C A Blackwell (Contracts) Ltd v Gerling Allegemeine Verischerungs-Ag

An all-risks insurance policy ordinarily requires the loss to be fortuitous, but fortuity is distinct from foreseeability. Damage may be fortuitous where it results from the contingent interaction of several factors, even though rainfall or other contributing events were foreseeable and not exceptional. Wilful misconduct requires more than negligence: the assured must knowingly run an appreciable risk of the relevant loss, or act recklessly as to that risk. A defective-condition exclusion applies only where the insured property was in a relevant defective condition. A failure in protective measures does not automatically make the protected property defective.

C A Blackwell (Contracts) Ltd, an earthworks contractor, claimed under a contractors’ all-risks policy issued by Gerling Allegemeine Verischerungs-Ag for damage caused by rainfall to capping and sub-formation on the M60 motorway project.

The insurer denied liability on the grounds that the damage was not fortuitous, resulted from Blackwell’s wilful misconduct, or fell within Exclusion 4 for property in a defective condition. The amount of the loss was agreed. The court determined whether the policy responded to the two rainfall incidents.

1. All-risks cover and fortuity. The policy was an all-risks policy. The requirement of fortuity arose from the nature of the risk insured, rather than from the precise wording of the insuring clause. The insured therefore had to establish loss or damage resulting from an accident or other fortuity.
2. Fortuitous loss. The damage was fortuitous. The relevant incidents resulted from the coming together of different factors, including the use of shale, the delayed progress of the works, the stage of construction and the drainage arrangements. None of those factors made the damage inevitable. Exceptional rainfall was unnecessary; the agreed evidence showed that the rainfall was heavy but not exceptional, and that did not prevent the loss from being fortuitous.
3. Wilful misconduct. The insurer’s case failed. Wilful misconduct required recklessness of a high order: knowledge of a risk of the relevant damage, or indifference to whether that risk existed, followed by proceeding regardless. The allegations established, at most, possible negligence. There was no sufficient evidence that Blackwell knowingly and deliberately ran the risk of damage.
4. Exclusion 4. The insurer failed to prove that the exclusion applied. The insured property was the capping and damaged sub-formation. Temporary drainage was not itself property, and protective drainage measures could be distinct from the capping and fall within the limitation for other insured property free of the defective condition. The occurrence of damage, or even negligence in the drainage arrangements, did not establish a defect in design, materials or workmanship. The evidence showed an essentially sound drainage system and did not prove that the insured property was in a relevant defective condition.
5. Disposition. Judgment was entered for the claimant.

Not stated in the judgment.