The owners of a building in which aluminium composite panels were installed is seeking compensation for loss or damage arising from the manufacturer supplier of those panels including the costs of removing the panels and remediating damage caused by affixing the panels to the building.

In this judgment the question was whether the insurer’s policy responded to the manufacturer and installer of the panels’ claim for indemnity or potential liability to the owners. 

The judgment only concerned an application to join the manufacturer of the panels to an existing recovery action.  The court was never required to and did not decide that the policy would actually cover the claim but found that it was “at least arguable” that it would. 

The question was whether the manufacturer’s potential liability arose from property damage caused by an event which results in property damage neither expected nor intended. 

The court found that the fixing of the panels to the building had “an instant and damaging effect on the building because the panels posed an immediate and unacceptable danger to the residents of the building”.  The court said that damage would likely be done in replacing the cladding and relied on and reviewed judgments on physical damage to tangible property some of which were also reviewed and discussed here: Property Damage Insurance and Physical Injury to Tangible Property (Australia) – Part 1 | Financial Institutions Legal Snapshot,

Property Damage Insurance and Physical Injury to Tangible Property (Australia) – Part 2 | Financial Institutions Legal Snapshot and

Product Recall Policy Exclusion (Australia) – Part 3 | Financial Institutions Legal Snapshot.

The question whether the incorporation of defective components in an otherwise perfectly good structure or product results in damage to that structure or product is in an issue which continues to engage courts around the world.

AAI Limited v The Owners – Strata Plan No 91086 [2025] FCAFC 6