The Federal Government has lost a legal action that sought to make Vero pay for the clean-up of an oil spill in Antarctica.

It had appealed to the Full Court of the Federal Court after the court last year ruled a policy applied to buildings, plant and equipment but not to land at the Australian Antarctic Division’s (AAD) Casey base station.

The case arose after Vero rejected a claim from the Government’s captive insurer Comcover over an oil spill in 1999 that contaminated 2000 tonnes of soil.

Although AAD personnel knew about the spill, they did not tell Comcover until 2004, when the remediation cost was estimated at up to $3 million. This has since risen to $6 million.

Comcover initially rejected the claim but reconsidered in 2005, paid the in-house retention and sought indemnity from Vero under its ultimate net loss policy.

The courts considered the meaning of “property” under the policy and whether it applied to the land at Casey.

The three appeal judges were divided on whether land was covered. Two agreed it was, but Justice Jayne Jagot wrote a dissenting judgement in favour of the Commonwealth.

Justice Jagot says there is “real ambiguity in the Comcover manual” that sets out arrangements between Comcover and its members, but the document does not expressly exclude land damage.

She says land is property that can be damaged and also repaired or remediated, and the policy covers repair cost and sudden and accidental pollution.

The Commonwealth has until January 3 to decide whether it will appeal to the High Court.