate causes of action. The question might most clearly arise in the context of a statute of limitations. 37 Some of the statements of the Chief Justice might be taken (as they were by the defendants) as support for a general legal proposition that there can be only one policy of insurance that responds to the coming home of a risk covering mesothelioma because there is only one liability to pay based on one cause of action. 38 With respect, we have reservations as to the full scope of these statements if they can be taken so far, based in part as they were upon the views of Cole J and Samuels JA in MMI v NEM and in particular Cole J's use of Deane J's judgment in South British, which is beyond what we consider to be legitimate. 39 In any event, the Chief Justice's views were obiter in a case concerning a quite different insurance policy. We do not consider that what his Honour said should be accepted as determinative of the problem of construction posed by the policies in question here. 40 The defendants submitted that the reasons of the Chief Justice could be taken as the expression of a rule that once one policy covering liability in respect of mesothelioma responds, no later policy can respond. For the reasons above, we do not consider that the Chief Justice's reasons should be so taken.

[60]

41 The defendants further submitted that that was how this Court in Vero applied the Chief Justice's reasons in Orica. In Vero the relevant policies were substantially similar to those here, except that they were public liability policies. A worker employed by the insured employer had contracted mesothelioma. A number of questions arose, only two of which are relevant to the present case. The first such issue was whether the bodily injury occurred during the relevant period of insurance. This was not the subject of admissions as it is here. A trial occurred before Curtis J in the Dust Diseases Tribunal. In respect of that issue, a relevant question was whether the inhalation of asbestos fibres was bodily injury. Beazley JA (with whom Campbell JA and Harrison J agreed) distinguished the reasoning of the Chief Justice, partly in the passages to which we have been referred and in earlier passages, as irrelevant because of the fundamentally different policy wording with which he was dealing. 42 The second relevant issue dealt with by Beazley JA in Vero concerned the question of which policy responded. There were a number of policies which the employer had taken out. The appellant, the insurer Vero, argued, relying on [56] and [57] of the Chief Justice's reasons in Orica, that it could be liable under only one policy and that was the policy on foot when the worker first suffered injury. 43 Curtis J had found that the last, not the first, policy responded. At [180] of her Honour's reasons, Beazley JA explained Curtis J's approach as follows: "[180] Curtis J had distinguished this case from Orica Ltd on the basis that in that case the parties had proceeded on an agreed basis as to the aetiology of mesothelioma. He considered that having regard to the additional medical evidence in this case, being the evidence of Professor Tattersall given in the matter of Hoyle DDT 71 of 1994, Mr Barlow's mesothelioma resulted from the totality of his asbestos inhalation. His Honour considered that the effect of Professor Tattersall's evidence was that it was not possible to conclude upon the probabilities that he would have developed mesothelioma without the impact of the ingestion of asbestos fibres in the final year of exposure. His Honour concluded, therefore, that it was not possible to demonstrate that the respondent would have been liable ' in respect of bodily injury occurring during ' any previous year of cover. On that basis, his Honour considered that the only probability was that the mesothelioma and, therefore, the respondent's liability, was caused by the final year of exposure. The indemnity under the policy in that year was $500,000." (emphasis added)

[62]

