Allstate Explorations Nl v QBE Insurance (Australia) Ltd
[2007] VSC 380
•10 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
F6096
No. 2026 of 2007
| ALLSTATE EXPLORATIONS NL (ACN 000 679 023) AND OTHERS | Plaintiffs |
| V | |
| QBE INSURANCE (AUSTRALIA) LTD (ACN 003 191 035) | Defendant |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 September 2007 | |
DATE OF JUDGMENT: | 10 October 2007 | |
CASE MAY BE CITED AS: | Allstate Explorations NL v QBE Insurance (Aust) Ltd | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 380 | |
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Insurance – Industrial Special Risks Insurance Policy – Interpretation of policy – Whether insurer liable for consequential loss in absence of physical damage to property.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N Young QC with Mr J Barber | Lander & Rogers |
| For the Defendant | Mr A Meagher SC with Mr A Segal | Wotton & Kearney |
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HIS HONOUR:
I. Introduction
On Anzac Day 2006 there was a rock fall at the Beaconsfield Gold Mine, with tragic and dramatic consequences. The rock fall has also had adverse financial consequences for the mine owners and operators, who suffered losses as a result of the rock fall. In this proceeding, they seek to recover some of those losses from their insurer.
The Beaconsfield Gold Mine is owned and operated by a number of companies in joint venture. They are the plaintiffs. The defendant is their insurer, QBE Insurance (Australia) Ltd.
By an “Industrial Special Risks Insurance Policy” (“the policy”) in force at the time of the rock fall, QBE agreed to indemnify the joint venturers against loss arising from any “insured events” which occurred during the period of insurance.
On Anzac Day 2006, a seismic disturbance caused a rock fall at the mine. On that day, an inspector under the Workplace Health and Safety Act 1995 (Tas) ordered, pursuant to s 38 of that Act, that all mining activities at the mine cease until further notice. The joint venturers allege that the inspector’s order was made by reason of the rock fall. This is denied by QBE.
The joint venturers allege that the mine closure was an insured event which was “due to the operation of a peril insured against” within the meaning of the policy. Accordingly, the joint venturers contend that they are entitled to indemnity under the policy for the losses suffered by them as a result of the interruption to their business caused by the mine closure. This claim is based upon cl 23 of the policy, which provides:
23. Civil Authority
Notwithstanding anything contained herein to the contrary, the Property Insured under this Policy is also covered against the risk of loss, destruction or damages arising from the actions of any civil authority during a conflagration or other catastrophe and for the purposes of preventing, minimising or retarding same and shall also include the closure of any Premises/operations by any civil authority due to the operation of a peril insured against.
QBE pleads in its defence that cl 23 has not, upon its proper construction, been engaged by the mine closure. Two independent grounds are relied upon. First, because the order for the mine closure was not due to any loss, destruction of or damage to “Property Insured” within the meaning of the policy, which damage was required to engage the business interruption cover provided in Section 2 of the policy. Second, because the actions taken by the inspector in ordering the mine closure were not for the purposes of preventing, minimising or retarding any conflagration or other catastrophe.
In addition, QBE pleads a number of other defences, including that the rock fall was caused by one or more excluded perils; that the joint venturers did not take reasonable precautions to prevent loss, destruction or damage to the insured property; and that, prior to the inception of the policy, the joint venturers did not, in breach of the policy and/or s 21(1) of the Insurance Contracts Act 1984 (Cth), disclose matters known to them which were relevant to the decision of QBE to insure. These other defences are factually intensive and are likely to give rise to substantial interlocutory steps and a lengthy trial. However, if QBE is correct in its contention that cl 23 of the policy was not, upon its proper construction, engaged by the mine closure, the cost and inconvenience of interlocutory steps and a trial directed to these other defences will be unnecessary.
