No Causal Link: NSWCA Rejects Pollution Liability Cover for Asbestos Remediation

Casenote: Seymour Whyte Constructions Pty Limited v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2026] NSWCA 154

NSW Court of Appeal (Payne, Ball and Free JJA) — 31 July 2026 — Appeal dismissed with costs

Executive Summary

In a judgment handed down on 31 July 2026,[1]  the New South Wales Court of Appeal dismissed an appeal by Seymour Whyte Constructions Pty Ltd (SWC) from a refusal by its insurer to indemnify it under a Contractor’s Pollution Legal Liability policy (Policy) for more than $3 million in costs associated with asbestos-contaminated soil encountered during a highway upgrade project.

The Court of Appeal held that the Policy did not respond merely because asbestos-contaminated material was encountered, handled or regulated during construction works. Here, the substantial costs claimed arose from SWC’s existing occupational health and safety (OH&S) obligations and a WorkSafe Improvement Notice (Improvement Notice) directed to the safe management of asbestos-contaminated material, rather than from a covered pollution event.

SWC was therefore unable to establish causation and was not entitled to indemnity for its remediation costs.

Background Facts

In 2017 SWC was engaged by VicRoads to upgrade the Chandler Highway in Melbourne. That work required the excavation of a large quantity of fill near the Yarra River. The excavated material could not be stockpiled in the flood zone, and SWC arranged to stockpile it on an adjoining site (being the site of the former Alphington paper mill).

On 14 August 2017, bonded asbestos was found in the stockpile. SWC ceased work, engaged hygienists and a licensed contractor, and WorkSafe Victoria issued the Improvement Notice. The Improvement Notice required SWC to implement a safe system of work for managing asbestos across the construction site.

SWC incurred approximately $3 million in remediation costs in relation to the stockpile, and sought cover for those costs under the Policy.  

Insurance Issue

The insuring clause required the insurer to pay sums SWC became "legally obliged to pay for Loss arising from Pollution Conditions caused by Covered Operations".

"Pollution Conditions" meant "the emission, discharge, dispersal, migration, release or escape of Pollutants".

“Pollutants” were defined to include “any solid contaminant”. It was common ground that asbestos constituted a “Pollutant”.

"Loss" included Clean-up Costs and Environmental Damage.

“Environmental Damage” was defined to mean “the injurious presence of Pollutants resulting in Clean-Up Costs”.

The central question was whether SWC's remediation costs could properly be said to "arise from" the dispersal or release of asbestos fibres.

SWC’s case was that its excavation works caused asbestos to be dispersed or released, either because the excavation itself caused asbestos to be released into the air, or because the transport of material containing asbestos to the adjoining site involved the dispersal of material containing asbestos.  

The insurer argued that the loss occurred instead because of SWC’s statutory duty to provide a safe system of work once asbestos was discovered, not from the subsequent dispersal of asbestos.

Decision

In a unanimous decision (Ball JA, Payne and Free JJA agreeing) the Court of Appeal agreed with the insurer and dismissed the appeal, and relevantly held that:

• the Policy was designed to fill a gap in contract works insurance, which often contain pollution exclusions, by providing cover for loss from third-party Bodily Injury/Property Damage claims and clean-up costs following an emission, discharge or dispersal of pollutants. However, the Policy was not a vehicle for recovering the ordinary costs of performing contracted works, even where a latent condition (undisclosed asbestos) was involved: [38]–[40].

• it was the presence, not the release, of asbestos that triggered the Improvement Notice and SWC’s OH&S obligations. The Notice was not directed at remedying a past release. It required a safe system of work "into the future". SWC would therefore have incurred the same costs irrespective of whether any fibres had actually been released: [41]–[43].

• In respect of SWC’s claim for loss caused by Environmental Damage, the loss must still arise from "Pollution Conditions". Here, the loss arose from the existence of asbestos, not its emission or dispersal, "a critical distinction": [50]–[51].

Why It Matters / Practical Takeaways

For both insurers and project participants, the decision underscores the need to distinguish between losses caused by a pollution event and losses arising from independent contractual or statutory obligations. Key takeaways include:

For insurers and underwriters

Careful consideration of causation remains critical in claims handling:

• "arising from" requires a substantive causal link to the defined trigger event (release/dispersal), not merely that the pollutant was present somewhere in the history of the claim. A "but for" connection alone is not enough;

• analyse the legal obligation, not the chronology. A claim may follow a contamination incident in time and still arise legally from pre-existing statutory or contractual obligations that would have been incurred regardless. Here, that obligation sat outside a pollution-triggered claim even where the same hazard was also a "Pollutant";

• whilst the Court accepted that a release had occurred, that was insufficient to establish a covered loss.

For contractors, engineers and project owners

• Do not treat Contractor’s Pollution Legal Liability insurance as a substitute for site-risk allocation. Contaminated-ground risk should be priced and allocated through tender documents, latent-condition clauses and site investigation regimes, not assumed to be picked up by pollution cover.

• Preserve evidence of causation from the outset: what pollutant moved, when, what regulatory or contractual instrument followed, and why the cost would not otherwise have been incurred.

Clyde & Co

Clyde & Co's insurance and construction lawyers have extensive experience advising insurers and project participants on coverage issues, contaminated ground claims, contractual risk allocation and dispute resolution.

If you would like to discuss the implications of this decision, or require assistance with a pollution liability claim, policy wording review or risk allocation strategy for a project, please contact a member of the Clyde & Co team.