Capral Limited v Insurance Australia Limited t/as CGU Insurance

In Capral Limited v Insurance Australia Limited t/as CGU Insurance, the Federal Court of Australia was asked to determine whether certain claims made against Capral, an aluminium manufacturer, were covered by an insurance policy issued by CGU. The dispute centred around defective aluminium plate supplied by Capral to customers who incorporated the plate into marine vessels. The court had to decide whether the claims made by the customers were for property damage as defined in the insurance policy and whether CGU's liability was excluded by certain policy clauses.

The key legal issues revolved around the interpretation of the insurance policy, specifically whether the claims by the customers were for "property damage" and whether the insurer's liability was excluded by the policy's "sistership exclusion" and other clauses. The court held that the claims were indeed for property damage as they involved a physical alteration of tangible property that impaired its usefulness or value. The court also ruled that the insurer's liability was not excluded by the policy provisions in question.

The court's reasoning was based on the construction of the insurance policy and the nature of the claims made by the customers. The court found that the defective plate caused a physical alteration to the vessels, which qualified as property damage under the policy. The court further determined that the "sistership exclusion" did not apply because it was not intended to exclude claims for damages caused by the defective product itself. The court concluded that the insurer was liable for the claims made by Capral's customers.

The final orders of the court were that the separate questions posed in the case were answered in favour of Capral. The court found that the amounts paid by Capral in settlement of the customers' claims were in respect of property damage, and that CGU's liability was not excluded by the policy clauses. The court also ordered CGU to pay Capral's costs and directed that the matter stand over for a later date to determine the quantification of the amount for which CGU was liable.