The joint venturers agree that, if QBE is correct in its contention as to the proper construction of cl 23 of the policy, their claim must fail. In these circumstances, the Court ordered that there be a trial of the following preliminary question:
On its true construction, does cl 23 of the Policy require QBE to indemnify the plaintiffs against loss resulting from interruption or interference to the business of the Beaconsfield JV caused by the closure of the Beaconsfield Gold Mine by a civil authority (whether or not for the purpose of preventing, minimising or retarding any conflagration or other catastrophe) due to the operation of a peril insured against?
II. The Policy
The insuring clause is contained in the preamble to the policy. It provides:
Whereas the Insured named in the Schedule has paid or agreed to pay to the Insurer(s) specified below the Premium shown in the Schedule, now the Insurer(s) agree(s), subject to the terms, Conditions, Exclusions, Memoranda, Warranties, limitations and other provisions, contained herein or endorsed hereon, to indemnify the Insured as specified herein against loss arising from any insured events which occur during the Period of Insurance stated in the schedule or any renewal thereof.[1]
[1]Emphasis added.
The policy provides cover in three sections, each of which specifies a class of insured events. Section 1 provides indemnity in respect of “any physical loss, destruction or damage … not otherwise excluded … to the Property Insured.” The indemnity is in the following terms:
In the event of any physical loss, destruction or damage (hereinafter in Section 1 referred to as “damage” with “damaged” having a corresponding meaning) not otherwise excluded happening at the Situation occurring during the Period of Insurance to the Property Insured described in Section 1, the Insurer(s) will, subject to the provisions of the Policy including the limitation of the Insurers’ liability, indemnify the Insured in accordance with the applicable Basis of Settlement.[2]
[2]Emphasis added.
The “Property Insured” is defined in Section 1 in very broad terms:
All real and personal property of every kind and description belonging to the Insured or for which the Insured is responsible, or has assumed responsibility to insure prior to the occurrence of any damage, including all such property in which the Insured may acquire an insurable interest during the Period of Insurance.
The indemnity provided by Section 1 of the policy is limited to loss arising from damage to physical property. This is plain from the “Basis of Settlement” provisions contained in Section 1, and from the express exclusion of consequential loss from the indemnity except as expressly provided for in Section 2 of the policy.[3]
[3]Perils Exclusion, Item 9.
Section 1 of the policy also contains specific inclusions of causes of physical loss, destruction or damage (included perils). The inclusion of these perils is not limited to Section 1. The included perils are listed under the following words:
the insurer will also indemnify the Insured for:
Physical loss, destruction or damage occasioned by or happening through:
…[4]
[4]Emphasis added.
Sub-section 1(a) of the policy provides indemnity in respect of machinery breakdown and/or boiler explosion. It is unnecessary to consider this section of the policy further.
Section 2 of the policy provides indemnity against loss resulting from business interruption or interference which happens in consequence of physical loss, destruction of or damage to Property Insured by any cause or event which is not excluded. The indemnity is in the following terms:
In the event of any Property Insured (as described in Section 1 and Section 1(a) of this policy) being physically lost, destroyed or damaged by any cause or event not hereinafter excluded (loss, destruction or damage so caused being hereinafter termed “Damage” with “Damaged” having a corresponding meaning) and the Business carried on by the Insured at the premises being in consequence thereof interrupted or interfered with, the Insurer(s) will, subject to the provisions of this Policy, pay to the Insured the amount of loss resulting from such interruption or interference in accordance with the applicable Basis of Settlement.[5]
[5]Emphasis added.
Sections 1 and 2 of the policy contain no ambiguity. The indemnity which is provided depends upon physical loss, destruction of or damage to any Property Insured. Further, under Section 2 of the policy, there must be a causal link between such physical loss, destruction or damage and the interruption or interference with the business of the joint venturers.
