L'UNION DES ASSURANCES DE PARIS IARD v SUN ALLIANCE INSURANCE LTD [1995] NSWCA 539

L7UNION DES ASSURANCES DE PARIS IARD v SUN ALLIANCE INSURANCE LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY, HANDLEY, SHELLER and SITJUDGE JJA 18 August 1994; 8 November 1994, 17 February 1995

[1995] NSWCA 539 Appeal from District Court — Judge Barbour QC

INSURANCE — damages — contribution between insurers The appellant and respondent were both insurers of Mid Coast Co-Operative Meat Society Ltd (Midco). Midco was covered by an Industrial Special Risks Insurance policy (ISR policy) issued by the appellant and an Engineering Plant Insurance policy (EPI policy) issued by the respondent.

On 11 March 1987 damage to one of the rotary boosters of the refrigeration system at Midco's plant resulted in the contamination of circulating ammonia and then in the contamination of lubricating oil in the oil collector causing damage to the monoscrew compressor which ultimately had to be replaced. In satisfaction of two claims made under ie EPI policy, the respondent paid Midco $75,275.70 for the costs incurred for damage to and replacement of equipment.

The respondent claimed that the subject of the second claim was covered by the ISR policy and sought to recover $33,140.05 (50 per cent of the amount paid in respect of the second claim) together with interest by way of contribution from the appellant. The principle of contribution between insurers is applicable where a common insured has been issued with policies which cover the same risk although the policies need not be identical; Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 345 and 352. At first instance the trial judge entered a verdict in favour of the respondent.

On appeal various clauses of the ISR policy were relied upon by the appellant to exclude liability in whole or in part. Firstly the appellant relied on perils exclusion CL7 (a) relating to mechanical breakdown (other than mechanical breakdown which resulted from or was occasioned by any peril (not otherwise excluded) to other property insured by the policy external to the machine falling within the proviso to the exemption) and CL8 which included contamination (other than sudden or unforeseen contamination) to exclude itself from liability. It submitted that the reference in the proviso to CL7 (a) to any peril (not otherwise excluded)" was a reference to contamination and hence the claim was not covered by the ISR policy. This argument was rejected by the Court which considered that "any peril (not otherwise excluded)" means any peril which is not excluded by some other provision of the policy. The words of CL8 indicate that the policy excludes damage resulting from contamination other ian unforeseen or sudden damage.