Ascertaining liability and exclusion clauses

The decision of Christopher Clarke J in Omega Proteins Ltd v Aspen Insurance UK Ltd [2010] EWHC 2280 (Comm) is notable for two reasons. First, it concerns the extent to which judgments, awards and settlements which impact upon the insured’s liability to a third party are binding as between insured and liability insurer. The judge declined to follow the decision of Tomlinson J in London Borough of Redbridge v Municipal Mutual Insurance Ltd [2001] Lloyd’s Rep IR 545 and subjected it to serious criticism. Secondly, the judge considered the effect of a contractual liability exclusion clause of a kind commonly found in public liability and public liability policies. The case is discussed by Mark Cannon QC and Fiona Sinclair of 4 New Square.

Omega Proteins: the background litigation

The claimant, Omega, bought by-products from animal carcasses used in the meat industry, processed them and sold on the processed product to pet food manufacturers and others. One of Omega’s suppliers, Northern Counties, supplied Omega with contaminated animal carcasses. Unaware of the contamination, Omega mingled the contaminated product with other material and sold it on to a customer, Pears. Pears brought a claim in contract against Omega and, in turn, Omega claimed an indemnity under its contract with Northern Counties against its liability to Pears. Both claims succeeded. HHJ Mackie QC decided that Omega was in breach of express and implied terms of its contract with Pears, and that Omega was accordingly liable to Pears for damages. He also granted Omega the declaration of indemnity that it sought against Northern Counties, holding that the factual findings he had made in Pears’ claim against Omega applied equally to Omega’s claim against Northern Counties. No liability of Northern Counties in tort was alleged or considered by HHJ Mackie.