Embattled department store owner Myer has launched legal action to recover the $4 million the struggling retailer says it is owed by its product warranty insurer.
The law suit comes as Myer struggles to cope with a downturn in retail spending and amid the department store owner’s stoush with shareholder Premier Investments.
A courtroom win by Myer will boost the retailer's bottom line. Credit: Jessica Shaprio
The claim equates to about 10 per cent of the $40 million Myer reported as its adjusted net profit in first half.
Myer launched the claim against Chubb Insurance Australia in the Supreme Court of Victoria earlier this month.
Myer alleges Chubb owes Myer a little more than $3.5 million after its warranty insurer, U-nited Warranties, collapsed and allegedly breached its contract with Myer.
Myer is also seeking interest on the $3.5 million which will stretch the amount being sought to $4 million.
Myer alleges Chubb has the liability for U-nited because under a separate insurance policy, Chubb had agreed to indemnify U-nited against losses and claims.
Myer took out warranty protection insurance through U-nited in September 2011. But the relationship was short-lived with U-nited ceasing to provide services on July 8, 2012.
By July 9, U-nited was placed in liquidation through a members’ voluntary liquidation.
Myer alleges U-nited held an insurance policy with Chubb under a “Premier INT Liability Package”, under which Myer says it had agreed to indemnify U-nited against losses and claims.
Myer declined to comment for this story. Chubb also declined to comment.
Solomon Lew has been highly critical of Myer's performance.Credit: Josh Robenstone
The case follows a tumultuous year for Myer, which has been hit hard by poor trading conditions and fought off criticisms over its performance from Premier Investment’s chairman Solomon Lew.
A slew of earnings downgrades issued by the retailer during calendar 2017 and early 2018 led to the ejection of chief executive Richard Umbers in February.
Myer booked a swingeing first-half loss of $476 million in February after it recorded a $538 million writedown of its goodwill and brand names.
The retailer brought in top insolvency practitioner Mark Korda of KordaMentha, to help negotiate with its landlords.
Premier holds on to a 10.8 per cent-plus stake in Myer, making it the retailer’s largest shareholder.
Myer's new CEO, John King (left) and executive chairman Garry Hounsell.
It has been agitating for change at the retailer after its $101 million stake withered in value to around $38 million based on Myer’s Friday closing price of 43.5 cents.
Mr Lew has savaged Myer’s performance and its board, specifically targeting Myer chairman Gary Hounsell. Myer appointed John King as its new chief executive in April.