Summary
Words such as “flood” and “burst” in an insurance policy or related construction contract do not have fixed meanings applicable in every context. Their meaning depends on the contractual language and the circumstances. Whether water constitutes a flood is a question of degree, involving factors such as its source, quantity, manner of arrival, the affected property and whether the event was abnormal. Whether a pipe or apparatus has burst depends principally on internal pressure, a break in its integrity and the suddenness or violence of the event. Contractual wording should not be rewritten merely because a different construction appears more commercially attractive. A co-insurance defence does not assist a defendant whose breach has deprived it of any right to claim under the policy.
Factual background
The trustees brought a subrogated claim against Duffy arising from extensive water damage during the Tate Gallery Centenary Development. The trial concerned agreed preliminary issues on pleaded facts. The issues included whether the escape of water constituted the specified perils of bursting or overflowing of water apparatus or pipes, or flood; whether clause 14.4 of the trade contract relieved Duffy from liability for damage beyond its own works; and whether assumed breaches of the insurance and contract obligations affected Duffy’s contractual or co-insurance defences.
Held
- Specified perils. Earlier decisions supplied valuable guidance but did not establish universal definitions. The court must consider the contractual context and all relevant circumstances. For flood, relevant factors included the natural or artificial source, externality, quantity, manner of arrival, area and character of the property, and abnormality. For bursting, relevant factors included internal pressure, whether the integrity of the pipe or apparatus was broken, and whether the event was sudden and violent.
- The water main, coupling and reducer collectively constituted a pipe. Internal water pressure caused the coupling to move and created an aperture through which water escaped. The integrity of the composite pipe was therefore broken, and the incident constituted bursting. The large volume, extensive inundation, abnormality and entry of water into the Gallery also made the event a flood. The answers to issues 1(A) and 1(B) were Yes.
- The effective cause of the damage was the bursting and resulting flood, rather than the earlier failure to restrain the coupling. The court relied on the causation reasoning in PUKSamuel & Co. Ltd. v. Dumas [1924] AC 431, Commonwealth Smelting Ltd. v. Guardian Royal Exchange Assurance Ltd. [1986] 1 Lloyd’s Rep. 121 and Scottish Special Housing Association v. Wimpey Construction (UK) Ltd. [1986] 1 WLR 995.
- Clause 14.4 referred to Duffy’s own external hard-landscaping works, not the project as a whole. The policy’s wider cover and commercial context did not justify rewriting the natural contractual language. The answer to issue 2(B) was No and the answer to issue 3 was Yes.
- On the assumed breach of clause 14.5 and general condition 4, Duffy could not claim under the policy for its own losses. General condition 6 preserved the trustees’ cover. The implied co-insurance term did not extend to a defendant whose breach made it impermissible to claim under the policy. The answers to issues 4 and 5 were Yes. The parties were directed to draw up an order recording all six answers.
The court’s approach to earlier authorities
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Key cases cited
12 authorities cited.
- Co-operative Retail Services Limited v. Taylor Young Partnership and Others [2002] UKHL 17
- Investors Compensation Scheme Ltd v West Bromwich Building Society (Investors Compensation Scheme Ltd v Hopkins & Sons) [1997] UKHL 28
- Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] EWCA Civ 1732
- Rohan Investments Ltd v Cunningham Court of Appeal transcript 20th January 1998
- HOPEWELL PROJECT MANAGEMENT LTD. AND HOPEWELL ENERGY (PHILIPPINES) CORPORATION v. EWBANK PREECE LTD. [1998] 1 Lloyd's Rep 448
- STATE OF THE NETHERLANDS (REPRESENTED BY THE MINISTER OF DEFENCE) v. YOUELL AND HAYWARD AND OTHERS [1997] 2 Lloyd's Rep 440
- NATIONAL OILWELL (UK) LTD. v. DAVY OFFSHORE LTD. [1993] 2 Lloyd's Rep 582
- MW Wilson (Lace) Ltd v Eagle Star Insurance Co Ltd 1993 SLT 938
- Scottish Special Housing Association v Wimpey Construction UK Ltd [1986] 1 WLR 995
- COMMONWEALTH SMELTING LTD. AND ANOTHER v. GUARDIAN ROYAL EXCHANGE ASSURANCE LTD. [1986] 1 Lloyd's Rep 121
- Young v Sun Alliance and London Insurance Ltd [1977] 1 WLR 104
- Samuel (P) & Co Ltd v Dumas [1924] AC 431
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Cases citing this case
3 later cases · 1 positive · 2 neutral
Most senior citing decisions:
- Rathbone Brothers Plc & Anor v Novae Corporate Underwriting Ltd [2014] EWCA Civ 1464 considered
- Leeds Beckett University v Travelers Insurance Company Ltd (Rev 1) [2017] EWHC 558 (TCC) considered
- Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd [2007] EWHC 3159 (TCC) applied
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