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QBE court win over Beaconsfield mine a win for insurers

An insurance claim over the closure of Tasmania’s Beaconsfield gold mine that has dragged through the courts for more than a year has so far shown courts’ willingness to defend the strict wording of policies.

The Beaconsfield case was the subject of a recent Victorian Court of Appeal decision – reported in insuranceNEWS.com.au last week – that affirmed an earlier decision upholding QBE’s right to deny a claim.

On Anzac Day in 2006, a seismic disturbance caused a rock fall at the mine trapping two miners and killing another. The disaster sparked the dramatic rescue of Todd Russell and Brant Webb, stopping an entire nation as they emerged from a two-week ordeal.

Allstate Explorations, which co-owned and managed the mine with Beaconsfield Gold at the time of the rock fall, claimed $45.5 million from QBE for business interruption, saying a workplace inspector ordered the closure of the mine after the rock collapse.

The rock fall closed the mine for seven months, and stopped gold production for a year.

QBE refused to provide indemnity on the loss resulting from the mine closure, as it says the business interruption was not a consequence of “physical” loss or destruction of or damage to property insured.

The industrial special risks policy did not cover financial losses if the mine was closed by civil authorities, unless the closure was due to physical damage. The policy had a one-month excess and was capped at $50 million.

Confusion apparently arose over a clause that was added to the standard policy wording.

The Victorian Court of Appeal has supported QBE’s denial of the claim, ruling the closure was not due to physical damage, and ordering Allstate to pay the legal costs of the appeal.

Beaconsfield Gold and Allstate lodged the appeal in October after losing in the Supreme Court in September.

The Supreme Court ruled in favour of QBE, agreeing the insurance policy was void as civil authorities had closed the mine due to non-physical damage.

Justice Kim Hargrave was of the view that “physical” loss, destruction of or damage to property insured was required in order for QBE to provide indemnity. The three Court of Appeal judges agreed there was no property damage.

The decision taken by both courts is good news for insurers and confirms a long-held view that for cover to be available under an industrial special risks insurance policy there must be “physical” loss, destruction or damage to the property insured.

The decision upholds the precept that unless an industrial special risks policy clearly says otherwise, the insurer will not be liable for loss in the absence of physical damage to property.

In handing down their decision, the Appeal Court judges urged insurers to exercise caution in adding clauses to pre-existing insurance contacts to ensure ambiguities and uncertainties are avoided – in other words, to prevent their clients from pursuing lengthy and costly court cases.

Beaconsfield Gold’s lawyers have previously conceded the case is likely to drag on through the legal appeal process, with QBE expected to challenge any adverse appeal ruling.

The final decision on whether to take the case to the High Court or cut their losses isn’t up to the lawyers, however – the mine’s owners have not yet decided on further action.

Beaconsfield Gold CEO Bill Colvin told insuranceNEWS.com.au the company is still seeking legal advice and was unable to confirm if it will appeal the court’s decision.

QBE declined to comment.