In addition, there are a number of deeming provisions contained in Section 2 of the policy which have the general effect of extending the indemnity provided by the policy to include consequential losses arising from physical damage to the property of third parties, provided that the cause of the physical damage is not an excluded peril. These deeming provisions extend cover to include consequential losses caused by physical damage to property in the vicinity of the insured premises, physical damage to property of a public utility and physical damage to the property of a specified supplier to the joint venturers which is damaged whilst at their premises.
The policy contains a number of specific exclusions. These exclusions are grouped together in two categories.
First, there are exclusions from the definition of “Property Insured”. These exclusions are listed under the following words:
This Policy does not cover physical loss, destruction of or damage to the following property or loss under Section 2 resulting therefrom:
… [6]
[6]Emphasis added.
Second, there are a number of excluded perils. With two exceptions, the excluded perils are identified by reference to specific causes of physical loss, destruction of or damage to the Property Insured. The two exceptions to this are the exclusion for legal liability to third parties and the exclusion of consequential loss unless expressly provided for in Section 2 of the policy. As I have said, no consequential loss can be recovered under Section 2 unless it is consequent upon physical loss, destruction of or damage to the Property Insured or to certain other specified property owned by third parties.
Paragraph 1(b) of the excluded perils is relevant. It provides:
The Insurer(s) shall not be liable under Section 1 and/or Section 2 in respect of:
1. physical loss, destruction of or damage to the Property Insured:
(a) …
(b)resulting from confiscation, nationalisation, requisition, or damage to property by or under the order of any Government or Public or Local Authority.
Notwithstanding the provisions of Perils Exclusion 1(b) the Insurer(s) shall be liable for loss, destruction of or damage to, or the cost of removal of, sound property at the Premises for the purpose of preventing or diminishing imminent damage by, or inhibiting the spread of, fire or any other peril insured against under this policy.[7]
[7]Emphasis added.
Finally, insofar as is relevant, the policy contains a miscellaneous group of provisions under the heading “CONDITIONS APPLICABLE TO ALL SECTIONS”. Clause 15 of these “conditions” provides that headings are included for ease of reference only and that the terms and conditions of the policy are not to be construed or interpreted by reference to the headings. The clauses appearing in this part of the policy are not truly conditions in the strict contractual sense. They are a miscellaneous group of provisions with mixed functions. It is in this part of the policy that cl 23 appears.
III. Applicable Law
It is necessary to construe the relevant provisions of the policy in accordance with general principles of contractual interpretation.[8] This requires the Court to consider what reasonable persons in the position of the parties would have understood the words to mean by reference to the text of the agreement, the surrounding circumstances known to the parties and the purpose or object of the transaction.[9] In interpreting the words and resolving any ambiguity, the Court should proceed in a common sense and non-technical way and give the agreement a commercially sensible construction.[10] The Court should have regard to all of the words used in the agreement “so as to render them all harmonious with one another”[11] and to ensure the “congruent operation of the various components as a whole.”[12]
[8]McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, [22]; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, [15].
[9]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [40].
[10]Hillas & Co Ltd v Arcos Ltd [1932] All ER 494, 499, 503-4; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, 437; Di Dio Nominees Pty Ltd, v Brian Mark Real Estate Pty Ltd [1992] 2 VR 732, 740; MLW Technology Pty Ltd v May [2005] VSCA 29, [76]-[81]; Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 770-1.
[11]ABC v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109.
[12]Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522, [16].
There was no dispute as to the content of the applicable principles.
IV. Surrounding Circumstances and Commercial Purpose
The only evidence of surrounding circumstances was that cl 23 of the policy was inserted at the request of an insurance broker who was acting as agent of the joint venturers at all material times. In my view, this evidence does not assist in the construction of cl 23. The evidence was not relied upon in submissions and it is unnecessary to refer to it further.
Having regard to the lack of evidence as to surrounding circumstances, I will approach the construction of the policy on the basis that, like any insurance policy, its commercial purpose is to provide insurance cover of the kind specified in the event of the occurrence of an insured event specified in the policy. Of course, the Court must give the policy a commercially sensible construction. However, in the absence of evidence of surrounding circumstances, the text of the policy should be given primary significance, and should not be displaced unless the words used lead to a result which does not accord with commercial common sense.
