March 2021


Importer wins as third-party beneficiary

by Resolve Editor Kate Tilley

A beverage importer whose stock was destroyed in a warehouse fire can rely on the Insurance Contracts Act’s definition of “a third party beneficiary” to claim under an industrial special risks policy issued by CGU.

Federal Court Chief Justice James Allsop found MOS Beverages was entitled to seek indemnity because it fell within the policy’s description of “interests of other parties”. Its goods were not “otherwise insured”.

CGU had rejected MOS Beverages’ claim for stock destroyed in the April 2018 Sydney warehouse fire. MOS had leased storage space from Admiral International, which purchased a one-year policy from CGU in September 2017.

Ben Tollner-Atkinson, an associate with Barry.Nilsson. Lawyers, said the issue was whether MOS was entitled to indemnity from CGU as a third party beneficiary under Section 48(1) of the Insurance Contracts Act 1984 (Cth), and whether sufficient records were kept of MOS’s insurable interests.

After CGU rejected MOS Beverages’ claim, the parties applied to the court to determine policy construction and indemnity as a separate issue, with quantum to be determined later.

Mr Tollner-Atkinson said MOS argued it was entitled to indemnity as a third party beneficiary, as defined under Section 11 of the Insurance Contracts Act, by virtue of Section 48(1) of the Act, which says: “A third party beneficiary under a contract of general insurance has a right to recover from the insurer, in accordance with the contract, the amount of any loss suffered by the third party beneficiary even though the third party beneficiary is not a party to the contact.”

To establish itself as a third party beneficiary, MOS relied on:

  • a memoranda to the policy which included an “Interests of other parties” clause, stating that the insurable interests of owners and “all other parties specifically noted in the records of the insured, shall be automatically included (under the policy)”
  • an endorsement in the policy schedule, SALESXB4 Customers’ Goods, which provided that: “The policy extends to insure goods belonging to the insured’s customers at the premises, to the extent that such goods are not otherwise insured”
  • the policy definition “property insured” included property “for which the insured is responsible, or has assumed responsibility to insure”.

CGU argued the mere mention of MOS’s goods within Admiral’s records was insufficient, and identifiable and specific interests in property must be noted.

But CJ Allsop found “that was actually the situation in which [MOS] found itself”, Mr Tollner-Atkinson said.

Admiral’s records (such as import notices and invoices) clearly identified the nature of MOS’s property and its insurable interest at the warehouse.

Mr Tollner-Atkinson said the implication for insurers was the need for “a thorough understanding of what records are required by an insured to establish an insurable interest owed to a third party under the policy wording; otherwise, you are at risk of unintentionally indemnifying broad classes of goods”.

For insureds or third parties placing goods in control of another party, “it is important that both parties maintain clear, unequivocal records of who holds the goods attaching the insurable interests so indemnity can be ensured even under strict policy wording”.

MOS Beverages Pty Ltd v Insurance Australia Ltd t/as CGU Insurance [2020] FCA 1716 (1 December 2020)

Read the full Barry.Nilsson. article.

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