Constructive Notes ®
Introduction
The case is concerned with the interpretation of a “builders risk” insurance policy (the Policy). South Capitol Bridgebuilders (SCB) was hired to build the Frederick Douglas Memorial Bridge. In building and integrating the supportive structures of the bridge, SCB’s poor vibration of concrete resulted in construction malformations known as “honeycombing” and “voiding”, which harmed the structural integrity of the bridge. As a result, SCB had to replace sizable portions of the bridge’s supportive structures. Believing that the Policy provided coverage for those expenses, SCB sought reimbursement, however, the insurer, Lexington Insurance Company (Lexington), relying on its interpretation of the insurance policy, refused indemnity.
Before the Court neither party disputed that the concrete repair expenses were necessitated by deficiencies in SCB’s workmanship but rather they simply disagreed over whether the insurance policy provided coverage, which was a question of law. Because the material facts were not in dispute, the Court ordered that Lexington’s liability under the policy was an appropriate question for summary judgment.
Background
The Insurance Policy and The Extension
The Policy insured against “all risks of direct physical loss of or damage to insured property”. The Policy defined “Property Insured” to include “Permanent Works” and “Temporary Works”. “Permanent Works” included “[a]ll materials, supplies, equipment, machinery, and other property of a similar nature . . . when used or to be used in or incidental to the demolition of existing structures, site preparation, fabrication or assembly, installation or erection or the construction of or alteration, renovation, rehabilitation of the Insured Project”. The Policy defined “Temporary [W]orks” as “[a]ll scaffolding, form work, fences, shoring, hoarding, falsework, and temporary buildings all incidental to the project”.
Part B(l) of The Policy, entitled “Perils Excluded”, explicitly excluded certain items from coverage under the Policy. Part B(l) stated inter alia:
“This policy shall not pay for loss, damage or expense caused directly or indirectly by any of the following.
[…]
(B) Faulty or defective workmanship or materials, unless direct physical loss or damage by an insured peril ensues and then this policy will cover for such ensuing loss or damage only;
(C) Fault, defect, error, deficiency or omission in design, plan or specification, unless direct physical loss or damage by an insured peril ensues and then this policy will cover for such ensuing loss or damage only;”
The Court noted that “insured peril”, “physical loss”, and “damage”, were all undefined terms in the Policy.
The Policy also included endorsements that modified the insurance provided by the Policy, including a LEG 3/06 Model “Improvement” Defects “Extension” (the Extension). The Extension explicitly replaced some of the language in the “Perils Excluded” section of the Policy and also provided a definition for the word “damage” as used in the Extension and a limitation on “damage” as used throughout the Policy.
The Extension relevantly stated:
“Perils Excluded, Item C. is deleted and replaced by the following:
All costs rendered necessary by defects of material workmanship, design, plan, or specification and should damage (which for the purposes of this exclusion shall include any patent detrimental change in the physical condition of the Insured Property) occur to any portion of the Insured Property containing any of the said defects, the cost of replacement or rectification which is hereby excluded is that cost incurred to improve the original material workmanship design plan or specification.
For the purpose of this policy and not merely this exclusion it is understood and agreed that any portion of the Insured Property shall not be regarded as damaged solely by virtue of the existence of any defect of material workmanship, design, plan, or specification.
All other terms and conditions of the policy remain the same.”
The Mechanism of Failure and Damage
Before the Court considered the insurance policy construction issues, it turned its attention to the bridge construction issues that led to the dispute before it.
The design of the Frederick Douglass Memorial Bridge included cast-in-place concrete substructure elements and a composite deck supported by three consecutive steel arches on each side of the bridge. Those three arches were supported on concrete abutments on the east and west sides of the Anacostia River and two concrete V-shaped piers (piers) which provide support more towards the centre of the river. From those three arches, cables were hung which connected the arches to the bridge deck. Together, the abutments, piers, and arches worked to support the weight of the bridge.