V. Resolution of the Preliminary Question
The first issue which arises for determination on the trial of the preliminary question is whether or not cl 23 only provides cover for, or in consequence of, physical loss, destruction of or damage to the Property Insured.
It is first necessary to note that the policy does not consistently use the same language to describe the occurrence of physical loss, destruction of or damage to the Property Insured. Section 1 provides indemnity in respect of “physical loss, destruction or damage … to the Property Insured.” Section 2 provides indemnity for consequential losses arising from “the Property Insured … being physically lost, destroyed or damaged”. The included perils are introduced by the words “the Insurer will also indemnify the Insured for physical loss, destruction or damage occasioned by or happening through …”. The exclusions from the definition of the Property Insured, and the perils exclusions, use the language “physical loss, destruction of or damage to” the Property Insured. There are other places in the policy where the policy is obviously referring to physical loss, destruction of or damage to the Property Insured, but where the word “physical” does not appear in the words used. For example, where the policy refers only to “loss, destruction or damage”[13] or to “loss, destruction of or damage to”.[14]
[13]Policy, pp 16 [Output Replacement], 17 [Sealing of Mine], 19 [Customers (sic) Excise and Other Duties], 40 [cll 9, 11].
[14]Policy, p 21 [cl 6].
It is common ground that the consequential losses claimed by the joint venturers in this proceeding are not the result of any physical loss, destruction of or damage to the Property Insured and that, accordingly, Section 2 of the policy has not been engaged.
In summary, it was submitted on behalf of the joint venturers that cl 23 should be construed as providing an independent head of indemnity which is separate from and additional to the indemnities provided for in Sections 1 and 2 of the policy.
In summary, it was submitted on behalf of QBE that cl 23 should be construed as forming part of the scheme of insurance provided for in Sections 1 and 2 of the policy, and was intended to do no more than provide that the specified actions of a civil authority are not excluded perils, in particular under Peril Exclusion 1(b).
The joint venturers supported their submissions by the following reasoning.
First, the joint venturers rely upon the fact that cl 23 does not provide cover in the event of physical loss, destruction of or damage to the Property Insured, as do Sections 1 and 2 of the policy. Instead, cl 23 provides cover against any “loss, destruction or damages” arising from the specified actions of a civil authority. Accordingly, the joint venturers submit that there is no need for any physical loss, destruction of or damage to the Property Insured for cl 23 to be engaged. It was submitted that, if this had been intended, it would have been an easy matter for the parties to have used in cl 23 language requiring physical loss, destruction of or damage to the Property Insured.
Second, the joint venturers submit that the words of cl 23 give a strong indication that the clause was intended to provide “freestanding” cover which is additional to, and separate from, the cover provided for in Sections 1 and 2 of the policy. In this regard, joint venturers rely upon the opening words of cl 23 “Notwithstanding anything contained herein to the contrary”, upon the words “is also covered against” and upon the words “and shall also include”. It was submitted that the words “and shall also include” should be read as referring to the additional cover provided for in cl 23, so that the phrase should read: “and the cover shall also include”. It was submitted that, when read in this way, cl 23 was directly connected to the insuring clause contained in the preamble to the policy, because it specifies further insured events which may occur during the period of insurance.
Third, the joint venturers submit that cl 23 should be read as comprising two distinct parts, as follows:
Notwithstanding anything contained herein to the contrary,
(1)the Property Insured under this Policy is also covered against the risk of loss, destruction or damages arising from the actions of any civil authority during a conflagration or other catastrophe and for the purposes of preventing, minimising or retarding same and
(2)(the cover) shall also include the closure of any Premises/operations by any civil authority due to the operation of a peril insured against.
