Marketform Managing Agency Ltd v Amashaw Pty Ltd

Marketform Managing Agency Ltd (the insurer) appealed from a decision of the primary judge concerning a claim by Amashaw Pty Ltd (the insured) under a public liability insurance policy. The dispute arose from the escape of petroleum hydrocarbons from the insured's service station into a neighbouring sewer owned and operated by Sydney Water. The insured sought indemnity for the costs incurred in installing an interception trench to prevent further contamination, as well as for liability to Sydney Water for nuisance.

The Court of Appeal was required to determine several legal issues. Firstly, it considered whether the insured had breached its duty of disclosure under the *Insurance Contracts Act 1984* (Cth) by failing to disclose existing site contamination, and whether a reasonable person in the insured's circumstances would have known that this contamination was materially different from what the insurer could assume to exist at a service station. Secondly, the court had to decide whether the liability for damage, defined to include nuisance, arose from pollution that occurred in its entirety during the policy period and was the direct result of a sudden, specific, and identifiable event during that period. Finally, the court considered whether the indemnity extended to the costs of installing the interception trench to prevent the escape of further contaminated groundwater.

The Court of Appeal reasoned that the primary judge had correctly found that the insured had not breached its duty of disclosure. The court held that the insured could not reasonably be expected to know that the existing site contamination was materially different from what the insurer might assume for a service station, particularly given the nature of the contamination and the time it had been present. Regarding the pollution cover, the court found that the damage, including the nuisance claim, arose from a continuous process of pollution that commenced during the policy period and continued thereafter. The court affirmed that the indemnity extended to the costs of the interception trench as a measure to mitigate further damage arising from the insured risk.

The appeal and cross-appeal were dismissed, with the appellant ordered to pay the respondent's costs of the appeal, and the cross-appellant ordered to pay the cross-respondent's costs of the cross-appeal.