Recent comments by a UK Commercial Court judge indicate that policyholders are entitled to “spike” their entire liability for a mesothelioma claim into any one year of employers’ liability (EL) cover. Spiking potentially arises where the period of EL cover is shorter than the period of negligent exposure to asbestos. The special rules that apply to mesothelioma liability mean that any defendant who negligently exposes a victim sufficiently to satisfy the Fairchild test is jointly and severally liable for 100% of the damages. If the claim is spiked, the EL insurer would be liable to indemnify its insured in full, not pro rata its time on risk.

Please click here to see our blog on the Supreme Court’s decision in Sienkiewicz, which reviews the relevant law governing liability for mesothelioma claims.

The decision itself (International Energy Group Limited v Zurich Insurance PLC UK) is of little relevance as it turned on the fact that the Compensation Act 2006, which provides for joint and several liability in mesothelioma cases, does not apply in Guernsey. The judge’s comments on spiking are therefore obiter only, but of interest nonetheless.

In looking at the position if the liability issues had been governed by English law, the judge reviewed the decision in Phillips v Syndicate 992 Gunner ([2004] LRIR 426). The Phillips case is often relied upon as confirming a policyholder’s right to spike, although there are a number of uncertainties. The judge indicated that Phillips had been correctly decided, although perhaps on the basis of the wrong reasoning.

The judge’s comments are not binding, but they are a guide to the way in which a court might well approach the Phillips case, if that decision were challenged.