It was submitted on behalf of the joint venturers that this is the natural way to read cl 23, because cl 23 deals with two distinct types of actions by a civil authority. First, actions of a civil authority during a conflagration or other catastrophe for the specified purposes. Second, the action of a civil authority in closing the mine or its operations due to the operation of a peril insured against. It was submitted that there are, objectively, good reasons to suppose that the parties intended a demarcation of this kind, because the two types of actions are likely to lead to quite different consequences. For example, it may be readily comprehended that in the course of a mining disaster (“during a conflagration or other catastrophe”), fire brigades or other rescue personnel (“any civil authority”) might cause loss (particularly property loss) in the course of responding to the disaster (“for the purpose of preventing, minimising or retarding the same”). In contrast, a civil authority in closing the mine is unlikely to cause property damage, but is very likely to cause an immediate loss of business revenue to the joint venturers. The joint venturers acknowledge that it is possible to generate examples of property damage derived from the closure of a mine by a civil authority (for example, entombment of property as a result of a permanent closure). However, it was submitted that such examples are remote possibilities when compared with the immediate loss of business revenue which is likely to follow from the closure of a mine operation irrespective of the incidence of property damage. Accordingly, it was submitted on behalf of the joint venturers that the most obvious risk against which an insured would seek protection as a result of a mine closure is the loss of profit consequent upon an inability to continue mining operations.
Fourth, it was submitted on behalf of the joint venturers that neither part of cl 23 requires, as a condition of cover, that there be physical loss, destruction of or damage to the Property Insured. Once again, reliance was placed upon the use of the words “loss, destruction or damages”, in contrast to words requiring physical loss, destruction of or damage to the Property Insured, such as are used in Sections 1 and 2 of the policy when providing for indemnity. It was submitted that the use of different words should be seen as a deliberate choice which indicates a broader form of cover to that provided for under Sections 1 and 2 of the policy.
It was submitted that this interpretation is supported by the fact that other parts of the policy use words such as “physical loss, destruction of or damage to the Property Insured” when referring to the incidence of property damage. This is to be contrasted with cl 23, which states that “the Property insured under this policy is also covered …“ It was submitted that this language in cl 23 is consistent with an intention to provide cover in respect of the full ambit of the defined Property Insured which, it was submitted, includes the joint venturers’ rights of operation of the mine under relevant mining licences.
Fifth, it was submitted that, even if the first part of cl 23 is limited to providing cover which is consequent upon physical loss, destruction of or damage to Property Insured, the second part of cl 23 is not subject to that limitation. This submission relies upon the premise that there are two parts to cl 23, and that those parts are delineated in accordance with the submissions of the joint venturers.
Sixth, it was submitted on behalf of the joint venturers that the construction contended for by QBE would render the second part of cl 23 otiose, or irrelevant surplusage, because the cover provided for under the second part would already be provided for under Sections 1 and 2 of the policy. It was submitted on behalf of the joint venturers that the parties could not have intended the second part of cl 23 to be mere surplusage.
The following example was relied upon. Assume the occurrence of a specifically included event, such as an earthquake. The earthquake might cause property loss or damage. The earthquake might also cause a civil authority to close the mine, which closure may then cause physical loss, destruction of or damage to property. In either case, the physical loss, destruction or damage would engage the cover provided for in Section 1 and, in the event of the mine closure causing consequential loss resulting from interruption to the joint venturers’ business, would also engage the cover provided for in Section 2 of the policy. It was submitted that the Section 2 cover would not be excluded under perils exclusion 1(b), because the physical loss, destruction or damage would still be “occasioned by or happening through” the specifically included peril of an earthquake.
Seventh, it was submitted on behalf of the joint venturers that the construction for which they contend leads to results which are more objectively reasonable, because their construction provides cover for the very kind of loss which is the most likely to derive from closure of a mine by a civil authority. It was submitted that this is the obvious commercial purpose of the second part of cl 23 and that the Court should give effect to that commercial purpose.
