A July 2023 judgment by the Federal Court of Australia held that by reason of the definition of “Contract Works” in the Contractors Liability Policy, the contract works exclusion was not limited to those parts of the works owned by or in the possession of the insured because the natural and ordinary reading of the exclusion and the context favoured a broad construction.

The insured constructed defective formwork on a construction project. When concrete was poured into the formwork for Basement 1 the formwork failed causing the concrete slab to collapse onto the ground below.

The policy excluded liability “in respect of or in any way connected with any liability in respect of damage to property which consists of or forms part of the Contract Works”. The definition of “Contract Works” included formwork. The cover included cover for “Insured’s Products” which meant anything after it had ceased to be in possession or control of the insured. The insured alleged that the exclusion should be narrowly construed so as to confine its application to the insured’s own contract works or those within its possession, relying mainly on the fact that the policy exclusion referred to “the” Contract Works. The court held that the ordinary and natural meaning of the language used in the exclusion did not favour a narrow construction. Despite the use of the definite article “the”, this was too slender a hook to bear the weight of the proposed distinction between contract works owned by or in the possession of the insured, and those which are not. In the context of other express language in the exclusions dealing with possession and control, it meant that the exclusion in question deliberately avoided such requirement. There was nothing unbusinesslike or absurd in adopting the ordinary and natural meaning of the exclusion.

The indemnity was accordingly denied.

The same reasoning would be followed in South Africa on similar facts and wording.

Prestige Form Group NSW Pty Ltd v QBE European Operations Plc [2023] FCA 749