In this judgment, Seymour Whyte Construction sought an indemnity under a Contractor’s Pollution Legal Liability Policy after asbestos-contaminated soil was discovered during highway upgrade works in Victoria, Australia.

During works to upgrade a highway, asbestos contamination was discovered in excavated soil. WorkSafe Victoria issued notices requiring remediation and asbestos management. Seymour engaged specialists, cleaned up soil, and incurred significant costs (including testing, monitoring, disposal, contractor services, and equipment).

The insured sought to recover costs associated with managing and removing the asbestos-contaminated soil.

The court had to decide whether the costs incurred by the insured were covered as loss that “arose from” what the policy terms “pollution conditions” and whether the policy’s terms extended to the specific asbestos-related costs in question.

Liberty accepted that the insured’s operations involved “pollution conditions” to the extent that asbestos fibres were released into the air. However, Liberty denied that most of the insured’s claimed costs were a “loss arising from” those pollution conditions. Liberty argued that the WorkSafe notices did not require removal of asbestos-contaminated soil, only that the insured conduct its contractual excavation works safely, an obligation that already existed under occupational health and safety law and its contract.

The court held that the policy responds to polluting, not merely to the presence or discovery of pre-existing contamination. Mere excavation or handling of contaminated soil, without an actual release of pollutants, did not constitute pollution conditions. Even where pollution conditions existed, most of the insured’s costs did not “arise from” them because the insured would have been legally obliged to incur those costs in any event to provide a safe system of work under the legislation and its construction contract. Accordingly, the substantial part of the insured’s claim for remediation and excavation costs failed.

However, the court found that limited losses were recoverable. Legal costs reasonably and necessarily incurred in obtaining advice to understand and respond to the WorkSafe notices did arise from the pollution conditions and fell within the policy’s definition of “Clean-up Costs”. The insured was therefore entitled, in principle, to indemnity for those legal advisory costs, subject to quantification.

Seymour Whyte Construction Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets