What Does An 'All Risks' Insurance Policy Cover?

This was the question before Judge Mackie QC in the case of C A Blackwell (Contracts) Ltd v Gerling Allegemeine Verischerungs - AG [2007] EWHC 94 when he had to consider whether losses caused by bad weather were covered by an all risks insurance policy.

C A Blackwell (Contracts) Ltd ("Blackwell") is a contractor with expertise in earthworks involved in motorway construction. Blackwell had successfully tendered for the earthworks on parts of the M60. Blackwell was responsible for insuring adequate temporary drainage for the earthworks. Blackwell took out a policy with Gerling Allegemeine Verichergungs ("Gerling") for the years to 31 December 1998 and 1999.

Bad weather and rain affected the works on several occasions and two incidents then caused damage to the capping layer (shale) and an area of sub-formation. The loss adjustor agreed £46,000 for the first incident and £488,975.15 for the second. Although the amount of damage was agreed, Gerling denied liability under the policy.

The Schedule of the policy described it as "Contractors All Risks". This was followed by a schedule applicable to Contractors Indemnity and Employers Liability Insurance which provides for a maximum sum of £6,000,000 subject to some excesses. The relevant provisions contained a clause excluding liability for loss or damage to property in a defective condition due to a defect in design plan specification, materials or workmanship.

Blackwell argued that the wording of the policy does not amount to an all risks policy. Gerling disagreed stating that the claimed losses were inevitable and not fortuitous and were therefore not recoverable. Gerling also argued that the losses had been caused by Blackwell performing work during the winter and failing to provide appropriate or adequate drainage for the season and further that the exclusion clause applied because the works were in a defective condition as a result of the absence of effective drainage.

Issues

The question the Judge had to answer were as follows:

Was the policy an all risks policy?

Was the damage caused fortuitous?

Was the loss caused by the wilful misconduct of Blackwell?

Decision

Judge Mackie QC held that the policy was quite clearly a contractor's all risks policy. This meant that the insured did not need to demonstrate that there was a precise cause of loss but did have the burden of proving that some loss or damage had occurred and that the loss was covered by the policy. The loss must be...