Starting in August and continuing through early September 2019, SCB poured concrete for the bridge’s abutments and two piers. These structures were cast in place using formwork. Due to the magnitude of the abutments and piers, concrete was placed in separate pours. Each abutment was completed in three pours and each pier was completed in four pours. While pouring the lower sections of the abutments and piers, workers stood inside the formwork and vibrated the concrete to ensure even placement. These vibrations were necessary to ensure that the concrete reached all areas of the formwork. This same process, however, was not feasible during concrete placement at the tips of the abutments and piers and as a next-best measure, SCB placed access holes in the side of the tip-section formwork to allow workers to vibrate the concrete. However, due to inadequate vibration of concrete during placement, once the concrete dried and workers removed the formwork, SCB observed structural deformities referred to as “honeycombing” and “voiding” in the concrete.
The Court observed that significant honeycombing is referred to as “voiding” and can diminish concrete’s weightbearing capacity and noted that both minor honeycombing and voiding were observed once SCB removed the formworks on the piers. It was accepted by the parties that after the flawed concrete was appended to the existing load bearing sections of the bridge, the structure was no longer able to support the weight of the bridge (it was able to support the dead load of the structure but not the live load of the next stages of construction). It was not disputed by either party that the honeycombing was a result of workmanship-related issues, including inadequate vibration during placement, that resulted in poor consolidation of the concrete.
The honeycombing and voiding required SCB to cease work and undertake repairs. While minor honeycombing was repaired with cosmetic patching, more serious honeycombing and voiding required significant alteration including the replacement of concrete and the sawing off of portions of the abutments to facilitate their replacement.
SCB filed a claim with Lexington seeking reimbursement for the cost of repair and the insurer denied cover. Proceedings subsequently ensued.
Applicable Law & Construction of the Policy
Both parties agreed that Illinois insurance law governed the Policy agreement. In Illinois, interpretation of an insurance policy is a question of law and it was observed by the Court that:
“In construing the language of [an insurance] policy, the court’s primary objective is to ascertain and give effect to the intent of the parties to the contract.” Traveler’s Ins. Co. v. Eljier Mfg., Inc., 757 N.E.2d 481, 491 (Ill. 2001).”
The test then applied, in many respects mirrors the approach taken by the Australian Courts to matters of policy construction:
“In order to ascertain the meaning of the policy’s language and the parties’ intent, the court must construe the policy as a whole and ‘take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract.” (quoting Am. States Ins. Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997)).”
The Court observed that when an insured sues their insurer over a denial of coverage, “the insured has the burden of proving that his loss falls within the terms of his policy”.i If an insured establishes a prima facie case, the burden shifts to the insurer to demonstrate that the loss resulted from an expressly excluded peril.ii Further, “it is the insurer’s burden to affirmatively demonstrate the applicability of an exclusion”.iii
Again, these principles largely reflect the approach taken by the Australian Courts. A notable difference in the law of Illinois and the law of States and Territories in Australia relates to ambiguity and exclusory provisions, and the author will return to this when considering the applicability of the Court’s judgment in our jurisdiction.
The Court noted that this case came before it on cross-motions for summary judgment. In effect, the parties agreed that only questions of law were involved and invited the Court to decide the issues based on the record. The Court considered the case a suitable vehicle for a summary determination.
Consideration by the Court
The Indemnity Clause
The Court noted that the sole disagreement on the issue of coverage was whether “damage” is properly understood to include the costs of fixing the concrete flaws that weakened the bridge. In concluding that the answer was unambiguously yes, the Court said that as a preliminary matter, the term “damage” was undefined in the body of the Policy and hence the plain, ordinary, and popular meaning of term was to be used.iv On the undisputed facts, the Court considered that SCB’s inadequate vibration caused a decrease in the weightbearing capacity of the bridge and its support structures and that a decreased weightbearing capacity was an injury, or at the very least a “bad effect”, on the bridge and its support structures.