I do not accept the submissions made on behalf of the joint venturers. In my view, physical loss, destruction of or damage to Property Insured is required in order to engage cl 23 of the policy. I am of this view for the following reasons.
First, cl 23 must be construed in the context of the policy as a whole. When the policy is read as a whole, a clear structure is evident. The policy provides cover for losses (including consequential losses recoverable under Section 2) arising from, or consequent upon, any event causing physical loss, destruction of or damage to any Property Insured, subject only to the following specified exclusions:
(1)The exclusion of specified property from the broad definition of the Property Insured.
(2)The exclusion of certain causes of physical loss, destruction or damage to Property Insured (excluded perils).
(3)The exclusion of legal liability to third persons unless expressly provided for.
In addition, within this structure, Section 2 of the policy contains deeming provisions which extend the cover provided under Section 2 to include consequential losses caused by physical damage to property of certain third parties.
In my view, clear language would be required to provide for extra cover outside of this clearly defined structure.
Second, although I accept that cl 23 should be read as comprising two parts, I do not accept that those parts should be delineated in the manner contended for by the joint venturers. In my view, having regard to the overall structure of the policy except cl 23, which requires physical loss, destruction of or damage to Property Insured in order to engage the insurance cover provided, a natural reading of cl 23 is to delineate its parts as follows:
Notwithstanding anything contained herein to the contrary, the Property Insured under this Policy is also covered against the risk of loss, destruction or damages arising from:
(1)the actions of any civil authority during a conflagration or other catastrophe and for the purposes of preventing minimising or retarding same; and (the cover) shall also include
(2)the closure of any Premises/operations by any civil authority due to the operation of a peril insured against.
When read in this way, cl 23 is consistent with the overall structure of the policy. The introductory words should be read as providing for cover in respect of the risk of loss, destruction of or damage to the Property Insured, and those words should be read as qualifying both parts of cl 23.
Third, I accept that the wording of cl 23 is not entirely consistent with other language used in the policy. In particular, as pointed out by counsel for the joint venturers, other parts of the policy use the language such as “physical loss, destruction of or damage to the Property Insured” when referring to the incidence of property damage. This is to be contrasted with the language used in cl 23: “the Property Insured is also covered against the risk of loss, destruction or damages.“ However, cl 23 does not, as it could easily have provided if that was the intention of the parties, provide that “the Insured is also covered against the risk of loss, destruction or damages arising from the actions of any civil authority”. It clearly states that “the Property Insured under this Policy is also covered against the risk of loss, destruction or damages arising from the actions of any civil authority”. I accept that a similar point can be made against QBE. It would have been easy to have included in cl 23 similar language as is used in the indemnity provisions contained in both Section 1 and Section 2 of the policy, each of which requires physical loss, destruction of or damage to the Property Insured. However, as I have said above,[15] there are other places in the policy where the policy is obviously referring to physical loss, destruction of or damage to the Property Insured but where the word “physical” does not appear in the words used.
[15]See [28] above.
As to the use of the plural “damages” and not the singular “damage” that should be considered a mistake. Given that the subject of cl 23 is cover in respect of the Property Insured, the use of the plural is unlikely to have been deliberate. However, even if this is not so, the use of the plural “damages” is not, in my view, a sufficiently clear expression of intention to justify reading the cover provided for in cl 23 as being independent of the structure of the policy as a whole.
Fourth, the construction of cl 23 which I prefer is consistent with treating cl 23 as a further qualification to peril exclusion 1(b). When read as a whole, including the qualification contained within it, peril exclusion 1(b) excludes liability under both Section 1 and Section 2 of the policy in respect of loss, destruction of or damage to the Property Insured “by or under the order of any Government or Public or Local Authority” (which I will refer to as a “government order”), unless it is the result of actions taken by or under the government order:
for the purpose of preventing or diminishing imminent damage by, or inhibiting the spread of, fire or any other peril insured against under this policy.[16]
[16]Emphasis added.
