Omega Proteins Ltd v Aspen Insurance UK Ltd  EWCH 2280 (Comm)
Aspen provided Northern Counties with insurance under a combined liability policy. As Northern Counties was in liquidation, Omega claimed against…
Where a liability insurance policy contained an exclusion of any liability arising under a contract, unless such liability would have attached in the absence of the contract, a judgment that the insured was liable for breach of contract did not prevent the insured from showing that there would also have been tortious liability.
Omega Proteins Limited (Omega) conducts business processing by-products from animal carcasses used in the meat industry which it then supplies to pet food manufacturers. Northern Counties supplied Omega with contaminated animal carcasses which Omega, unaware of the contamination, supplied to JG Pears. Omega became liable to pay damages to Pears for breach of contract and Northern Counties was held contractually liable to indemnify Omega for that liability. Northern Counties went into liquidation.
Aspen provided Northern Counties with insurance under a combined liability insurance policy. As Northern Counties was in liquidation, Omega claimed against Aspen under the Third Parties (Rights Against Insurers) Act 1930.
The insurance policy contained an exclusion in respect of any liability arising under any contract or agreement unless such liability would have attached to Northern Counties in the absence of such contract or agreement.
Aspen submitted that Omega could not bring a claim against them as insurers on the basis of the earlier judgment because it conclusively determined that the liability of Northern Counties was in contract and did not find liability on any other basis.
The earlier judgment did not preclude the Court from considering what liability there would have been in the absence of the contract between Northern Counties and Omega had the facts of the case remained the same in every other respect.
Northern Counties, as part of its duty of care, ought to have kept itself up to date on what constituted contaminated matter and would therefore have been liable in negligence had there been no contract.
Northern Counties would have been liable in tort for allowing material to be supplied that was only fit for disposal without warning, an action that could foreseeably cause damage to Omega.
As to the liability of the Aspen, the insured had to establish loss had been suffered which was caused by a peril which came within the scope of the policy (West Wake Price & Co v Ching). The previous judgment established that Northern Counties had suffered a loss, but it was open to either party to show what the cause of the loss was. Aspen were at liberty to show the loss was not an insured loss or fell within an exception (MDIS Ltd v Swinbank ).
In this case Aspen failed to show there would have been no liability on their insured, Northern Counties, in negligence, and therefore failed to bring itself within the relevant clause. Omega was entitled to be indemnified by Aspen.