In Omega Proteins Limited v Aspen Insurance UK Ltd  EWHC 220 (Comm) the High Court was asked to consider whether a judgment that an insured was liable for breach of contract prevented a court from finding tortious liability within the same cover.
In the earlier case of JG Pears (Newark) Ltd v Omega Proteins Limited  EWHC 1070 Omega was held liable to pay damages for breach of contract to JG Pears for supplying meat materials which were only fit for disposal under EC Regulation 1774/2002. As it was Omega's supplier Northern Counties Meat Limited that had failed to comply with the Regulation, it was held liable to indemnify Omega against its liability to JG Pears. However, Northern Counties was in liquidation and unable to satisfy the judgment against it.
Therefore, Omega brought the present claim against Northern Counties' insurers, Aspen, under the Third Parties (Rights against Insurers) Act 1930. The insurance policy contained an indemnity in respect of "all sums which the Insured becomes legally liable to pay" subject to an exclusion clause for liability arising "under any contract or agreement unless such liability would have attached in the absence of such contract or agreement." It was Aspen's contention that Omega's claim fell within this exclusion as the earlier judgment had conclusively found liability to have arisen in contract.
Mr Justice Clarke ruled in favour of Omega stating that the correct question for the court to ask was what liability would have arisen, on the same facts, had there been no contract between Omega and Northern Counties. In order for the exclusion clause to apply the burden of proof was on the insurer, Aspen, to show that there would have been no liability in the absence of a contract and they had failed to do so. Northern Counties' failure to warn Omega that the material it had supplied was only fit for disposal would have amounted to an act of negligence and given rise to the corresponding liability. It was insufficient for Aspen to direct the court's attention to the earlier judgment as this did not constitute proof that Northern Counties had no tortious liability, only that they had to pay Omega the amount of the judgment sum.
Clarke J said that Aspen should provide an indemnity for all sums which Northern Counties would have been liable towards Omega had there been no contract in existence. Any claim by Omega would not be limited to that which would have been recoverable against Northern Counties in contract.