Silbermann & Anor v CGU Insurance Ltd

The High Court of Australia considered an appeal by the appellants, Mr. and Mrs. Silbermann, against a decision of the Victorian Court of Appeal concerning an insurance dispute with the respondent, CGU Insurance Ltd. The core of the disagreement revolved around whether the appellants were entitled to indemnity under their home building insurance policy for damage caused by a burst pipe.

The central legal question before the High Court was whether the damage caused by the burst pipe constituted "accidental damage" within the meaning of the policy. Specifically, the court had to determine if the damage was excluded by a policy clause that excluded damage "caused by or arising from or in consequence of the subsidence, or the settling, hardening or drying out of the ground."

The High Court, in a joint judgment, found that the damage was indeed accidental and not excluded by the policy. Their Honours reasoned that the burst pipe was an independent event that caused the damage, and the subsequent drying out of the ground was a consequence of that initial accidental event, not its cause. The court applied the principle that exclusions in insurance policies are to be construed strictly against the insurer. The court allowed the appeal, setting aside the orders of the Court of Appeal and remitting the matter to the Supreme Court of Victoria for determination of the quantum of indemnity.