...supply inWestern Australia. Apache immediately issued a notice of force majeure 1 to Alinta. Alinta, in turn, issued the same to Millennium. Shortly thereafter, Millennium notified its insurers of its claim for loss of business income, which the parties agreed totaled nearly $11 million.
Alinta consumed a small amount of the natural gas that it purchased for its own operations. Although it took title to the gas, it never physically possessed the gas it sold to its customers because the gas molecules were commingled as soon as they entered the pipeline — making it impossible to tell either the source or the owner of any given molecule at any given time. Despite this impossibility, title to a specified volume of gas passed from Alinta to Millennium at the inlet point of Millennium’s production facilities.
At the time Millennium sought insurance it was stated that they specifically required coverage “for direct suppliers/customers.” Ultimately, Millennium chose to purchase coverage from National Union and ACE, each of which took 50 percent of the risk. The quote of National Union, moreover, provided, “THERE SHALL BE NO COVERAGE FOR INDIRECT SUPPLIERS/ RECIPIENTS.”
ACE also offered a quote providing policy limits only for “direct suppliers.” When these two insurers issued their binders, neither provided any coverage for “indirect” suppliers.
When the policies were issued, both included an endorsement titled “Contingent Business Interruption Contributing Property(ies) Endorsement,”which covered Millennium against certain losses resulting from the disruption of the supply of materials to Millennium caused by damage to certain “contributing properties.” A general section of each of the policies scheduled sublimits and provided that any direct contributing properties were covered for $25 million; while any unnamed direct contributing properties were covered for $10 million. Millennium did not list any contributing properties on the provided schedules.