In observing that the Court’s assessment of the meaning of “damage” need “not end with the dictionary”, the Court considered that the Policy wording was consistent with faulty or defective workmanship being capable of causing loss, damage or expense.
The Court further went on to observe that the LEG 3 Defect Extension similarly suggested that SCB’s claim was within the scope of coverage of the Policy, with the Court considering that the Extension’s treatment of the term “damage”, which it defined as “patent detrimental change”, underscored that issues of defective workmanship can cause damage (although it did not accept SCB’s suggestion that “damage” in the exclusion was identical to “damage” as used in the coverage provision).
While the Court took further support for that construction of the wording from the penultimate sentence of the Extension, it rejected Lexington’s argument that this part of the Extension defined “damage” in a way that conclusively excluded defects caused by material workmanship. The Court said that “caused by” and “solely by virtue of the existence” were not the same and that the Extension did not suggest that property could not be “damaged” if there were defects in material or workmanship somewhere in the causal chain. Instead, the Court said it indicated that defects of material workmanship in and of themselves were insufficient to constitute damage.
In concluding that SCB did not seek reimbursement solely for its defective workmanship, but rather for honeycombing and voiding, which in turn led to decreased structural integrity of the bridge caused by defective workmanship, the Court held there was damage to which the Policy would prima facie respond. In arriving at this conclusion, the Court considered the “parties intent” and “overall purpose of the contract” and noted that one risk inherent in any complex construction project is damage from errors of workmanship.
In arriving at this position, the Court had cause to consider a number of arguments put forward by the insurer. Lexington argued that Illinois law definitively establishes that insured property must be altered, not merely defectively constructed, in order to constitute “physical loss” or “damage” and that no insured property was altered because the honeycombed concrete components were defective “from the time [they] were made”. Accordingly, the concrete components did not become defective, but rather were defective from the moment the concrete dried and the components became fabricated. Additionally, Lexington argued that the incorporation of defective components into a larger project does not constitute damage under Illinois law.
In rejecting these arguments the Court said a change that results in a reduction in the weightbearing capacity of a bridge is an “alteration” to that bridge and that even if this were not so, the Court did not accept the relevance of Lexington’s authorities which it considered fell into three “buckets”.
The first of these involved several cases in which businesses sought reimbursement from their insurers for the loss of the use of their property following COVID-19 closure orders. Not only did the Court consider that none of the cases were similar to the facts in the case before it, it considered that if anything, they undermined the insurers argument given their rejection of there being direct physical loss under an insurance policy because there was “compromise to the physical integrity” of the property insured. The Court found that Lexington had not persuasively articulated how a reduction in the weightbearing capacity of the bridge was anything other than a “compromise to [its] physical integrity”.
In turning to the second “batch” of authorities in which businesses were sued by third parties for issues stemming from defective manufacturing and construction (in which the cost of repairs for incorporation of or creation of defective parts were regarded as “economic injuries”), the Court found that these policies were Commercial General Liability (CGL) policies as distinct from the “builder’s risk policy” that SCB purchased. This difference was critical as Illinois law made clear that the purpose of CGL policies is “to provide coverage for injury or damage to the person or property of others; they are not intended to pay the costs of repairing and replacing the insured’s defective work and products. Viking Const. Mgmt., Inc. V. Liberty Mut. Ins. Co., 831 N.E.2d 1, 13 (Ill. App. Ct. 2005) (quoting Pekin Ins. Co. V. Richard Marker Assocs., Inc., 682 N.E.2d 362, 365 (Ill. App. Ct. 1997)).’’
By contrast, the Court noted that the policy at issue in the case before it undoubtedly provided coverage for damage to the bridge’s structures, whether permanent or temporary, during construction and in this way, the CGL policies in these cases differed drastically from the builder’s risk policy purchased by SCB and that this difference was fatal to the insurer’s reliance on these cases.
