By David Slatyer, Partner and Tyra Zacka, Paralegal

Seymour Whyte Constructions Pty Ltd (‘SWC’) was engaged by VicRoads to perform work associated with the upgrade of a section of the Chandler Highway in Melbourne. That work required the excavation of a large quantity of fill, which was found to be contaminated with asbestos. SWC incurred substantial costs associated with asbestos management, investigation, remediation and disposal.

SWC held a Contractor’s Pollution Legal Liability Policy (‘the Policy’) issued by Liberty International Underwriters (‘LUI’). SWC sought indemnity for those costs under the Policy, but LUI rejected the claim contending that the costs did not fall within the scope of cover provided by the Policy.

At first instance, McHugh J dismissed SWC’s claim. His Honour held that the costs were incurred because of the presence of asbestos and SWC’s independent statutory and contractual obligations to manage it, rather than as a result of any relevant “Pollution Conditions” as defined in the Policy. SWC appealed this decision.

Issues on Appeal

SWC outlined ten grounds of appeal. All grounds concerning the proper construction of the Insuring Agreement (clause 1 of Section I) of the Policy and its application to the facts. Specifically, whether the costs incurred in managing and remediating the asbestos contamination constituted a “Loss” arising from a “Pollution Condition”.

Judgement

Appeal dismissed. The New South Wales Court of Appeal upheld the primary judge’s finding that SWC was not entitled to indemnity under the Policy.

Reasons for Decision

• The Policy only covered losses arising from a “Pollution Condition”, which would be civil fines and penalties etc arising from the “emission, discharge, dispersal” etc of pollutants.
• The Court found that SWC’s costs arose from the discovery and presence of asbestos-contaminated soil and from its statutory and contractual obligations to manage that contamination.
• It was not the dispersal or release of asbestos fibres into the air that gave rise to the Improvement Notice issued by WorkSafe Victoria to SWC. Rather, it was the discovery of asbestos in the material that had been and was proposed to be excavated by SWC.
• As the claimed losses did not arise from a covered “Pollution Condition”, the Policy did not respond to SWC’s claim.