45 Her Honour's conclusion that the first policy responded was a matter of construction. That question being thus answered, the last policy could not respond as a consequence of both parties' arguments. The way the case was presented reinforced the relevance of the notion that "liability … arose once only". The conclusion and reasoning in [181] was relevant to reaching an answer based on the construction of an insurance policy in a context in which, on the arguments of the parties, either one or other policy responded. The conclusion and reasoning in [181] are not determinative of a different question as to whether more than one policy can respond to a particular risk. 46 The contents of [182] tend to reinforce the particularity of the conclusion based as it was also on the evidence. Beazley JA said at [182] and [185]: "[182] In any event, I am of the opinion that his Honour's conclusion that Mr Barlow's mesothelioma was caused by all of his exposure does not accord with Professor Tattersall's evidence. In order to understand the evidence, it is necessary to set it out in some detail, including the passage upon which the trial judge relied at [46] of his judgment. Professor Tattersall said that the ' exposure [to asbestos] gives rise to the presence of retained particles in the lung and it's that which causes the tumour to develop later '. Professor Tattersall was then questioned about exposure over, for example, a 10 year period. Professor Tattersall said the probability of developing mesothelioma was related ' to a retained dose '. He observed that the ' dose retained will be highest in year 10 of that exposure '. He said that if there was equal exposure in each of the 10 years then: '… since there's a relationship between the amount retained in the lung and the risk, there will be a greater risk in the 10th year than in the first year.' … [185] However, the question whether it could be said whether Mr Barlow was one of the persons who would develop mesothelioma is not at issue in this case. He fell within that class of persons who did develop mesothelioma. The question for determination was, on the probabilities, which exposure was likely to have caused the mesothelioma which Mr Barlow in fact contracted. As I have said, I consider this question has been determined by my finding that injury occurred at the time of initial exposure. Consistently with that, having regard to the dicta in Orica to which I have referred and having regard to Professor Tattersall's evidence, the likelihood is that it was the initial exposure which caused the mesothelioma in circumstances where in this case, the initial exposure was significantly heavier than the later exposure. " (emphasis added) 47 Factual considerations played a significant part in this reasoning. This was a consideration in the rejection of special leave to appeal to the High Court: Vero Insurance Limited v Power Technologies Pty Ltd [2008] HCATrans 134 (7 March 2008). 48 We do not consider that such use as was made of Orica in Vero elevates what was said by the Chief Justice to the status of a rule which, when applied to circumstances different to Orica (a different policy) and different to Vero (different issues propounded and admissions in the present case contrary to the facts considered relevant by the Court of Appeal in Vero), supplies a legal answer to the problem. 49 The problem here is one of construction of a commercial insurance policy. On the agreed facts the insuring clause was satisfied. 50 We would therefore answer the question in the affirmative. We would have entered judgment against the first and third defendants as suggested in [3(t)] above, but yesterday the parties indicated that there were issues about interest and costs which might have to be argued. These can be dealt with in due course. For the sake of good order it should be noted that the second defendant has never been served and the claim was dismissed by consent against the fourth defendant. **********

Parties

Applicant/Plaintiff:

Commonwealth Steel Company Ltd

Respondent/Defendant:

Certain Underwriters At Lloyds Comprising Syndicate Nos 130, 144, 208, 210, 214, 235, 250, 404, 469, 490, 677 and 870

Legislation Cited (2)

Workers Compensation Act 1926(NSW)

Workers Compensation Act 1987(NSW)

Cases Cited (17)

CITATION: Commonwealth Steel Company Ltd v Certain Underwriters At Lloyds Comprising Syndicate Nos 130, 144, 208, 210, 214, 235, 250, 404, 469, 490, 677 and 870 [2010] NSWCA 31

Bain v Frank G O'Brien Ltd [1976] HCA 29; (1976) 135 CLR 158 EM Baldwin & Son Pty Ltd v Plane (1998) 17 NSWCCR 434 Brunsden v Humphrey (1884) 14 QBD 141 Fisher v Hebburn Ltd [1960] HCA 80; 105 CLR 188 Geraldton Building Co Pty Ltd v May [1977] HCA 17; 136 CLR 37 HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc [1998] NSWSC 436; 43 NSWLR 601 Insurers' Guarantee Fund - NEM General Insurance Association Ltd (in liq) v GIO General Ltd (1994) 33 NSWLR 247 JJ Lloyd Instruments Ltd v Northern Star Insurance Co ('The Miss Jay Jay') [1987] 1 Lloyd's Rep 32 Layne & Bowler (Australasian) Pty Ltd v Pearson Machine Tool Company Ltd (unreported, 25 November 1983, Yeldham J). Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223. CASES CITED: McCarthy v St Paul International Insurance [2007] FCAFC 28; 157 FCR 402 MLC Insurance Ltd v Pinto [1994] NSWCA 206; 10 NSWCCR 101 Morris v George [1977] 2 NSWLR 552 MMI v NEM [1989] NSWSC 6; 5 ANZ Insurance Cases 60-906 MMI v NEM (1991) 6 ANZ Insurance Cases 61-038 National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86 National Employers' General Insurance Association Ltd v Calver [1983] 3 NSWLR 107 National & General Insurance Company Limited v South British Insurance Company [1982] HCA 62; 149 CLR 327 Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; 59 NSWLR 14 Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226; 5 DDCR 206 Vero Insurance Limited v Power Technologies Pty Ltd [2008] HCATrans 134

[1998] NSWSC 436

[1989] NSWSC 6

[2008] HCATrans 134

(1976) 135 CLR 158

(1998) 17 NSWCCR 434

(1994) 33 NSWLR 247

(1989) 18 NSWLR 223

(1994) 10 NSWCCR 101