A hospitality business’ losses will not be covered after the discovery of asbestos-contaminated mulch in a Sydney park caused the cancellation of a festival.

The company was due to provide bar services at the festival on February 18 last year, but authorities closed the park because of the health scare.

It said its business interruption policy should respond under an additional benefit clause that extended damage cover to customers and suppliers, or alternatively under a prevention of access wording.

The policy had an exclusion for contamination, but that did not apply when the issue was caused by “persons acting maliciously”, which the claimant argued was the case with the mulch.

Suncorp declined the claim, saying the contamination did not constitute “damage” and the claimant had not established, in any case, that the claimed damage happened during the insurance period or “at the premises” of a customer or supplier.

The insurer added cover was not available under the prevention of access clause because the contamination did not prevent access to or hinder use of the claimant’s premises, and the event was cancelled due to general health concerns.

In a dispute ruling, the Australian Financial Complaints Authority says asbestos in the mulch was effectively damage, but it may have happened before the insurance period.

The complainant provided no detailed evidence about the relationships between the business, the park and the event organisers, and it was not possible to say if the damage occurred to the premises of the complainant’s customer or its supplier.

It says there were “any number of reasons” for the contamination and, while the claimant pointed to NSW Environment Protection Authority investigations, it was not established that it was caused maliciously. Therefore, the exclusion applied.

“The complainant has not provided additional evidence about how the asbestos came to be in the mulch or, indeed, when and in what circumstances the mulch was laid down in the park.”  

The prevention of access cover was not triggered, AFCA says.

An authority ordered closure of the park because of the damage, and the park was within a 50km radius of the insured premises, as required, but the insurer was entitled to rely upon the terms of the policy to deny the claim, the authority finds.

The decision is available here.