The Federal Court of Australia in examined the interpretation of an exclusion for damage to contract works in a contractors' liability policy, ruling that the exclusion was not confined to the insured's 鈥榦wn contract works鈥.
The claim involved damage to contract works during construction when formwork failed causing a large concrete slab to collapse onto the floor below.
Facts
Richard Crookes Construction Pty Ltd had engaged Prestige to carry out the formwork. When another subcontractor was pouring concrete into the formwork in one of the basements, it failed and collapsed, causing damage to the floor underneath.
Richard Crookes Construction Pty Ltd sought AUS$2m from Prestige for the damage.
Prestige claimed under its policy with QBE which accepted that the loss fell within the insuring clause. However, it applied the exclusion for 鈥楥ontract Works鈥 which stated:
鈥淭he Insurers shall not be liable to indemnify the Insured in respect of or in any way connected with any鈥 liability in respect of damage to property which consists of or forms part of the Contract Works鈥
On that basis, QBE declined the claim.
Prestige argued that use of the word 鈥渢he鈥 in 鈥渢he Contract Works鈥 meant that the exclusion only applied to the insured鈥檚 own contract works or those in its possession, so did not apply in this instance.
QBE argued that the ordinary and natural language of the Contract Works exclusion did not support Prestige鈥檚 position and that the absence of the words 鈥渢he insured鈥檚 contract works鈥 meant that the intention of the exclusion was clear.
Court鈥檚 decision
The Federal Court agreed with QBE and rejected Prestige鈥檚 arguments.
In analysing the exclusion, the judge looked at the wording of other exclusions in the QBE policy which referred specifically to the insured, for example the 鈥楩aulty Workmanship鈥 exclusion which excluded work 鈥渄one or undertaken by the Insured鈥.
By contrast, the Contract Works exclusion had no such wording.
Accordingly, the Federal Court held that 鈥淐ontract Works鈥 for the purpose of the exclusion were not limited to those owned by or in the possession of the insured which makes the claim under the policy; the exclusion was interpreted in favour of QBE.
Comment
Although a decision of the Australian courts, and so persuasive but not binding on an English court, the decision is a useful reminder of the scope of exclusions in contractors鈥 liability policies with regard to contract works.
Contents
- Perils: Property insurance claims newsletter - October 2023
- Insurance considerations following use of RAAC concrete
- Underlying contracts remain key in arguments over scope of co-insurance
- Recklessness not ‘accidental’ when it comes to trespass
- Property damage oil spills, reliance and duties of delivery drivers
- The Supreme Court considers limitation in environmental nuisance claims
- Incorrectly named insured policy dispute - was the broker or insurer liable?
- Australian Court of Appeal considers welding exclusion
- FOS: complaints involving damage to underground pipes
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