Axa contest £6m slag contamination claim

Outokumpu Stainless Ltd v Axa Global and others

(Queen's Bench Division - 8 November 2007)

Avesta, a wholly owned subsidiary of the claimant, operated a steelworks in Sheffield at which it smelted scrap metal to produce stainless steel.

A discarded heart pacemaker containing radioactive plutonium 238 was inadvertently included in the scrap. In consequence, although no damage was done to the claimant's plant or equipment, it was left with a quantity of contaminated slag which it was obliged to dispose of at a licensed British Nuclear Fuel site in Cumbria at a cost of some £6m.

The claimant claimed this sum under its "all risks" material damage policy with Axa, which disputed the claim.

On one hand, the operative insuring clause afforded indemnity against "the amount of the loss resulting from damage" to the insured property (with "damage" being defined as "accidental loss or destruction of or damage to the property insured") - which, Axa argued, meant that since there had been no such damage the policy did not respond.

On the other, a special "radioactive contamination" extension gave cover against "loss destruction or damage due to contamination" - which, so the claimant argued, afforded much wider cover and included the £6m disposal cost (as being "loss").

The judge rejected the claim, holding that "loss, taking its colour from its context, should be regarded as restricted to that type of physical damage-related loss to the recovery of which the policy as a whole is directed."

COMMENT

This is another illustration of "read the policy as a whole" construction: in the context of a "material damage" policy it is not sensible to construe "loss" as introducing cover against purely economic loss, here consequent upon radioactive contamination. - Philip Vallance QC, BLM London.