Outokumpu Stainless Ltd v AXA Global Risks (UK) Ltd & Ors

An extension to a property-damage policy must be construed consistently with the policy read as a whole. Cover for loss, destruction or damage caused by radioactive contamination extended cover for physical damage to insured property, including the cost of cleaning or decontamination needed to restore that property. It did not create separate cover for purely economic loss, including the cost of disposing of contaminated material which was not itself insured property. The policy’s context, structure, exclusions and related provisions may inform construction, but an insured’s subjective objective or desired level of cover cannot enlarge the words used.

The claimant operated a stainless-steel works where a shielded radioactive source was inadvertently melted with scrap metal. Radioactive contamination affected slag and required testing, handling, storage, transport and disposal under controlled conditions. The insured property damage was limited in practical terms, and the principal claim concerned approximately £6.38 million in incident-management and disposal costs.

The claimant sought indemnity under an all-risks property-damage policy containing a radioactive contamination memorandum. The insurers accepted that contaminated slagpots suffered physical damage, but disputed liability for the wider costs. The central issue was whether the memorandum covered those costs as loss caused by radioactive contamination, or merely extended the existing property-damage cover to contamination-related physical damage.

1. Claim dismissed. The radioactive contamination memorandum was an extension to the cover provided by the Property section. It had to be read with the policy’s general insuring clause, definitions, exclusions and structure.
2. The policy as a whole was traditional property-damage insurance. The reference to “loss destruction or damage” in the memorandum did not give “loss” an unrestricted economic meaning. The memorandum reinstated cover for an excluded cause of physical damage; it did not introduce a wholly different form of insurance.
3. Where insured property was contaminated, the cost of cleaning or decontaminating it could be recoverable as the equivalent of repairing it. The extension could also respond to repair or replacement of contaminated plant. It did not cover the cost of disposing of radioactive dust, valueless slag or other material merely because its removal was necessary before the factory could resume operations. Such costs were not covered property damage and did not fall within the debris-removal provision.
4. The commercial and factual background did not alter that conclusion. The insured’s subjective wish for “full cover” was irrelevant, and evidence of negotiations or subjective intention was not relied upon for construction. The court applied the objective approach stated in ICS Limited v West Bromwich Building Society [1998] 1 WLR 896 and the principles concerning contractual background and subjective objectives in Prenn v Simmonds [1971] 1 WLR 1381.
5. Obiter, the court considered that the separate exclusion for loss or damage to stock caused by processing would not have excluded the claim on causation grounds: the contamination was caused by the radioactive source, not naturally described as caused by processing. The court also expressed the view that the time of damage would ordinarily be assessed by asking when each item of slag was contaminated.