The insurance industry has welcomed a House of Lords ruling which divides asbestos-related compensation between employers, but claimant lawyers say it is unjust. Michael Faulkner reports

This week the House of Lords handed down its judgment in another landmark test-case relating to asbestos claims. The Barker v Corus UK judgment was immediately seized upon by claimant lawyers as being an unjust erosion of mesothelioma victims' right to full compensation.

"The real winner here is the insurance industry which now stands to save billions of pounds," said union law firm, Thompsons, in disgust. "We will be urging trade unions and asbestos victim support groups to press for legislation to counteract this massive injustice."

The Association of Personal Injury Lawyers (Apil) described the ruling as "an insult to thousands of claimants and their families" and "another example of insurers fighting tooth and nail to save cash".

Strong words. Yet despite claimant lawyers' attack on "greedy insurers", the insurance industry was not involved in Barker or the two other test cases that were joined in the appeal.

Not only that, but the initial response from the insurance industry is it will not be enjoying the million pound windfall that the claimant lawyers predict.

Indeed, insurers argue it is a fair decision which, in the majority of cases, will not see asbestos victims' compensation cut.

So what is the fuss about? The Barker case addressed the technical question of how to deal with a situation in which a claimant has been exposed to asbestos by more than one employer.

In the previous landmark ruling in Fairchild v Glenhaven Funeral Services [2003], the House of Lords decided that where there was more than one employer any of them could be sued for compensation by a mesothelioma sufferer, despite the fact it could not be proved which employer was responsible for causing the disease.

Fairchild was seen as a pro-claimant decision, as it meant the injured party was not adversely affected if one or more of the

previous employers had gone bust or could not be traced. As long as one employer could be found, then that company - and its insurers - would be liable for the whole claim. It was then a matter for the defendant, often an insurance company, to seek out any other liable parties and obtain a contribution for the damages paid.

The Barker case marks a significant change in this position, swinging the scales of justice back towards the defendants.

The House of Lords ruled that an employer is liable only for a portion of the claim based on the length of time the claimant was exposed to asbestos while in its employ.

As a result a claimant will now have to make a claim against all liable employers in order to obtain full compensation rather than just one.

If an employer cannot be traced, then the claimant will not be able to obtain compensation for that period of employment. Periods of self-employment, if exposure occurred during these times, must also be included and will affect the level of compensation.

In giving his judgment, Lord Hoffman recognised the potential injustice to defendants of the Fairchild decision, saying the change would "smooth the roughness of the justice" created by the earlier decision.

"When liability is exceptionally imposed because you may have caused harm...fairness suggests that if more than one person may have been responsible, liability should be divided according to the probability that one or other caused harm," he said.

The insurance industry described the decision as fair, arguing that defendants were entitled to justice as much as the claimant.

A spokesman for Norwich Union (NU) said it was right that a defendant be responsible only for the "time on risk". He said: "The judgment puts the onus on the plaintiff to prove his case and find the right people to sue".

A Royal & SunAlliance spokeswoman said the company "welcomed the clarity around establishing apportionment of liability".

Kieron West, partner at City law firm Kennedys, said: "This decision will be welcomed across the insurance community, since it is both logical and just. When apportioning liability, I cannot see any valid basis for ignoring a mesothelioma victim's own negligent acts and omissions during a period when he was self-employed. A defendant should only be liable for the damage he himself has caused.

"The House of Lords is to be applauded for recognising that claimants and defendants both have rights and for their attempt to achieve justice between the parties."

West rejected suggestions that the judgment was "an erosion of claimants' rights" to compensation.

Despite claimant lawyers' assertions that the judgment will see compensation payment to mesothelioma victims slashed, the insurance industry says it remains to be seen how claims costs be affected.

While Royal & SunAlliance would say only that it was "too early" to determine the impact on claims, NU insisted the effect would be minimal.

"Ultimately the amount of compensation will be the same unless there is a period of self-employment. But most people are exposed to asbestos by an employer," said the NU spokesman.

West agrees, saying that the impact had been "exaggerated" by some parties. "Many claimants will be exposed by only one employer, so the [ruling] won't apply."

Nick Starling, the ABI's head of general insurance, said: "This is a very detailed and complex judgment and the industry, which was not party to the case, will study it carefully. Our over-riding commitment is to ensure that claimants receive the compensation to which they are entitled as quickly as possible." IT