Appeal Court decision gives insurers ‘comfort’ on policy wording
The NSW Court of Appeal has sided with insurers for upholding policy exclusions in a case involving defective construction work at Sydney Airport.
The case dates back to 1993 when Baulderstone Hornibrook Engineering (BHE) began work on reinforced earth walls on the perimeter of the third runway at Sydney Airport. The work was later found to be defective.
Sydney Airports Corporation successfully settled with BHE, and the engineering company began proceedings in 2003 to seek indemnity from its insurers.
The insurers involved included AMP offshoot Gordian, CGU, QBE and HIH, which at the time was in liquidation.
BHE’s case failed when the NSW Supreme Court ruled the liability fell under certain uninsured construction risks rather than insured professional indemnity risks.
In the appeal BHE argued that because the construction design was fundamentally flawed, the design was incapable of providing an adequate finished product and reflected a technical and professional error.
The company argued that on this basis the claim met terms of its PI policy.
But the Court of Appeal found the proximate cause of the loss was defective construction techniques, which fell within a policy exclusion for construction work.
The case dates back to 1993 when Baulderstone Hornibrook Engineering (BHE) began work on reinforced earth walls on the perimeter of the third runway at Sydney Airport. The work was later found to be defective.
Sydney Airports Corporation successfully settled with BHE, and the engineering company began proceedings in 2003 to seek indemnity from its insurers.
The insurers involved included AMP offshoot Gordian, CGU, QBE and HIH, which at the time was in liquidation.
BHE’s case failed when the NSW Supreme Court ruled the liability fell under certain uninsured construction risks rather than insured professional indemnity risks.
In the appeal BHE argued that because the construction design was fundamentally flawed, the design was incapable of providing an adequate finished product and reflected a technical and professional error.
The company argued that on this basis the claim met terms of its PI policy.
But the Court of Appeal found the proximate cause of the loss was defective construction techniques, which fell within a policy exclusion for construction work.