Exploring the Boundaries of the Term ‘Accident'

What should a court do when a case comes before it relating to a building built over a historic watercourse in 1996 and which got damaged in 2011. The supporting concrete blocks of the structure had “turned into mush”. The building insurance policy of the insured had the term ‘damage’ defined as meaning "accidental loss or destruction or damage". The case: Leeds Beckett University v Travelers Insurance Company Ltd (Rev 1) [2017] EWHC 558 (TCC) (11 April 2017), England and Wales High Court (Technology and Construction Court). The court found a duty to examine the boundaries of term ‘accident’.

The court introduced the subject in para 199: “Insurance lawyers often refer to accidental damage, the term relevant here, as 'a fortuity', something that happened by chance. Beyond that, some of the attempts at definition are liable to mislead. For example, it has been suggested that, to be accidental, damage cannot be caused by an inherent vice of the subject matter, or by ordinary wear and tear. But that is not correct: in some situations, damage can occur due to an inherent vice and yet still be a fortuitous occurrence. In my view, 'accidental' simply means an event that occurs by chance, which is non-deliberate (wilful or deliberate damage is always excluded).”

Thereafter, the court examined the various authorities:

1. In The Xantho [1887] 12 App. Cas. 503 at 509, Lord Herschell said: "There must be some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen."

2. This passage highlights the difference between the risk of something happening, which will usually be covered by the policy, and the inevitability of something happening, which will not. The same point was made by Lord Sumner in British and Foreign Marine Insurance Company Ltd v Gaunt [1921] 2 AC 41, at 57: "There are, of course, limits to 'all risks.' They are risks and risks insured against. Accordingly, the expression does not cover inherent vice or mere wear and tear or British capture. It covers a risk, not a certainty; it is something, which happens to the subject-matter from without, not the natural behaviour of that subject-matter, being what it is, in the circumstances under which it is carried. Nor is it a loss which the assured brings about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself."

3. In the same case, Lord Birkenhead LC said that, for damage to be covered by an all risks policy, it "must be due to some fortuitous circumstance or casualty."

4. The exclusion of inevitable events does not mean that the event causing the loss or damage has to be extraordinarily unusual or calamitous to qualify as accidental: it is enough that the event is non-inevitable (Gaunt at pages 47, 52 and 58). Foreseeability is irrelevant (The Miss Jay Jay [1985] 1 Lloyd's LR 264, affirmed at [1987] 1 Lloyd's LR 32). The test is that, if the parties to the contract would readily view the event as something that was going to happen, it should not be regarded as fortuitous: see C A Blackwell (Contractors) Ltd v Gerling Allegemeine Verischerungs-AG [2007] EWHC 84 (Comm).

5. All risks policies will implicitly exclude damage due to ordinary wear and tear: as Paul Reed QC notes at paragraph 10-012, ordinary wear and tear is usually treated as an aspect of inevitability. He also notes that such policies are "not an indemnity against the ordinary action of the elements". In cases where the damage results from an interaction between an inherent defect and ordinary usage, he suggested that there was a critical distinction between those cases where the casualty was caused by an inherent weakness, as opposed to those cases where there has been some external fortuitous event: see The D C Merwestone [2012] EWHC 1666 (Comm), at paragraph 57.

6. Some of these points were considered in Global Process Systems Inc and Another v Syarikat Takaful Malaysia Bhd ("The Cendor Mopu") [2011] UKSC 5. In that case an oilrig was being transported across the sea on a barge and suffered catastrophic damage when waves of a particular height and direction caused metal fatigue. The Supreme Court found that the proximate cause was an insured peril of the sea, not ordinary wear and tear. On the facts, this was perhaps unsurprising, given that the evidence was that the leg of the rig was an enormously strong structure and that, in order to do the damage that was done, "you've got to catch it just right if you want to make it actually fail all the way round".

The court finally summarised:

(a) The claimant must prove that the loss was caused by some event covered by the general policy wording, but does not have to prove the exact nature of the accident or casualty (Gaunt).

(b) Accidental damage means damage that was not wilful or deliberate (Xantho, Patrick);

(c) Accidental damage means damage that was caused by a chance event, against the risk of which the insurance was taken out (Xantho, Gaunt);

(d) Accidental damage does not mean damage that was inevitable (C A Blackwell (Contractors) Ltd v Gerling Allegemeine Verischerungs-AG [2007] EWHC 84 (Comm));

(e) Inevitability will be assessed prospectively, from the time that the cover was taken out (Soya). Foreseeability is irrelevant (J J Lloyd Instruments Limited v Northern Star Insurance Co Ltd; The Miss Jay Jay: CA 1987);

(f) Accidental damage does not mean damage to the property due to the inherent characteristics of that property ((Global Process Systems Inc v Syarikat Takaful Malaysia Berhad [2011] UKSC 5, The Cendor Mopu);

(g) There is a critical distinction between those cases where the damage was caused by an inherent weakness and those where it was caused by an external fortuitous event (The DC Merwestone);

(h) The policy should be construed in accordance with the ordinary rules of construction, most recently summarised in Arnold v Britten.

After detailed examination of the facts and circumstances, the court concluded that what happened in December 2011 was not accidental damage within the meaning of the policy. It was clear that when the policy was taken out in August 2011, the collapse was inevitable. Thus, the case was dismissed and went in favour of the insurer.