Wotton Kearney acted for the Defendants, Certain Underwriters at Lloyd’s, in a complex insurance coverage dispute in the Supreme Court of Victoria.

Judgment was handed down last week by Matthews J dismissing the Plaintiffs’ claims in their entirety. We are delighted with the result which confirms Insurers’ position that no indemnity was payable under the Industrial Special Risks (ISR) Policy.

The proceeding was brought by Glass Recovery Services Pty Ltd (in liquidation) (GRS) and 82 M Pty Ltd (a related entity, which owned the land where GRS’ premises were located) against their Insurers, claiming indemnity for the physical loss of large stockpiles (glass fines or glass mixed with ceramic, stone and porcelain materials (CSP)) removed from the GRS premises by the Environment Protection Authority Victoria (EPA); costs paid by 82M to the EPA for the clean-up and disposal of the stockpiles; damage to other property at the premises allegedly caused by the EPA’s removal of the stockpiles; and consequential business interruption losses for loss of gross profits and loss of gate fees.

The claim stemmed from the EPA exercising its powers under section 62 of the Environment Protection Act 1970 (Vic) to remove and dispose of the stockpiles at the GRS Coolaroo premises due to the risk of spontaneous combustion and the pollution or environmental harm that would result from a fire in the stockpiles.

Her Honour found that, while the physical loss of the stockpiles was covered under the Section 1 indemnity of the Policy (as the Stockpiles were Property Insured), coverage was excluded by four separate and independent exclusions: Perils Exclusion 1(b) (confiscation by a public authority), Perils Exclusion 4(a) (contamination or pollution), Endorsement NMA 2342 (seepage, pollution and contamination) and Perils Exclusion 6(c) (spontaneous combustion and self-heating). The Court’s analysis provides important guidance on the operation of key exclusions in ISR policies.

While the plaintiffs’ case failed in its entirety based on the exclusions, the Judge made extensive factual findings on all other issues to establish the record. This aspect of the Judgment is interesting as Matthews J meticulously and systematically disposed of the plaintiffs’ claims on the basis that many aspects failed to trigger cover under the Policy as a matter of fact, as the plaintiffs did not prove the alleged damage and, even if cover was triggered and not excluded, the plaintiffs did not establish their alleged quantum above the Policy deductible.

At 250 pages, the Judgment is lengthy and complex – driven by the vast coverage factual and quantum issues in dispute. However, that complexity and the issues canvassed means that this Judgment will likely have something of interest for most insurance and litigation practitioners generally.

For the insurance practitioners, there is guidance on the proper construction and application of: (a) multiple policy exclusions; (b) the section 1 and section 2 basis of settlement provisions; and (c) the use of expert evidence to prove the measurement of loss.

For litigation practitioners generally, there is a fascinating exposition of the perils of building a case based on:

• Lay witnesses who have previously given sworn evidence in prior proceedings which directly contradicts their present evidence on the exact same topic – in this case, the stockpiles. Matthews J made some scathing credibility findings against some of the plaintiffs’ witnesses.
• Expert witnesses who are not actually independent. Matthews J made extensive findings exposing the lack of independence and partisan allegiance of the plaintiffs’ quantum expert who prepared the quantum claim for the value of the loss of the stockpiles and the business interruption loss.

The matter was led by Mr G McArthur KC with Mr S Burt of Counsel, instructed by Adam Chylek (Strategic Growth Leader – International Property, Energy & Infrastructure / Specialty) and Matthew Foglia (Special Counsel) and supported by Ioanne Gianniotis (Associate).