A negligent act with an appreciation of the risk can still be an ‘accident’4 November 2016 | Insurance Issues
- What constitutes an ‘accident’
- Whether the overloading and damage to the crane was ‘accidental’
The respondent insured a 100 tonne Telescopic Crawler Crane (the crane) owned by the appellant. On 1 February 2009 the crane was damaged when its boom collapsed. Shortly before the collapse concrete rubble had been placed in the area where the crane was to pass. In the 12 seconds that the crane was crawling over it, the rubble did not compress, causing the boom to collapse. The crane was found to be beyond economical repair. The appellant sought to recover under the policy, arguing that either the collapse was due to a pre-existing defect in the base of the boom (to which the ‘Material Damage’ cover responded) or that the failure was an accident (to which the ‘Accidental Overload’ cover responded).
The Decision at Trial
The ‘Material Damage’ policy covered the appellant for accidental, sudden and unforeseen damage to the crane while it was located and in use in the manner in which it was designed to be used. After a detailed consideration of the meaning of ‘accident’, the trial judge concluded that accidental meant ‘unintended and unexpected’ and that the appellant had failed to establish that the collapse of the boom was ‘accidental’. The trial judge further found that the operator knew the crane should not be operated on a slope and that if he did so there was a real risk of the boom collapsing. Despite this knowledge he operated the crane on a 7 degree angle.
The policy contained an additional benefit for damage caused by ‘Accidental Overload’ which was non-deliberate and clearly unintentional. The appellant submitted that the term ‘overload’ in the policy should be read to encompass a situation where the crane was overloaded because it was operated on a slope. The trial judge considered the meaning of ‘overload’ and held that the plain meaning of the word, being ‘physically overloaded with an excessive load’, was consistent with a proper construction of the policy as a whole. Therefore ‘Accidental Overload’ cover responded to accidental ‘physical’ overload of the crane where it had otherwise been operated in the manner in which it was designed to be used. As the crane was operated in contravention of manufacturer’s guidelines, the additional cover under that policy provision did not respond to the appellant’s claim.
After consideration of additional cover and exclusions in the policy, the trial judge concluded that the policy did not respond to the plaintiff’s claim.
The Issues on Appeal
The appellant appealed the trial judge’s findings arguing, in essence, that notwithstanding the trial judge’s findings of fact (which included a rejection of the crane operator’s evidence) the overloading of the crane was still accidental.
The Decision on Appeal
In a 2:1 majority the Court of Appeal allowed the appellant’s appeal.All three judges took issue with the trial judge’s finding that the crane was not ‘overloaded’.They were satisfied that ‘overloading’ could encompass a scenario of structural (as opposed to just physical) overloading and accordingly by operating on an incline the crane was overloaded.The case therefore turned on whether this was ‘accidental’.
The majority concluded that, for the appellant to be denied of the benefit of the Accidental Overload clause, both the overloading and damage must have been expected.In finding for the appellant it was noted that:
- The particular method of operation (laying the rubble in the expectation it would compress) was standard industry practice and was not inherently dangerous.The incident occurred because the rubble did not compress as expected.
- The crane operator had only operated the crane (on the rubble) for 12 seconds before the boom collapsed.By the time he realised the rubble was not compressing the overloading and damage was imminent and unavoidable.
- Accordingly, whilst the crane operator ‘deliberately took a risk’ he was ‘by no means inviting the disaster which ensued’ and accordingly both the overloading and damage were ‘uninvited’ and were ‘not expected or designed’. Therefore the overloading was, within the meaning of the policy, ‘accidental, non-deliberate and clearly unintentional’.
Justice Fraser offered the dissenting judgment, concluding that 12 seconds was sufficient time for the crane operator to fully appreciate that it was reckless to continue crawling up the ramp.Further, even if the crane operator did not appreciate the crane would be overloaded, the appellant failed to prove that he did not ‘deliberately court such a high degree and seriousness of risk that the crane would be dangerously overloaded by its operation on the incline that the overloading should not be regarded as ‘accidental’.’
Implications for you
The Court of Appeal accepted that a negligent decision made by an insured, even with an appreciation of the risk, can still be an ‘accident’. It can be problematic assessing when that line is crossed, however, the decision serves as a reminder of the difficulties faced by insurers in establishing that the circumstances giving rise to a claim go beyond that which might be considered an ‘accident’.
The decision is being appealed by the respondent.