Intersnack, which trades as Snack Brands Australia and produces Cheezels, Thins chips and other snacks, filed proceedings in the Federal Court on December 24. The company alleged AIG rejected a claim for indemnity for losses caused by national business manager Daniel Trad for handing out unauthorised discounts, rebates and allowances to customers.

“[Intersnack] is entitled to indemnity under the AIG policy for the direct financial loss it sustained in the amount of $2,983,790 subject to the deduction of the policy retention in the amount of $50,000,” the lawsuit says.

“[AIG] has wrongly refused to indemnify [Intersnack] under the AIG policy in the amount of $2,933,790 for the insurance claim. Such refusal by [AIG] to indemnify the applicant constitutes breach of contract of insurance by the respondent.”

Intersnack is seeking a declaration that is it entitled to indemnity under its policy and an order for indemnity or damages in the amount of $2.93 million.

Under the policy, taken out in May 2019, the company was covered for losses caused by employee fraud or dishonesty until May 2020, according to court documents.

Intersnack had allegedly allocated a budget to Trad to give out discounts, rebates and allowances to retail customers or offer special promotions for the company’s products. Intersnack either paid customers directly or offset amounts they owed for the supply of snack products when Trad offered discounts.

Intersnack conducted an audit in January 2020 which allegedly found Trad had dishonestly adjusted date ranges and values for 78 discounts, rebates and allowances to “deliberately conceal the true amount of excessive trade investment spend”, according to the lawsuit.

“[Trad] deliberately lied to [Intersnack] about case deal investments that were spent on services that were never provided, but were nevertheless claimed as discounts or rebates by customers,” the lawsuit says.

“In consequences of the acts of dishonesty committed by Mr Trad as an employee of [Intersnack], Mr Trad exceeded his authorised trade investment spend budget by $2,983,790 due to the excessive and unauthorised discounts, rebates and allowances which Mr Trad offered to, or allowed to be made by customers of [Intersnack].”

According to Intersnack, Trad lied about giving out excessive allowances, rebates and discounts to which customers were not entitled or allowed them to “double-dip” on promotion discounts.

Trad’s alleged fraud resulted in a “direct financial loss” of $2.98 million in amounts customers otherwise would have paid to Intersnack.

Intersnack terminated Trad’s employment in February 2020 and made a claim to AIG on June 29, 2020. AIG allegedly declined indemnity to Intersnack on July 24, arguing the criminal protection section of the snack giant’s insurance policy did not cover the claim.

After reconsidering on October 22, AIG said Intersnack did not suffer a “direct financial loss” and was not entitled to indemnity for “unauthorised advertising expenses”.

Intersnack Australia is a unit of German snack food company Intersnack Group.. The company has operated in Australia since 1996 and produces over 200 million packets of chips and snacks per year.

AIG, also known as American International Group, is a US-based multinational finance and insurance company operating in over 80 countries.

AIG did not respond to Lawyerly’s request for comment.

Intersnack is represented by Gillis Delaney Lawyers.

The case is Intersnack Australia Holding Company Pty Limited t/as Snack Brands Australia v AIG Australia Limited.

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