Finally, the Court noted that the insurer had cited a half-dozen cases not involving Illinois law to argue that “damage” in builder’s risk insurance contracts requires some “initial satisfactory state” or otherwise precludes recovery for defective construction. The Court considered that the agreement in the case before it was simply different and that no case Lexington cited involved a similar construction project or a similar insurance policy that was similarly modified.
The Exclusion Clause
Given the Court’s finding that SCB had established coverage under the Policy, Lexington had the burden of demonstrating that an exclusion applied. Lexington relied on the LEG 3/06 Defect Extension to do so. SCB argued that the language of the Extension unambiguously supported coverage. Lexington countered that it unambiguously excluded coverage. In this event the Court held that neither party was correct. The Court said that the LEG 3 Extension was ambiguous (“egregiously so”).
The Court noted that the parties’ first disagreement on the Extension began with its title: “LEG 3 Defect Extension”. More specifically, they disagree over whether the provision was in fact an extension at all. Lexington argued that the provision was really an exclusion because it was meant to delete and replace portions of the “Perils Excluded” section of the Policy. SCB argued that the provision actually operated as an extension of coverage under the Policy.
In the event the Court said that the two things can be true at once. The Court said “Yes, the LEG 3 Extension is an exclusion— it even refers to itself as one”, however, in replacing a broad exclusion from coverage with a narrower exclusion, the endorsement functionally extended what SCB was entitled recover for.
Having accepted that damage had been established (the “honeycombing” and “voiding” resulting in a reduction in the weightbearing capacity of the bridge qualified as a “patent detrimental change in the condition of the insured property”), the Court then turned to the scope of the exception to the exclusion. The Extension excludes replacement or rectification of costs incurred to “improve” the original workmanship. The Court posed the question: “But what does it mean to “improve” the original workmanship?”
The Court noted that SCB seemed to suggest this meant making it better than originally planned. Thus, if SCB decided to replace the defective concrete with “solid gold”, or otherwise upgrade it, SCB could not then seek reimbursement of those enhancements. By contrast, the Court noted that on Lexington’s view, simply patching or replacing defective components constituted an improvement. The Court again asked rhetorically: “After all, if something broken gets fixed, hasn’t that thing been improved?”. While noting that argument had intuitive appeal, the Court considered that it fell apart upon closer scrutiny.
While accepting that repairing or replacing a defective component could technically be considered an improvement — unless that component is replaced with something worse, the context of the Extension suggested that to improve meant to make a thing better than it would have been if it were not for defective work. In fact, it was noted (in rejecting the insurers suggestion that the two phrases were co-extensive) that the Extension explicitly distinguished the “cost incurred to improve” work from “the cost of replacement or rectification”.
In the event the Court held that the LEG 3 Defect Extension was subject to more than one reasonable interpretation and was therefore ambiguous. As a result, the Court held that the Extension was ambiguous as to whether it excluded coverage and under Illinois law, the Court had to construe the Extension against its drafter, Lexington, and in favour of coverage.
Because the Extension did not exclude coverage for SCB’s claim for reimbursement, the Court held that Lexington was liable for breaching the Policy and granted SCB’s motion for summary judgment.
Analysis
There are a number of initial observations to be made in relation to the decision before considering the rationale behind the Court’s view of “damage” and the operation of the LEG3/2006 exclusion.
Firstly, the decision is welcome in that it provides the first judicial consideration anywhere in the world of the LEG 3/2006 exclusion. Given the incorporation of this exclusion into Contract Works Material Damage policies of insurance worldwide, it is surprising that there has been no prior judicial consideration of the clause.
It is equally surprising that the only reported decision in relation to the operation of the LEG2 exclusion (which is arguably of little value as a precedent given the matter was remitted to the earlier court and then resolved prior to further judgement), is Acciona Infrastructure Canada Inc v Allianz Global Risks US Insurance Company.v
It should be remembered however that the LEG clauses have no “standing” in their own right and if incorporated into a policy of insurance are treated in the same manner as any other exclusion contained within the policy and are subject to the rules of interpretation governing the operation of exclusions in the relevant jurisdiction.
