Have you ever wondered how Public Liability came about? Well it all started with the end result of a landmark English legal case from 1868 called Rylands v. FletcherLR 3 HL 330.
It established the so-called Rylands rule which has in Australia become absorbed into the ordinary law of negligence with all the requirements of duty of care, tests of reasonableness of care, foreseeability, proximity, and considerations of contributory negligence.
The dispute in Rylands concerned escape of water onto neighbouring land. Later cases in which the Rylands test was applied involved the escape of all manner of wastes and materials, extending outwards to a broad range of inherently dangerous activities considered essential to modern life.
The application and interpretation of the Rylands rule has been an important step in the development of legal policy relating to modern industry, risk allocation, liability and negligence.
John Rylands constructed a reservoir on land he was renting to supply water to his steam-powered textile mill. Thomas Fletcher operated mines on nearby land and had tunnelled up to old disused mines which were under the land where Rylands’ reservoir was located. Both parties rented land from Lord Wilton and both were engaged in lawful uses of the land. The lands were in Lancashire, in an area known for its mines. Rylands employed independent contractors and engineers to do the work of building the reservoir which was completed in December 1860. While excavating the construction site, the contractors came across some disused mine shafts which had been loosely filled with marl and soil. No attempt was made to seal these shafts. These shafts actually led, via a series of interconnected shafts and tunnels, into Fletcher’s mines and land. Water from Rylands’ reservoir flooded into Fletcher’s mines on 11 December 1860, just days after completion of the reservoir and after it had been partially filled. There had been no excessive rains or local floods. Fletcher sued Rylands.
The case went through four Courts of increasing status, starting in the local Court of Liverpool Assizes (Summer Session) in 1861 who found in favour of the Plaintiff Fletcher on the basis of trespass and nuisance.
Then Rylands successfully gained an order for the matter to be heard by the Court of Exchequer before three judges where the previous decision was overturned with two judges deciding for the Defendant Rylands. Rylands had been engaged in a reasonable and lawful act, with no ill-intent or negligence, and there was no nuisance as there is nothing offensive to the senses about water. Some legal commentators interpret this as a case of the victim being the one to bear the cost of the accident.
Fletcher took the matter to the Court of Appeal, being the Exchequer Chamber of six judges, in 1866 (L.R. 1 Ex. 265). The prior decision was overturned in favour of the appellant Fletcher. Justice Colin Blackburn spoke on behalf of all the judges and said,
“We think that the true rule of law is, that the person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril, and, if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.
Rylands appealed to the House of Lords which dismissed the appeal and agreed with the determination for Fletcher, in 1868 (L.R. 3 H.L. 330). Lord Cairns, in speaking for the House of Lords, stated their agreement of the rule stated above by Justice Blackburn, but added a further limitation on liability, which is that the land from which the escape occurs must have been modified in a way which would be considered non-natural, unusual or inappropriate.
Rylands had argued that he was acting reasonably and lawfully on his land and thus should not be held responsible for a simple accident which resulted without any negligence or wilfulness on his part.
The Court found in favour of Fletcher and ordered Rylands to pay for all the property damage to the mine. The Court agreed that Rylands had a duty in maintaining the reservoir and of being liable for all harm caused by it with broad scope of liability (strict but not absolute) with the extent of defenses described above by Blackburn J and Lord Cairns.
This case was a major development in modern law and has influenced many subsequent rulings. The changes in negligence law as a field of torts has in some jurisdictions incorporated the Rylands rule. In Australia as example, the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd (179 CLR 520; 120 ALR 42) (1994) held that the rule in Rylands had been absorbed into the ordinary law of negligence with all the requirements of duty of care, tests of reasonableness of care, foreseeability, proximity, and considerations of contributory negligence.
It is the law of negligence which in this example has led to the development of Public Liability cover. To fit into the criteria of insurability it needs to be foreseeable, it needs to be fortuitous, it requires a duty of care and it is measurable. Therefore a suitable Insurance policy covering the Property Damage and Bodily Injury that can be caused to another party or victim protects those individuals or businesses who do not deliberately cause such a financial loss but can end up being liable. The precedent has been set by the Court and the great thing about Insurance, is that these matters are decided much quicker, without having to go to Court and the subsequent additional costs. They are therefore settled all on the basis that it is unlikely the Courts will change the precedent set by Rylands versus Fletcher. However not every matter is clear cut and the Courts will still continue to be tested.