In July 2023 the Australian Federal Court held that an excavator loaded onto the back of a trailer which struck a bridge was not a “vehicle” excluded from cover under the Public and Product Liability Insurance Policy, but an included “tool of trade”. The court also held that whilst the excavator was being conveyed between sites, the damage was no longer an element of the “loading” of the vehicle, despite an error made whilst loading.

Employees of an mining exploration drilling company wrongly measured the height of the excavator loaded on the trailer as no greater than 4.3 metres. But while moving between sites the loaded excavator struck a bridge with a clearance given as 4.9 metres causing damage to the bridge whose owners claimed against the drilling company. The policy covered amounts the insured was “legally liable to pay as compensation in respect of property damage”. The policy excluded any liability for property damage arising out of the use of any vehicle whilst being operated as a “tool of trade” on any worksite.  It also excluded liability for “the loading or unloading of any Vehicle”. A “tool of trade” meant a vehicle that “has tools, implements, machinery or plant attached to or towed by the vehicle and is being used by You at Your premises or on any worksite”.

The excavator was a vehicle, being a type of machine on self-laid tracks. It was not however something attached to the trailer but a tool of trade in itself. Although a “vehicle” excluded a vehicle travelling to and from a worksite, the court said that any site where work is performed includes, “all areas between sites” as in this case.  It was not necessary for the insured to establish that every element of the vehicle was actually being operated or used as a tool of trade at the time of the incident.

The words “loading or unloading” are verbal nouns which refer to the activities of loading or unloading. The exclusion did not include the words “caused by or arising out of” the loading or unloading. Whilst the measuring of the height of the excavator and trailer was an aspect of the task of loading the excavator, the event did not happen in the course of loading and unloading.

On the same wording the same conclusion would be reached in South Africa. This case demonstrates yet again how carefully exclusions have to be phrased in order to exclude events and occurrences and property which are not intended to be covered.

[Kerembla Pty Ltd v XL Insurance Company SE [2023] FCA 769 (7 July 2023)]