RPC partner on the possible consequences

Law

Reinsurers could find themselves facing costly legal wrangling following a mesothelioma case in the UK’s Supreme Court, according to RPC partner Richard Breavington.

The outcome of IEG vs Zurich will determine if a claimant can recover the full amount of a mesothelioma claim under employers’ liability insurance for any single year, even if the exposure to asbestos happened over several years. The results are expected in the Autumn.

If the Supreme Court decides that the claimant can recover in this way, reinsurers should take note, because the deductibles for a single reinsurance period could easily be breached by the new wave of costly mesothelioma claims.

Breavington says: “This case only applies to the insurance level. Whether or not a similar ruling would apply to a reinsurance level is up in the air

“Where it does get interesting is the reinsurance recovery.”

The Supreme Court case is unlikely to mention reinsurers at all, Breavington says:

“Most likely, they won’t even mention reinsurance in their judgement, and the reinsurance market will have to work out how the principles applied at the insurance level will apply at the reinsurance level.”

If the appeal is successful, reinsurers will need to agree amongst themselves on how to proceed, set up bilateral agreements, or resort to legal action.

Breavington says that legal action is possible, but unlikely: “The reinsurance market has been very good at avoiding large scale disputes that affect the whole market. They tend to sort things out among themselves.

“But it may be that there is enough at stake that they can’t deal with it amicably. That would certainly be a candidate for the court of appeal or the Supreme Court again.”