Nuplex supplied a resin to Siegwerk, who used it in the manufacture of lacquer. This lacquer was applied to the inside of cans that were used in canned tuna goods. The purpose of the lacquer was to prevent corrosion of the cans and protect the tuna. When the lacquer failed, and a number of cans corroded, a product recall resulted. The can manufacturer sued Seigwerk, who sued Nuplex. Nuplex joined its insurer, QBE.
The Full Federal Court found something a little fishy in Nuplex’s claim on its insurer, QBE, and found the claim fell within an exclusion clause concerning loss of use. The issue was that not all cans the subject of the recall had suffered physical damage. Rather, it was the quality of Nuplex’s products (the resin) that caused the loss of use, not the physical destruction of other tangible property (in this case the loss of use of the cans of tuna).
The case is a useful reminder of the complexities of broadform liability or industrial special risks policies of the type considered here. The case also reinforces the requirement that a “businesslike interpretation” is to be taken to the construction of an insurance policy that gives a “congruent operation to the various components of the whole”.
The decision can be accessed here.