ISR Additional Benefit 6 part 2 – Removal of Debris, Dismantling & Temporary Repairs
“Subject to the liability of the Insurer(s) not being increased beyond the Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify the Insured for:…
(f) Costs and expenses necessarily and reasonably incurred in respect of:…
(ii) the lnsured’s legal liability in respect of removal, storage and/or disposal of debris, notwithstanding Excluded Peril 8 in relation to premises, roadways, services, railway or waterways of others, consequent upon damage to the Property Insured by a peril hereby insured against for such costs together with the cost of cleaning provided that such liability was not assumed by the Insured under an agreement entered into after the commencement of the Period of
Insurance or any renewal thereof unless liability would have attached in the absence of such agreement.
Provided that the insurance under this section does not extend to any liability that the Insured may incur as a consequence of pollution of any kind.”
The first point to note is that this Additional Benefit has a proviso that states that the cover does not extend to cover the liability of the Insured as a consequence of “pollution of any kind”.
The Mark IV wording(s) does not include any definition of ‘pollution’. Therefore, its ordinary meaning would apply which, according to The Macquarie Dictionary is: “act of polluting, 2. environmental pollutants, such as motor vehicle emissions, industrial waste, etc, 3. the results of these pollutants”.
The above definition refers twice to the word ‘pollutants’, which has the following meaning: “that which pollutes; a polluting agent”. The root of the word is ‘pollute’, which is also used in the definition of ‘pollutant’ and means:
“make foul or unclean, dirty”.
After a fire, any debris or residue other than the Insured’s that ends up on the property would, under the above definitions taken from The Macquarie Dictionary, fall within the broad policy definition of “pollution of any
kind”. Therefore, while the policy provides cover to clean up and remove the debris that may have found its way onto neighbouring property, such as “premises, roadways, services, railway or waterways of others”, it does not extend to cover any claim for damage or other loss caused by the presence of the debris.
Even then, the debris must arise from damage to the Insured Property. In a recent case I attended, a motor wrecker arranged insurance under an ISR policy for much of his property, but specifically stipulated that there was to be no cover at all for stock in the open air. This stock consisted of severely damaged vehicles, as you would expect a motor wrecker to hold as stock. A fire broke out in the wrecked vehicle ‘grave yard’, and it took many millions of litres of water to extinguish the fire. The fire-water escaped the boundary of the Insured’s property, and polluted adjacent storm water channels. The cost of the clean up ordered by the EPA came to over $250,000. The Insured found that he was not insured under his ISR policy, as the only property on fire was not Property Insured under the policy.
Further, the Insured found that his Liability policy did not cover it either. The reason for the declinature hinged on the meaning of the word ‘compensation’ found in that particular liability wording. The liability Insurer took comfort from the case of Eres v Deer Park Installations Pty. Ltd. & Steel Mains Pty. Ltd. (1985).
In that case, Gray J. stated that when considering “compensation” in the context of a liability policy:
Immediate difficulty is encountered with ‘compensation’. Its ordinary meaning is some recompense for an injury done to the person receiving by the person paying. It is not an apt word to describe a statutory obligation to recoup a person who has himself incurred a statutory liability to a third party. Nor does the context suggest that an extended meaning should be given to ‘compensation’. In my opinion, the parties to the policy comprehended that [the Insured] would be indemnified in respect of liabilities incurred directly to physically injured persons and not in respect of more remote or indirect obligations.”
Please note that the sub-clause includes the following proviso:
“…that such liability was not assumed by the Insured under an agreement entered into after the commencement of the Period of Insurance or any renewal thereof unless liability would have attached in the absence of such agreement.”
This means that the Insured cannot enter into an agreement to meet the costs of Removal of Debris (as defined above) after the date of the inception of the policy, and obtain an indemnity, unless the Insured would have been liable anyway. It follows that if the Insured entered into any such agreement before the inception date of the Policy, he would need to disclose the fact to Insurers, otherwise it could be regarded as a non-disclosure of a material fact,
particularly if the Insured would not otherwise have been liable.
To receive the benefit of this very valuable additional cover, the Sub-Limit for Removal of Debris must be adequate, something that regrettably the team and I at LMI Group find too low far too often.
The Macquarie Dictionary, Revised 3rd Edition, edited by Delbridge A., Bernard
J.R.L., Blair D., Peters P. and Yallop C., 2001, The Macquarie Library Pty Ltd,
Eres v Deer Park Installations Pty. Ltd. & Steel Mains Pty. Ltd. (1985) 3 ANZ Ins Cas 60-604.