What is the limitation period for a claim for contribution between insurers? That was the issue for the High Court in RSA Insurance PLC v Assicurazioni Generali.
Mr Merritt worked for a painting and decorating company (AWL) between 1975 and 1985, during which time he was exposed to asbestos and subsequently developed mesothelioma. Although RSA provided employers’ liability cover to AWL only for the final six months of Mr Merritt’s employment, by virtue of section 3 of the Compensation Act 2006 it was obliged to indemnify AWL for the whole of the claim. Having been unable to identify any other insurers covering the risk during the relevant period, RSA settled with Mr Merritt for approximately £170,000.
Subsequently the Employers Liability Tracing Office (ELTO) was set up and RSA conducted searches against AWL. These revealed that Aviva and Assicurazioni Generali had also provided EL cover to AWL during the relevant period. RSA sought contribution from both of them in proportion to the time they were on risk (in accordance with Fairchild v Glenhaven Funeral Services  1 AC 32). Aviva agreed to make its 60% contribution. Assicurazioni Generali, however, refused to make its 32% contribution, arguing that the claim was time-barred on the basis that it fell under section 1(1) of the Civil Liability (Contribution) Act 1978 (the 1978 Act). Further to section 10(1) of the Limitation Act 1980, the 1978 Act provides for a limitation period of two years running from the date that the offer to settle the initial claim is accepted.
Section 1 of the 1978 Act provides that “…any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).” The issue was whether RSA’s claim was one covered by that provision. The parties agreed that the answer was determined by the question of whether AWL’s claim against RSA for an indemnity in respect of Mr Merritt’s mesothelioma claim was a claim sounding in debt or one sounding in damages.
The judge reviewed previous case law on the issue, including the Supreme Court decision in International Energy Group Limited v Zurich  UKSC 33 (in which Lords Mance and Sumption came to different conclusions). He concluded that there was a long line of authorities which have decided or confirmed that the liability arising under an insurance contract of indemnity sounds in damages rather than debt. It followed that RSA’s right of contribution from Assicurazioni Generali fell within section 1 of the 1978 Act. As the claim had not been brought within two years of the date of settlement, it was time-barred.
Assicurazioni Generali’s alternative case was that it should be able to challenge the reasonableness of RSA’s settlement with Mr Merritt. Though it was unnecessary to decide the point, given the findings on the primary case, the judge rejected that argument. He dismissed the suggestion that any contribution should be reduced to reflect the fact that RSA had not pursued previous employers of Mr Merritt. Assicurazioni Generali had sought to argue that it was open to the court to base contributions on broader equitable principles, rather than a division according to, in ‘Fairchild’ cases, the period for which each insurer was on risk, as a proportion of the total period for which the employee was exposed to asbestos dust. In the judge’s view, this would produce great uncertainty as to the basis upon which contributions should be calculated. Given that contributions between employers are normally divided up in accordance with established industry practice, such uncertainty would, he said, be highly undesirable as it would be likely to lead to an increase in the cost and time taken to settle rights of contribution between insurers and lead to an increase in those rights of contribution being disputed in the court.
This decision is likely to cause disquiet for long-tail liability insurers. In accordance with Fairchild and IEG, legacy insurers are required to settle mesothelioma claims in full before identifying and seeking contribution from other on-risk insurers. It is clear from this decision that contribution claims must be brought within two years and not the six year period that applies to claims in contract or tort.