Ripple effect

In 2003, the Association of British Insurers created guidelines for the payment of mesothelioma claims. These were promulgated in a laudable attempt to ensure, following Fairchild, that claims were settled quickly and disputes between compensators were, so far as possible, avoided.

The 'pay and be paid' principle encountered difficulties in practice, however. Lead compensators would be cautious about making pre-action concessions or moving to settlement where they might end up shouldering 100% of the claim, and then be unable to recover a fair share from the other contributors.

In future, an admission of liability will not expose the party to a potential 100% liability. This is a valuable development for claims handlers, as compensators should now be able to calculate their contribution, thus enabling early proportionate Part 36 offers to be made.

There is no longer any need to wait for contributors to agree, since a significant barrier to speedy settlement has been removed.

Nevertheless, there is scope for disagreement between insurers, and it is in everyone's interests to formulate a scheme whereby they will, within defined limits, compensate claimants on a straight-line time-exposed basis, obviating arguments between them as to the intensity of exposure, or the type of asbestos.

While such a co-ordinated approach would not bind a claimant, it would remove the need for defendants in a multi-party claim to incur significant costs investigating the precise extent to which they each exposed the claimant - a process that delays settlement. Fundamentally, with a few adjustments, the existing 'handling guidelines' that embrace divisible long-tail asbestos-related diseases could be revised to cover mesothelioma claims as well.

Proportionate liability

The decision in Barker could also have an impact on the earlier decisions in Phillips v Gunner Syndicate (2000) and Ballantine v Newalls Insulation (2003).

In Phillips, employers' liability insurers on risk for part of a claimant's employment attempted to argue for proportionate liability by claiming that the rateable proportion clause enabled them to bind the claimant to proportionate recovery on the basis of insurers' custom and practice of apportioning liability on a time-on-risk basis.

Justice Eady rejected this, and legal commentators have harboured concerns that the decision rendered a partial insurer (having taken a premium only for a limited period) nevertheless liable in respect of the policyholder's legal - and, therefore, total - liability.

Barker imposed proportionate liability between defendants. Notwithstanding that the narrowly defined circumstances allowing proportionate liability might not necessarily extend to issues between insurers and policyholders, it is hoped Phillips cannot survive the Barker decision.

By virtue of Ballantine, compensators are currently entitled to deduct from any payment of compensation a figure equivalent to any award made to the claimant under the Pneumoconiosis etc (Workers Compensation) Act 1979. The rationale behind the Act was to enable victims to be compensated on a no-fault basis where there was nobody available to be sued.

A pre-condition to payment of benefit under the Act is that every relevant employer has ceased to carry on business. Experience has shown that the Department for Work and Pensions, and its predecessor departments that administered the scheme, were generous in their approach leading to double recovery.

After Barker, each employer is only liable in respect of its share and it is, therefore, arguable that the 1979 Act payment should only be deducted insofar as it was made in respect of an insolvent employer without effective insurance - principally any proportion payable by the Financial Services Compensation Scheme.

This would ameliorate the burden on the claimant in respect of any void. Enhancements of this statutory regime could be devised to make up any shortfall that would otherwise affect the claimant, particularly if statutory tariffs are enhanced to reflect a common law level of damages.

A third area to consider is the influence of Barker on existing and future provisional damages awards. What if a claimant has judgement against one employer for a modest immediate award of damages for pleural thickening (a divisible disease) and the claimant subsequently develops mesothelioma? If they invite the court to award further damages, having had judgement entered against it, can the employer argue that it is only responsible - post-Barker - for an apportioned share? We suggest it can.

This was a problem anticipated by the Court of Appeal in one of the Fairchild raft of cases, Pendleton v Stone and Webster, where the putative liability of the defendant in respect of further litigation under the return conditions was said to depend on the state of medical science at that time "considered in the light of the law's requirements as to causation" (para 166: Lord Justice Brooke).

Although the observations of the court were directed to medical conditions that might develop in the future, why should similar considerations not apply to the issue of establishing legal liability?

A claimant must establish that he has developed some serious disease as a result of the act or omission in question. Where there are other potential exposers, they may not be able to do so given the current limitations of medical science but to preclude them from returning for a further award altogether would be blatantly unfair - they would be in the same position as the claimant in Fairchild.

Equally, however, to condemn any single employer as to 100% of a further award would perpetuate one of the injustices flowing from Fairchild, namely the imposition on a defendant of a disproportionate amount of the claimant's compensation. Our view is that in the absence of express agreement or estoppel, any further damages should be apportioned. It will be open to insurers to impose this in any event as a matter of agreement in provisional damages settlements.

Finally, consideration should be given to asbestos-related lung cancer claims.

Lung cancer mortality exceeds that of mesothelioma, and insurers are concerned to ensure the floodgates are not opened to give all asbestos-exposed smokers with lung cancer automatic compensation.

Claimants currently argue for a lower causation threshold by using the 'Helsinki Criteria', yet we believe they will still have to prove causation on the conventional 'but for' basis, and the Fairchild decision will no longer, owing to Lord Hoffman's comments in Barker, assist them in the event of their failing to satisfy this test.

The Fairchild decision left the law of causation with some structural difficulties. Although Barker will inevitably require the market to again consider its approach to asbestos claims, particularly in claims handling, Barker has largely resolved those difficulties and will be seen ultimately as a pragmatic decision allowing for a more efficient and coherent approach to these claims.

- Brian Goodwin and Toby Scott are partners, respectively, with Berrymans Lace Mawer and Eversheds, both of whom acted for the employer appellants in Barker v Corus and the related appeals.