Application of businesslike and common sense to interpret insurance terms.
With reference to Acciona
Infrastructure Australia Pty Ltd v Zurich Australian Insurance Limited [2023]
FCAFC 47 case
In a 19.5Km
long road construction project, the Client obtained the Works insurance, and it
indemnified the Contractor.
The
insurance covers the Project Site(19.5Km long road); an exclusion of the
insurance is provided below.
Due to the heavy rain, a section of the road was damaged. There were four weather stations located in the region, but only one weather station recorded the heavy rain as a 1-20 event. Even the nearest weather station to the damaged section has not recorded the rain as a 1-20 event.
(Lesson learned- If multiple weather stations relate to the project, clarify which station you consider.)
The contractor argues that “location insured” means the entire Project Site. So, the damages shall be compensated by the insurance policy, as one weather station recorded a 1-20 event.
The insurer contended that; location insured” means the location of the damage. So, the damage shall not be covered under the insurance policy, as the weather station near the “location insured” does not trigger the exception to the exclusion, i.e.1-20 event.
The court
accepted the insurer’s position, considering a businesslike and common sense
approach.
“It is
common ground that the Project, being road construction, extended over a
lengthy geographical area within which the intensity of a single rainfall event
might vary considerably from place to place. In these circumstances, it is
difficult to see the logic in ascertaining the intensity of the event causing
the damage, to which the insurance would apply, by reference to the intensity
of the same event obtaining at some distant part of the Project Site.” (para
23)
“The
“location insured” can sensibly be understood as the location insured in
respect of the particular claim, being that location where the damage occurred
for which the insurance would be relevant.” (Para 27)
Definitions:
Businesslike
- happening in a way that is practical and effective.
Common sense
- the ability to use good judgment in making decisions and to live in a
reasonable and safe way
References:
https://dictionary.cambridge.org/
Case - https://jade.io/article/971281
Image - https://image.slideserve.com/562333/psychosocial-hazards-n.jpg
Note: The article was also published on www.aact.lk
