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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Johnston
Lord Wheatley
Sir David Edward,
Q.C.
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[2008] CSIH 20
XA6/07
OPINION OF THE COURT
delivered by LORD JOHNSTON
in
APPEAL FROM THE SHERIFFDOM
OF GRAMPIAN, HIGHLANDS AND ISLANDS AT ABERDEEN
by
KNOWLES FOOD SERVICES
LIMITED
Pursuers and Appellants;
against
CGU INSURANCE PLC
Defenders and Respondents:
_______
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Act: Johnston, Q.C., Gardiner; Simpson & Marwick, W.S. (Pursuers and Appellants)
Alt: Murphy, Q.C.; HBM Sayers (Defenders and Respondents)
29 February 2008
[1] This is an
appeal from the sheriff at Aberdeen in relation to the construction of
an insurance policy offering cover to the reclaimers in respect of premises
they owned in Aberdeen.
The pursuers' claims were dismissed by the sheriff. The relevant damage upon the averments was
cracking to a supporting beam caused by vibration emanating from building
operations nearby and in particular the movement of skips. The pursuers' claim was purely for the cost
of remedial work to the beam.
[2] The sheriff
sets out the relevant parts of the insurance policy, which were not in dispute,
in his Note as follows:
"[6] The
insurance policy entered into between the pursuers and the Norwich Union ... was
an all risks policy with exceptions. The
insured contingency ... was 'Accidental loss, destruction of, or damage
(hereinafter termed Damage) to the Property Insured described in the Schedule.' The policy immediately continues to list
certain exceptions to the general contingency.
The fifth is in the following terms:-
'E. Damage in respect of a building or structure caused by its own
collapse or cracking unless resulting from a Defined Contingency and not
otherwise excluded.' Page 15 of the
policy contains the definitions of certain terms, the first of which is 'Defined
Contingency'. The definition is in the
following terms:- '"Defined Contingency"
shall mean damage caused by fire, lightning, explosion, aircraft and other
aerial devices or articles dropped therefrom, riot, civil commotion, strikers,
locked out workers, persons taking part in labour disturbances, malicious
persons other than thieves, earthquakes, storm, flood, escape of water from any
tank, apparatus or pipe, impact by any road vehicle or animal.'"
[3] The Sheriff
interpreted the policy in the following way:
"[32] The insurer's obligation is contained in
page 3 of the policy which, reading short, is to the effect:- 'the corporation [i.e. the defenders] will by
payment ... indemnify the insured to the extent hereafter described in respect of
loss, destruction, damage, accident or injury occurring during the period of
insurance subject to the terms, exceptions and conditions contained herein or
endorsed hereon'.
[33] The basic cover or contingency in respect
of which the insurance is given appears in section A2 on page 13 and is
'Accidental loss, destruction of or damage (hereinafter termed Damage) to the
Property Insured described in the Schedule'.
The basic cover statement immediately proceeds to provide for exceptions
to the basic cover, stating 'Exceptions to section A2 This section does not cover A ... P' Only one of these, E, is relevant. Substituting the extended definition of
'Defined Contingency' narrated in paragraph 6 above Exception E reads as
follows:- 'Accidental loss, destruction
of, or damage in respect of a building or structure caused by its own collapse
or cracking unless resulting from fire, lightening, explosion, aircraft ...
impact by any road vehicle or animal".
[4] Thereafter
the sheriff goes on to determine the dispute between the parties which centred
upon whether cover extended to this particular damage in the following way:
"[34] There can be no question of the damage
having to be in someway spontaneous or intrinsic. Firstly it would not make sense to have
spontaneous cracking or collapse which was caused by, for example, the building
being hit by an aircraft. The collapse
can not be both spontaneous and have an external cause. Secondly that is not what the contract
says. Rather the contract itself
provides an extensive and exclusive list of factors which could cause the 'own
collapse or cracking' and which would be insured. Vibration is not one of them. Each of the defined contingencies could be
seen as events which were the proximate cause of the ultimate loss suffered by
a property owner when the event caused cracking or collapse. There could be other events (vibration is one
example) which were the proximate cause of such cracking and of such loss. Insurance cover exists under this policy in
respect of loss caused by cracking caused by the defined contingencies not
because the defined contingency wins a competition to determine the proximate
cause, it exists because the parties have agreed that it should exist. Conversely cover is denied by the policy in
respect of loss caused by cracking caused by an event other than a defined
contingency not because the event is not the proximate cause, but because the
parties have agreed to exclude cover for loss caused by cracking caused by any
event other than a defined contingency.
[35] I consider that the phrase 'own collapse
or cracking' simply means collapse or cracking of the building itself. I note from the policy that many of the
exceptions to the all risks cover deal with what might be considered to a
greater or lesser extent 'spontaneous' collapse or cracking. For example exception A excludes damage
caused by inter alia inherent vice,
latent defect and faulty materials.
Exception B excludes corrosion, rot, loss of weight, dampness or
dryness, exception C pollution and exception D subsidence or settlement. Each of those exceptions except D, and
other exceptions in the policy, is disapplied if resulting from a Defined
Contingency. This shows a clear
structure for the policy as a whole which I think supports the
interpretation. I have set out in
paragraph 34."
[5] The
submissions for the appellants were concise and to the point.
[6] In the first
place it was submitted that this was an all risks policy relating to damage to
the "Property Insured", which it was
not disputed included the premises in question.
It was further not disputed that such damage was damage "in respect of a
building or structure" which had occurred by reason of the cracking. Accordingly, there was no need to proceed
even to the exceptions since they were concerned with consequences of cracking
rather than the cracking itself. The
sheriff had misconstrued the exception by interpreting the words "own collapse
or cracking" as meaning collapse or cracking of the building itself, thus, on
his interpretation, excluding cover under Exception E. A
fortiori one did therefore not have to proceed to the defined contingencies
which modified the exceptions in exception E which has been quoted.
[7] The approach
of counsel for the respondents was equally short and to the point.
[8] He submitted
that the sheriff had reached the right conclusion by reason of the fact that
the policy's terms had to be looked at as a whole. The proper construction, which admittedly
covered all risks extending to the
damage in question, excluded in quite general terms, under Exception E,
cracking of the building itself and thereafter extended cover only if the
circumstances of the particular claim fell within the defined contingencies.
[9] There was
some discussion between the parties on the general insurance law relating to
proximate or dominant causes in respect of a claim for loss or damage, but we
do not consider it necessary to embark on that discussion since that is only
relevant to an issue which is governed by two possible causes or two actual
causes when it becomes necessary to determine which of them is the dominant
one. In this case there is no question
but the cause of the cracking to the beam was vibration. How the vibration was caused is nothing to
the point unless related to a defined contingency.
[10] In our opinion
the construction that was favoured by the sheriff and put forward by
Mr Murphy is to be accepted. It is
necessary to read all relevant clauses of the policy together. It is an all risks policy and accordingly, prima
facie, covers damage to the building however caused. That being so, it is thereafter necessary in
our opinion to examine the exceptions and we have no hesitation in construing
exception E as extending to the cracking of the building itself or any part of it. That being so, it is thereafter necessary, as
urged upon us by counsel, to look at the defined contingencies where there is
no reference to vibration and thus, in our opinion, this claim is
excluded. For a claim to be included
once it falls within one of the exceptions, it must fall within the defined
contingencies. In our opinion, therefore,
the simple answer to this case is that vibration damage, however caused, is not
a risk covered unless it can be linked to any of the defined contingencies which
it clearly, in this case, cannot.
[11] In these
circumstances we consider the decision of the sheriff to dismiss the action was
correct and we will dismiss the appeal.
