ALLIANZ INSURANCE CO LTD v KEMCON PTY LTD [1993] NSWCA 5

ALLIANZ INSURANCE CO LTD v KEMCON PTY LTD SUPREME COURT OF NEW SOUTH WALES COMMERCIAL LAW DIVISION

MEAGHER, HANDLEY and Cripps JJA 18 August 1992, 8 February 1993

[1993] NSWCA 5

FACTS: The respondent is a manufacturer of chemicals, one of which is the insecticide heliothon EC. In 1987 a batch of the insecticide was contaminated through the negligent act of an employee of the respondent. The negligence went undetected and the insecticide was supplied to Bayer Australia Ltd who retailed the contaminated insecticide principally to tomato growers whose crops failed as a direct result of use of the contaminated insecticide. The growers claimed against Bayer Australia Limited who claimed against the respondent. The respondent (insured) sought indemnity from the appellant (insurer) and

was successful. The appellant now claims the losses were incurred outside the period of the insurance policy.

HELD:(per curiam)

(1) Contamination is a direct damage to goods and may cause consequential damage to property which cannot result in the loss of cover after the policy has expired.

(2) The application of the facts to the plain language of the policy results in the availability of indemnity for a claim arising out of or in connection with any property treated or altered by the respondent during the period of insurance.

ORDERS:

(1) Appeal dismissed with costs.

South Coast Basalt Pty Ltd v R W Miller and Co Pty Ltd (1981) 1 NSWLR 356

Meagher JA This is an appeal from a decision of Giles i in a dispute between a manufacturer (the respondent Kemcon Pty Ltd) and its insurer (the appellant Allianz Insurance Co Ltd) on the meaning of a products liability policy. Amongst other products, KemCon Pty Ltd manufactured a product called heliothon EC for its clients, one of which was Bayer Australia Ltd. The ingredients of this product were heliothon Al, emulsifier 1061 and xylol. The client supplied the first two ingredients and Kemcon Pty Ltd provided the third. The end product, heliothon EC, was an insecticide. In May 1987 Bayer Australia Limited ordered some heliothon EC from Kemcon Pty Ltd, which substantially supplied the product to Bayer Australia Ltd by the end of June 1987. Unhappily, some employee of Kemcon Pty Ltd negligently mixed with the heliothon EC a substance called Velpar, which was a herbicide. Between June and November that year, Bayer Australia Limited sold to tomato growers quantities of heliothon EC thus contaminated with predictably disastrous results. Bayer Australia Limited compensated the tomato growers for their lost crops, recalled all unused supplies of the product, and incurred legal and investigative expenses in connection with the incident. Bayer Australia Limited sought to recover these damages from Kemcon Pty Ltd (as to which there seems little if any, dispute) and Kemcon Pty Ltd sought indemnity from its insurer, the present appellant. Giles J found against the insurer.