The Federal Court has ruled a beverage importer can rely on the meaning of "a third party beneficiary" as set out in the Insurance Contracts Act to claim under an Industrial Special Risks Insurance Policy issued by CGU.

Chief Justice James Allsop also says in his ruling that MOS Beverages is entitled to seek indemnity as the business fell within the description of "interests of other parties" as outlined in the first clause of the memoranda to the policy.

The IAG-owned insurer had rejected the beverage trader's claim for goods destroyed by a fire at a Sydney warehouse in April 2018. It had leased the storage space from Admiral International, which took out the one-year policy from CGU in September 2017.

At the time of the fire, MOS Beverages had not insured the goods, but it proceeded to claim for the losses under Admiral's policy, which was rejected by the insurer.

CGU says MOS Beverages has no grounds to make a claim, submitting mere record-keeping of the business between Admiral and the importer would mean the policy provided "coverage extending to anyone" to whom the warehouse leased storage space.

The insurer also argued it was open to MOS Beverages to take out insurance for its goods.

But Chief Justice Allsop dismissed the defence arguments made by the insurer. He says MOS Beverages had an "insurable interest" in goods that were insured under the policy.

"MOS Beverages is not merely a third party whose name is mentioned in the records held by Admiral," Chief Justice Allsop said in his ruling. "It is specifically identified in Admiral's records in the context of it being a customer whose goods are stored at the premises.

"In my view, a reasonable businessperson would have understood the terms of the 'Interests of Other Parties' clause to mean that owners of property insured under the Policy would have a direct avenue to claim against CGU, provided that their insurable interest was noted in the records of Admiral in some acceptable businesslike way, prior to the loss being sustained."

Click here for the ruling.