In the case of CA Blackwell (Contractors) Ltd v Gerling Allegemeine Verischerungs AGvi, the Court, when asked to consider the operation of another “industry standard” clause being a DE exclusion, was referred to a report by the Advanced Study Group of the Institute of Insurance (which gives a history of the defect exclusion clauses).
While finding the report “instructive” as to the purpose of the defect exclusions and how they had evolved, the court found that it could not be used as an aid to construction of the clause in question (DE3) which had to be construed according to its terms. The court concluded that the intention of those who drafted it and other similar clauses was neither relevant nor admissible.
It is however worth noting in the context of the SCB decision, that while the Court made specific comments in relation to the wording pertaining to “damage” contained within the LEG 3 exclusion, there was no mention made in the judgement of the fact that the London Engineering Group’s LEG3 wording was changed in 2006, in light of observations made in the 2005 English Court of Appeal case of Skanska Construction UK Ltd v Egger (Barony) Ltdvii, with LEG introducing a new exclusion known as LEG3/06, which purported to make clear that “damage” includes any patent detrimental change in the physical condition of the Insured Property.
In Skanska Construction, the Court was concerned with a floor slab in which cracking was observed shortly after completion, ultimately necessitating replacement of the slab. In obiter comments in that case, Mance LJ concluded that the operation of an exclusion in terms of DE 3 would exclude cover for damage to the floor, with the judge concluding that the phrase ”loss or damage” could not extend to rectification of the defects in themselves.viii
It is questionable whether the modification of the LEG 3 clause in light of those comments, with the addition of the words “…(which for the purpose of this exclusion shall include any patent detrimental change in the physical condition of the Insured Property)…”, was either necessary, nor provided any further clarity as to its operation.
In as much however as the addition of those words was intended to address a concern that there was a risk that the original LEG 3 clause could have been interpreted so as to preclude the operation of its “write back” in circumstances where the indemnity otherwise available extended to rectification of defects which manifested in physical damage to Property Insured, the Judge in the SCB case considered that the LEG 3/06 clause’s treatment of the term “damage” which it defined as “patent detrimental change” underscored that issues of defective workmanship can cause damage.
While opining that the definition of “damage” in the LEG3/06 clause may shed light on the scope of “damage” used in the coverage provision, the judge found that prefatory language in the clause’s damage definition suggested it was not necessarily used in the same way as “damage” in the coverage provision.
This, coupled with the penultimate sentence of the exclusion (“…for the purpose of this policy and not merely this exclusion…”), indicated to the judge that while defects of material and workmanship in and of themselves were insufficient to constitute damage, the insured was not seeking reimbursement solely for its defective workmanship but rather for the costs of remedying the honeycombing and voiding, which in turn led to decreased structural integrity of the bridge, which the judge considered constituted damage.
A further matter of which to be conscious, is that the court held that the exclusion was ambiguous, being “subject to more than one reasonable interpretation”, and as a result, under Illinois law the Court was obliged to construe the exclusion against its drafter, being the insurers, in favour of coverage.
This is not the test that the Australian courts adopt in relation to determining ambiguity. The fact that a clause is susceptible to more than one reasonable interpretation will not mean that the court will automatically invoke the principle of contra proferentum, which as has recently been confirmed by the New South Wales Court of Appeal in Allianz Australia Insurance Limited v Rawson Homes Pty Ltd [2021] NSWCA 224 [at 46], is a rule of last resort.
Turning now to the two substantive matters considered in the judgement, being the existence of “damage” and the operation of the LEG3/06 “Extension”.
The judge noted that the sole disagreement on the issue of coverage (prior to consideration of the LEG3/06 clause) was whether “damage” could be properly understood to include the costs of fixing the concrete flaws that weakened the bridge. In concluding that the answer was “unambiguously yes”, the judge appears to have given weight to factors which may not be so clearly determinative of the position in this jurisdiction.
