Material damage

The cover provided by a business interruption policy is often provided in a separate section of a wider policy covering, amongst other things, physical damage to the insured subject matter. It is also common for the two sections to be linked, so that there is business interruption cover only where loss of revenue is caused by material damage. In Mainstream Aquaculture Pty Ltd v Calliden Insurance Ltd [2011] VSC 286 the question before the Supreme Court of Victoria was whether there had been any physical damage. This was a preliminary issue, so that other questions were not under consideration at this stage.

Mainstream: the facts

Mainstream’s business was that of a commercial fish breeder, and was carried on at a leased property. The electricity to the property was supplied by Powercor, through a substation situated on the property but owned by Powercor. Only Powercor staff had access to the substation. In view of the importance of the electricity supply to Mainstream’s business, in particular for oxygenating the water in which the fish stock was maintained, Mainstream had purchased a generator in order to provide a supplementary power supply in case of an interruption to the mains supply.