Insurance & Reinsurance Update - Interpretation and application of the "contractual liability" exclusion in a liability insurance policy - September 2010
This case considered whether, where a liability policy contained an exclusion excluding liability arising under a contract unless such liability would have attached in the absence of such a contract, and where there was a judgment finding the insured liable for breach of contract, that foreclosed the question as to whether there was also tortious liability that would fall within the terms of cover.
The Claimant, Omega Proteins Limited ("Omega") claimed against the defendant insurer, Aspen Insurance UK Limited ("Aspen") under the Third Parties (Rights Against Insurers) Act 1930.
Omega carried on business processing by-products from animal carcasses used in the meat industry, which it then supplied to pet food manufacturers and others. A meat processing company, Northern Counties Meat Limited ("Northern Counties") supplied Omega with contaminated animal carcasses which Omega then, unaware of the contamination, supplied to one of its customers who used the material and suffered losses in consequence. In the ensuing litigation, Omega was found liable to pay damages to its customer for breach of contract and Northern Counties was found liable to indemnify Omega against its liability to its customer. The judgment against Northern Counties was based purely in contract, namely breach of an express contractual term regarding the category of material to be supplied, as well as a breach of the implied terms of satisfactory quality and fitness for purpose. No claim or allegation was made in those proceedings that Northern Counties had been negligent or was liable to Omega by virtue of any non contractual obligation.
Northern Counties was in liquidation and was unable to satisfy the judgment against it. Omega therefore claimed against Northern Counties' insurer, Aspen, under a combined liability insurance policy providing coverage against employers' liability, public liability, product liability and pollution liability.
Lawyers Susannah Wakefield, Anthony Menzies, James Crabtree, Jonathan Rogers, Peter Kempe, Dr. Gunbritt Kammerer-Galahn, Franz Janssen, Dr. Astrid Wagner, Wolfgang Schaller, Alain de Foucaud, Christine Flion, Christopher Dixon