The indemnity clause insured SCB against “all risks of direct physical loss of or damage to insured property”.
The first thing to note is that it is unclear whether the judge treated the word “physical” as qualifying not just “loss”, but also “damage”. The better view is that the word “physical” in a clause of this nature should qualify bothix yet the judge, in noting that the term “damage” was undefined in the body of the Policy, appears to have adopted the “plain, ordinary and popular meaning” of the term, unburdened by this additional overlay which can be quite significant.x
The second thing to note is that English cases have drawn a distinction between property which is damaged and that which is merely defective at the moment of its creationxi. In the circumstances of the SCB case, there does not appear to be any moment at which Insured Property the subject of the claim for indemnity existed other than in a defective state.
In Corbett v Vero Insurance New Zealand Limited [2019] NZHC 1823, the judge said [at 41]:
“First, as noted earlier, the parties agree that the concept of “physical damage” has an agreed and specialised meaning in the insurance industry”.
In that case the judge considered important the fact that before being scratched, the windows had been installed correctly and there was no suggestion that they were not capable of performing and being operated as expected. The judge accordingly concluded that the windows were not in a defective condition at the point at which they were deemed “damaged” in the sense of undergoing a physical transformation.
This can be contrasted with the situation in the SCB case, in which the concrete never existed other than in a defective condition. Query then whether this is what is meant by “physical damage” in the sense in which the term is understood in this country, which requires there to be a change in the condition of the property.xii
Further, and although in the context of a liability policy, in the case of Pilkington v CGU Insurance [2004] BLR 97 Potter LJ said [at 107]:
“Damage requires some altered state….it will not extend to a position where a commodity supplied is installed in or juxtaposed with the property of a third party in circumstances where it doers no physical harm and the harmful effect of any later defect or deterioration is contained within it”.
Even when addressing the concept of “damage” (which was found in the operative clause of the policy to have a wider meaning than “physical damage”), Justice Woodhouse in Technology Holdings Limited v IAG New Zealand (HC Auckland, Civ-2005-404-3450) found that a diminution in value or functionality was insufficient, and that an additional element was required, being that something must happen to the property itself, followed by the impairment of value or usefulness.
Accordingly, while it is one thing to say (as the Court of Appeal did in the Acciona case) that the operation of the policy was not dependent upon elements of the construction being complete at the time of damage, it is the authors opinion another thing altogether to suggest that it is apt to treat Insured Property as “physically damaged” when it has never existed other than in a defective state and was always incapable of performing or operating as expected.
It goes without saying that if in fact there is no “physical damage” so to trigger policy response, there should be no scope for the operation of the LEG3/06 clause which as an exclusion (even if styled as an “Extension”) operates to “cut something out already included by the general recitals and provisions”.xiii
Turning to the interpretation of the LEG3/06 exclusion itself, unfortunately little real guidance is provided in the case as to how it might be construed to operate in practice.
One of the “difficulties” with the LEG exclusions (2 and 3) is that they arguably conflate the occurrence of defect and damage with causation. The two concepts are uneasy bedfellows and have led to comments such as those from the judge in the SCB case who made referenced to the “…mishmash of terms that comprise the LEG3 Extension”.
There is however some small guidance which can be drawn from the decision.
The court noted that both parties acknowledged that the “Extension” began by generally precluding recovery for defects in material workmanship, and that both parties agreed that “nestled” within the exclusion is some exception for instances in which there is “damage” – a “patent detrimental change in the condition of the insured property”.
The court found that “damage” as used in the “Extension” unambiguously encompassed SCB’s claim, on the basis that the honeycombing and voiding resulted in a reduction in the weigh bearing capacity of the bridge, which qualified as a “detrimental change in the condition of the insured property”, and that change was “patent”.
