Visy Packaging manufactured ring pull cans for various customers, which were used for packaging tuna.  Following packaging the tuna came into contact with the can ends and the tuna inside deteriorated.  Visy settled the resulting claims from their customers.

Visy believed that the problem was that the lacquer which they had applied to the can ends had failed to seal the ends properly so as to prevent the tuna coming into contact with the bare metal.  Visy sued the manufacturer of that lacquer. 

The lacquer manufacturer in turn sued Nuplex, which had supplied to the manufacturer a resin which was used as an ingredient of the lacquer.  It turned out that in a number of batches supplied to the manufacturer, Nuplex had substituted a different resin. 

The lacquer manufacturer settled Visy’s claim, but its own claim against Nuplex continued.  Nuplex in turn sued its broadform liability insurer which had refused to provide indemnity. 

The manufacturer’s claim against Nuplex was dismissed by a Federal Court judge.  But then he still had to decide whether the libility policy covered Nuplex’ defence costs. 

Not surprisingly the judge had no trouble in finding that there had been an ‘occurrence’ causing ‘property damage’ within the meaning of the policy.  Also unsurprisingly, the judge rejected an argument by the insurer that it could apply the exclusion of cover for claims resulting from the failure of Nuplex’ product to meet the level of performance, quality, fitness or durability expressed or implied, warranted or represented by Nuplex.

Finally, the judge did not permit the insurer to apply the recall exclusion, because the nature of the settlement between Visy and the lacquer manufacturer meant that it was not possible to differentiate between affected items which might, or might not, be subject to the recall exclusion.  That was just bad luck for the insurer. 

So the insurer had to indemnify Nuplex in respect of those legal costs which it did not recover from the unsuccessful lacquer manufacturer.  

This case is a reminder that insurers can have difficulty in discharging the burden of proof which they bear when attempting to rely on an exclusion clause. 

Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd