MELBOURNE, AUSTRALIA (Oct. 14, 2 p.m. ET) — A PET resin manufacturer has won compensation from a credit risk insurer after a client's business failed during the global financial crisis.
Melbourne-based Leading Synthetics Pty. Ltd. operates a polyester plant that manufactures PET resin, polyester fiber and filament yarns. It supplies resin to companies in Australia, New Zealand and Europe.
In 2007 and 2008, Leading Synthetics supplied resins to Melbourne-based Signum Specialities Pty. Ltd., which processed them into plastic containers. In November 2008, Signum went into liquidation, owing Leading Synthetics US$2.2 million.
In late 2007, Leading Synthetics had asked Melbourne-based insurance broker Adroit Insurance Group Pty. Ltd., trading as Austbrokers, to insure it against the risk Signum might fail to pay.
From January to May 2008, Austbrokers negotiated with Sydney-based credit risk insurer Atradius Credit Insurance N.V. to place cover for up to US$781,528 in losses.
May 5 2008, Austbrokers emailed Atradius requesting an update on the status of Signum's credit risk cover, to which Atradius said it was “awaiting the outcome on others prior to processing”. Austbrokers did not follow up, so no policy was prepared, no invoice sent and no premium paid.
After Signum failed, Leading Synthetics launched action against Atradius in the Victorian Supreme Court for indemnity, alleging an insurance contract was made. Alternatively, it claimed Atradius could not deny a contract existed because of its conduct after the May 5 email.
If Leading Synthetics had been unsuccessful in proving it had cover, it would have claimed damages against Austbrokers for having failed to put cover in place.
Atradius argued Leading Synthetics did not give it relevant information, which affected its decision whether to accept the risk.
But Justice Cameron Macaulay said a contract had been made. Under the policy, Leading Synthetics was entitled to receive 90 percent of the US$781,528 insured loss, or US$703,426. After deducting the premium and taxes, he assessed Leading Synthetics' net loss at US$688,915.