(Re)insurance Weekly Update 14- 2017

A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Leeds Beckett University v Travelers Insurance Company: The meaning of "accidental" in a property policy and the scope of various policy exclusions

http://www.bailii.org/ew/cases/EWHC/TCC/2017/558.html

An accommodation block was built by the claimant in 1996 over an historic watercourse. In December 2011, large cracks appeared overnight. Further investigation revealed that the building's supporting concrete blocks had "turned into mush" and the building was demolished in 2012. The claimant sought to claim under its building insurance policy (which was taken out in August 2011). "Damage" was defined under the policy as meaning "accidental loss or destruction or damage" and various exclusions were included in the policy.

Much of the case turns on its facts, but Coulson J summarised some key principles in the decision. He held as follows:

(1)" "Accidental" simply means an event that occurs by chance, which is non-deliberate". Damage can occur due to an inherent vice, or by ordinary wear and tear, and still be accidental. However, to be accidental the event must be non-inevitable. Inevitably will be assessed from the time that cover was taken out. The claimant does not need to prove the exact nature of the accident and foreseeability is irrelevant.

On the facts of the case, it was held that at the time the policy was taken out the damage was inevitable at some point during the policy period and hence was not accidental. Furthermore, there had been no flood, as argued by the claimant.

Accordingly, the claim failed. Nevertheless, the judge also considered the various policy exclusions.

(2) Cover for "gradual deterioration" was excluded under the policy. The judge rejected the claimant's argument that this meant deterioration of the thing itself (ie the building), without any influence from an external source. He accepted the insurer's argument that deterioration inevitably involved an interaction between the property being insured and its environment (eg the ground on which it stood). Furthermore, "gradual" meant something which develops over time: "If deterioration is itself progressive (ie it takes place over time), then gradual deterioration must mean a process that may go even more slowly". Here the damage happened over a period of at least 10 years and so this exclusion would have applied even if the damage had been accidental.

(3) Cover for...