Mopani Copper Mines Plc v Millennium Underwriting Ltd

A construction/erection all-risks policy does not ordinarily cover completed plant once it becomes operational, although the parties may agree wider operational cover. The court construes the contractual documents together with the admissible factual background and the subject matter of the negotiations. Prior agreements may assist construction. Deleted words are generally excluded, but may be considered where a deletion in a contractual or printed form objectively shows what the parties agreed not to agree and the retained wording is ambiguous. Any wider operational cover must be identified with sufficient particularity, including its duration and premium. An endorsement granting limited operational cover for specified commissioning activities does not extend cover to subsequent general operation.

Mopani claimed an indemnity under insurance and reinsurance arrangements relating to a copper-smelting project in Zambia. The claim concerned damage to an electrostatic precipitator after its testing and commissioning had been completed and while the plant was operating before final handover.

The court was required to determine five preliminary issues, including whether the Memorandum of Understanding made Mopani and Zigi Insurance Ltd parties to it, whether the original contracts covered completed plant once operational, and whether Endorsement No 1 extended cover to operational use before final handover.

1. Memorandum of Understanding. Mopani and Zigi were parties to the Memorandum of Understanding. Its payment clause did not entitle Mopani or its brokers to recover an unagreed claim, although Millennium accepted that Mopani could seek a declaration as to coverage.
2. Construction and operational cover. Construction/erection all-risks insurance and operational or property insurance cover different risks, although particular policies may combine them. A construction policy may include operational activity during testing and commissioning, but wider operational cover requires agreement. The original contract did not cover completed project elements once they became operational.
3. The 18 January 2005 slip and the contractual email document had to be read together. The parties had been addressing a possible gap between commissioning and final handover. The contemporaneous documents showed that the relevant plant was expected to remain idle until handover, so additional operational cover was not agreed. The words referring to operational all-risks cover did not acquire a wider meaning merely because they remained in the type clause.
4. Deleted words. The general rule is that deleted words are not used to construe the retained wording. Exceptionally, deleted words in a printed form may assist in resolving ambiguity, and a contractual deletion may be considered where it objectively shows what the parties agreed not to agree. Any inference must be cautious, since deletion may have several explanations. Here, the deletion, read with the contractual email document, confirmed that wider operational cover had not been agreed.
5. Endorsement No 1. The endorsement varied the contract by granting limited operational cover for the activities described in the 17 December 2004 email, including specified operations connected with commissioning. It did not provide cover for general operation of the plant after commissioning and before final handover.
6. Issue 3 was answered against Mopani; issue 4 was answered in the defendant’s favour on alternative (iii); issue 5 did not arise. The court invited counsel to consider the form of order.