LAKE Macquarie City Council claims it will be forced to spend $124 million ripping up and replacing roads due to an alleged "defective" product used in roadworks across the local government area.
The council is being sued by residents, including Robert Kanis, alleging their homes have been damaged due to roads uncontrollably expanding.
The Newcastle Herald first revealed the issue in 2014, following claims expanding roads were causing the emergence of dangerous speed humps, lifting median strips, cracking gutters and residential driveways being pushed into homes.
In response to two lawsuits brought by multiple residents claiming damage, council lodged two cross-claims against Newcastle Resources, formerly known as South Coast Equipment Resources, the supplier of Steelstone Mix 3 that was used as part of road base on dozens of construction projects.
The council alleges that Steelstone Mix 3 contained untreated steel furnace slag, which had unhydrated calcium oxide in it that was capable of "uncontrolled expansion" if not sufficiently weathered.
Council wants Newcastle Resources held responsible for the alleged property damage and is also seeking more than $124 million it claims is needed to rip up and repair roads and other infrastructure.
Mix 3 was used in roadworks across Lake Macquarie between July 2006 and June 2014.
It is alleged the mix "expanded excessively" causing damage to nearby properties, roads, kerbs, drains and other infrastructure.
Council claims the mix was "unsuitable" for road construction and needs to be removed from at least 80 sections of road across the LGA, including at Dudley and Wangi Wangi.
The ongoing legal stoush that began in 2017 has seen the council, residents and Newcastle Resources chew through millions in combined legal fees.
Now Newcastle Resources has lodged a claim in the Supreme Court against its insurer, Certain Underwriters at Lloyd's Syndicate, seeking an order to make it continue paying legal costs to defend the matters.
The court heard that the insurer had spent $1 million defending the two cross-claims, but since November 2021 refused to pay anything further.
Newcastle Resources unsuccessfully argued that due to four indemnity insurance policies it held between June 2011 and June 2015, the insurer was "obliged" to pay all its legal fees to defend the cases.
Justice James Stevenson disagreed, ruling that the insurer was only obliged to cover legal fees for things covered under the policies.
Because part of the largest cross-claim brought by the council was for "future road replacement" estimated at $124 million, not just property damage that Justice Stevenson ruled was covered under the policies, the insurer was not responsible for all legal fees.
Justice Stevenson said because he found property damage was covered under the policies, it "may be possible" to make an argument that the insurer was responsible for legal fees to defend one case.
He invited written submissions from the council and the insurer about the issue.
The residents lawsuits and cross-claims are on hold pending the outcome.
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