As mentioned earlier, the court acknowledged that the prefatory language in the “Extension” damage definition suggested it was not necessarily used the same way as “damage” in the coverage provision. The author would agree and suggest that the required integer of damage to trigger policy coverage might not be satisfied by matters, which the court considered inform the definition of damage in the LEG3/06 clause.
The court then turned its attention to the scope of the exception to the “Extension” which excludes replacement or rectification costs incurred to “improve” the original workmanship.
The notion promulgated by the insurer, that to patch or replace defective components constituted an “improvement” within the meaning of the clause was rejected by the Court, noting that the “Extension” explicitly distinguished the “cost incurred to improve” work from the “cost of replacement or rectification”.
The Court said that while something that is broken which is fixed is in one sense improved (unless that component is replaced with something worse), the context of the “Extension” suggested that to improve means “to make a thing better than it would have been if it were not for the defective work”.
Ultimately however the court provided no real guidance as to what that formulation might mean in practice. What does “make a thing better” mean?
Is this a reference to a deduction for a potential incremental improvement in what was originally constructed, even if both the original construction and the replacement of the relevant portion of Insured Property were potentially capable of meeting the Principal’s Project Requirements?
Alternatively is it a reference to a deduction for costs that arise due to replacement that leads to greater load capacity or durability than originally contemplated, or a higher factor of safety etc (i.e. some evidence of tangible benefit is required before there will be any deduction)?
The court did seem to support SCB’s contention that to “improve” the original workmanship meant making “better than originally planned”. The example given was that if SCB decided to replace the defective concrete with solid gold, or otherwise upgrade it, SCB could not then seek reimbursement of those enhancements.
In the event, while considering “SCB’s reading” to be “more plausible”, the Court found the “Extension” to be ambiguous and in accordance with Illinois law construed the “Extension” against its drafter, Lexington, in favour of coverage.
Conclusion
While providing some welcome guidance to the operation of the LEG3/06 exclusion, it does so in the context of “damage” brought about by defective workmanship, so the decision does not address further complications which might arise if the damage is occasioned by a defect in design, plan, specification etc (or through a combination of design and workmanship defects).
Further the decision is of a single judge of the United States District Court For The District of Columbia, and (assuming it is not in any event appealed), will arguably be of limited value as a precedent in the Australian jurisdiction, given differing approaches seemingly to the question of [physical] damage and the consequences flowing from a finding of ambiguity under Illinois law.
iAB WDev., LLC v. Cont’l Cas. Co., 203 N.E.3d 922, 928 (Ill. 2022).
ii Johnson Press of Am., Inc. v. N. Ins. Co. of New York, 791 N.E.2d 1291, 1298 (2003).
iiiIbid.
ivTraveler’s Ins. Co. v. Eljier Mfg., Inc.,757 N.E.2d 481, 496 (Ill. 2001).
v[2015] BCCA 347.
vi[2007] EWCA Civ 1450.
vii[2002] EWCA Civ 310.
viiiSkanska Construction Ltd v Egger (Barony) Ltd [2002] EWCA Civ 310 [30] (Mance LJ).
ixSee for example Axa Global Risks (UK) Ltd v Haskins Contractors Pty Ltd (2004) 13 ANZ Ins Cas 61-611[43] and [50]; Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181 [30]-[32]; Allstate Exploration NL v QBE Insurance (Australia) Ltd [2008] VSCA 148 [15].
xFor a discussion of the dichotomy between “damage” and “physical damage” see Transfield Constructions Pty Ltd v GIO Australia Holdings Pty Ltd [1997] 9 ANZ Ins CAS 61-336 and Technology Holdings Ltd v IAG NZ Ltd & Anor [2008] NZHC 1228.
xiSee Bacardi v Thomas Hardy Packaging [2002] 2 Lloyd’s Rep 379.
xiiSee Ranicar v Frigmobile [1983] TAS R 113.
xiiiPer Leeming JA in Allianz Australia Insurance Limited v Rawson Homes Pty Ltd [2021] NSWCA 224 [10].
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