It is not unusual that, following a fire, an insured property owner receives a notice from the Environment Protection Authority requiring the cleaning up of contamination.  Such contamination is often caused by fire-fighting water carrying contaminants into a drain and from there into a creek.  Sometimes insureds try to squeeze in such obligations under their public liability cover.

A Supreme Court of Queensland judge has considered such a claim.  Following a fire at the insured’s chemical manufacturing plant, the EPA obtained orders against the insured requiring the insured to remove contaminants from surrounding properties and from a creek, and to clean relevant structures.  The insured spent over $10 million in complying with the orders. 

The insured had a liability policy which provided pollution liability cover on a ‘claims made’ basis, and an ISR policy. 

In the course of a proceeding brought by the insured against their brokers, the judge appeared to accept that the insured had a liability to pay compensation within the meaning of the liability policy, which is perhaps surprising given that the insured’s obligation was to clean up, and not to hand over money.  However, such liability had to be in respect of claims made against the insured, and the judge appeared to conclude that there had been no claim for compensation made against the insured. 

Further, the judge decided that an exclusion in respect of claims arising out of damage to the insured’s own property applied, which is perhaps surprising given that there was also damage to neighbouring properties and to a creek. 

The judge decided that the loss did not fall within the removal of debris cover in the ISR policy.  “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 is inconsistent with indemnity being given for the costs of remediation of pollution in respect of the insured’s own property.”  Rather more conventionally the judge also applied an exclusion in respect of “any liability that the insured may incur as a consequence of pollution of any kind".

Cover for pollution clean-up remains a vexed issue for both insureds and insurers.  

Hamcor Pty Ltd v State of Queensland