Meaning of "debris" under an ISR policy
Property Insurance eBulletin - 6 March 2013
- The Queensland Supreme Court has recently interpreted the meaning of "debris" in an ISR policy as "accumulated physical items".
- This did not include the costs of remediating pollution.
The Queensland Supreme Court recently considered the meaning of "debris" under an Industrial Special Risks policy in the context of a chemical contamination claim in Hamcor Pty Ltd and Anor v The State of Queensland and Ors1. The plaintiffs asserted, in claims against their brokers, that indemnity would have been available under the material damage extension for disposal of debris.
The Court found that the costs would not have been indemnified and held that the term "debris" relates to "accumulated physical items". This did not include the costs of remediating pollution, which was also specifically excluded in the relevant policy.
The plaintiffs were owners of land at Narangba in Queensland which contained a chemical manufacturing plant. On 25 August 2005, the plant, building and its contents were destroyed by fire. The water used to extinguish the fire was contaminated by chemicals in the property which escaped into a creek and neighbouring properties. As a result of the contamination, the Environmental Protection Agency required the plaintiffs to carry out remediation works which cost over $10 million.
The primary claim was made against the State of Queensland, on the basis that the fire brigade had been negligent. Claims were also issued against the plaintiffs' brokers, Marsh Pty Ltd and Otago Pty Ltd, for failing to obtain appropriate insurance policies for pollution including an Industrial Special Risks policy.
The plaintiffs asserted that an Industrial Special Risks policy would have been reasonably available and would have provided indemnity for the costs and expenses necessarily and reasonably incurred for “the removal, storage and/or disposal of debris”.
The Court held that
"the use of the term 'debris' is consistent with a requirement that any indemnity relate to the cost of the removal storage and/or disposal of accumulated physical items."
It was also relevant that the policy relied upon by the plaintiffs contained an express exclusion for pollution.
Industrial Special Risks policies commonly do not cover pollution. The pollution damage is often to property which is not owned by the insured and therefore falls outside of Section 1 Material Damage cover. In addition, most policies specifically exclude pollution, including the policy which the plaintiffs relied on in this case.
While the definition of "debris" is open to competing interpretations, the Supreme Court of Queensland has rejected the suggestion that this could include pollution, and has defined it to include "accumulated physical items". This decision will be binding on single judges in Queensland, and persuasive in other Australian states.
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