This qualification to peril exclusion 1(b) limits the circumstances envisaged by the first part of cl 23 to actions taken “by or under” a government order in respect of a fire (which must include a conflagration) or any other insured peril. The first part of cl 23 is wider. It extends the qualification to peril exclusion 1(b) to include loss, destruction of or damage to the Property Insured as a result of any action taken by a civil authority, whether or not by or under a government order. For example, emergency action taken by a fire brigade in the absence of a government order. Further, it is not limited to fire or other perils insured against. It includes any actions taken by a civil authority, for the specified purpose, during a conflagration (fire) “or other catastrophe”.
The second part of cl 23 further extends the qualification to peril exclusion 1(b) to include closure of the mine by a civil authority whether or not that closure is by or under a government order, and whether or not that closure is for the purposes specified in the qualification contained within peril exclusion 1(b) or the purposes specified in the first part of cl 23. The only limit to this extension is that the closure must be “due to the operation of a peril insured against”.
Fifth, the construction of cl 23 which I prefer is also consistent with other aspects of the policy. For example, cl 6 of the policy provides that no claim under the policy shall be payable unless notice is given of specific matters. The required notice must include:
a statement of claim in writing containing as particular account as may be reasonably practicable of the items of property lost, destroyed or damaged and of the amount of loss, destruction or damage thereto.[17]
This language is consistent with the structure of the policy. It is not consistent with cl 23 providing cover in the absence of physical loss, destruction of or damage to the Property Insured.
[17]Emphasis added.
Further, in the event that a claim for indemnity was to be made in the absence of physical loss, destruction of or damage to the Property Insured, cl 23 does not specify an applicable “Basis of Settlement”, as is contained in both Section 1 and Section 2 of the policy. The fact that cl 23 contains no Basis of Settlement provision supports a construction that the parties did not intend to provide for cover except within the structure of Sections 1 and 2 of the policy.
Sixth, it cannot be said that a construction which requires physical loss, destruction of or damage to Property Insured in order to engage cl 23 does not accord with commercial common sense. Although there is some force in the submission that loss of business revenue is the most obvious risk to the joint venturers arising from closure of the mine, it is possible to generate examples of physical damage consequent upon a mine closure. The joint venturers concede this. Moreover, the parties recognized this in peril exclusion 7(b), which contemplates that physical loss, destruction or damage to the Property Insured may result from the cessation of mining operations caused by strikes and other labour disturbances and excludes that peril from insurance cover.
Further, there is no evidence as to the commercial reasonableness of Section 2 of the policy, which insists upon physical loss, destruction of or damage to the Property Insured as a pre‑requisite to cover for consequential losses. However, there is no dispute that this is what the policy, with the sole exception of cl 23, provides.
Seventh, if physical loss, destruction of or damage to the Property Insured is necessary to engage the operation of the second part of cl 23, this does not render that part of cl 23 mere surplusage. Even if the example postulated by counsel for the joint venturers would lead to insurance cover being provided under Section 2 of the policy,[18] cl 23 would still have work to do because, as discussed above, cl. 23 provides further qualifications to peril exclusion 1(b).
[18]As to which, see [41] above.
Having regard to my conclusion on the first issue arising for determination, it is unnecessary to consider whether, if physical loss, destruction of or damage to the Property Insured was not required in order to engage cl 23, the joint venturers would also be required to establish that the mine closure was for the purposes of preventing, minimising or retarding any conflagration or other catastrophe. Had the issue arisen for decision, I would have been of the clear view that the joint venturers did not need to make out this further requirement. This follows from the way in which I have divided cl 23 into two separate parts.
VI. Conclusion
The preliminary question should be answered: “No, unless the mine closure was caused by physical loss, destruction of or damage to Property Insured”.
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