The Meaning of “Accidental Damage”
The Technology and Construction Court has, in recent months, provided clarification as to the meaning of “accidental damage” in property insurance contracts in the recent case of Leeds Beckett University v Travelers Insurance Company Limited  EWHC 558 (TCC).
The Building Works and the Claim
Leeds Beckett University (“the University”) undertook building works between 1993 and 1996 on the Kirkstall Brewery building. Their project included the construction of new accommodation blocks along with the renovation of the old Brewery building (“the Works”).
The largest newly constructed building (“the Building”) ran adjacent to the canal and the foundations of which consisted of a concrete beam laid across pile caps, with courses of concrete blockwork on top of the beam to support the inner and outer leaves of the wall.
On 13 December 2011, approximately 15 years after the Works had completed, large cracks appeared on the canal side of the Building. Due to the size and location of the cracking, the Building was excavated. Investigations over the following few months revealed that an area of concrete blockwork below ground level, which supported the inner leaf, had 'turned into mush', with no structural strength at all. The Building had been built on a historic watercourse and over the years, the running water had caused sulphate to attack the concrete blocks. Late in 2012, the decision was taken to demolish the entire Building due to the lack of structural integrity.
The University had incepted a policy with Travelers in August 2011 and made a claim under the accidental damage section of the policy. Travelers declined the claim based on the following exclusion:
“The insurance provided under this Section does not cover:
1. Damage caused by or consisting of
(a) Inherent vice latent defect gradual deterioration wear and tear frost change in the water table level its own faulty or defective design or materials…
but this shall not exclude subsequent Damage which itself results from a cause not otherwise excluded”
The Court’s Decision
Mr Justice Coulson rejected the claim for the following reasons:
1. The Damage caused could not be defined as accidental damage;
2. Even if this was a case of accidental damage, it would be excluded by the operation of the exclusion for “gradual deterioration”;
3. Even if this was a case of accidental damage, it would also be excluded by the operation of the exclusion for “faulty/defective design”.
Mr Justice Coulson rejected the argument that the damage caused to the Building could be defined as “Accidental”.
In reaching this determination he provided a helpful summary of the law in relation to the definition of accidental damage which is outlined below:
“(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;
(b) Accidental damage means damage that was not wilful or deliberate;
(c) Accidental damage means damage that was caused by a chance event, against the risk of which the insurance was taken out;
(d) Accidental damage does not mean damage that was inevitable;
(e) Inevitability will be assessed prospectively, from the time that the cover was taken out. Foreseeability is irrelevant;
(f) Accidental damage does not mean damage to the property due to the inherent characteristics of that property;
(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;
(h) The policy should be construed in accordance with the ordinary rules of construction.”
Mr Justice Coulson decided that the claim did not fall within the meaning of accidental damage due to the damage being “inevitable” (as per point d and e above). It was found that there had not been a flood or an increase in the volume or flow of water. The concrete blocks had degraded over time and the eventual collapse was inevitable. The damage was certainly inevitable when the policy of insurance was incepted in August 2011.
The evidence showed that the deterioration of the concrete blocks had been gradually occurring over the course of at least 10 years. The relevant exclusion relating to gradual deterioration was found to encompass the effect of the environment which correlated with the cause of the damage in this case.
The primary cause of the damage to the concrete blocks was found to be relating to the faulty and deficient design of the Building and, in particular, the failure to approach the design of the groundwater drainage in a proactive and strategic way. Mr Justice Coulson therefore found that this damage also fitted within the exclusion relating to faulty/defective design.
This case provides a useful overview of the interpretation of “accidental damage” in determining whether an insured peril has operated.
The decision assists insurers when considering what amounts to “accidental damage” and whether exclusions relating to deterioration, wear and tear or defective design apply.
The case also highlights the importance of obtaining evidence (expert or otherwise) at an early stage on the precise cause of the damage in order to assess whether an insured peril operates.