The case of Matton Developments Pty Ltd v CGU Insurance Limited1 considered the construction of an accidental overload clause under a Contractors Plant and Machinery insurance policy.
The decision highlights that taking known risks which ultimately result in damage may nevertheless be “accidental” for the purposes of specific accidental cover extensions.
The background facts as found by the primary judge were as follows:
- Matton Developments Pty Ltd (Matton) owned a mobile crane and contracted Mr Sprecak of G & M Panel Constructions Pty Ltd for the hire and operation of the crane. Matton’s related company supplied the crane operator, Mr Hitaua.
- Prior to operating the crane, Mr Hitaua created a ramp using construction rubble which was expected to compress and create a level gradient for the crane.
- The crane was loaded with a 39 tonne concrete panel and Mr Hitaua began climbing the crane up the ramp at a seven degree incline, which he knew was in clear breach of the manufacturer’s guidelines and the Australian Standards.
- As Mr Hitaua crawled the crane up the ramp for about 12 seconds, it failed to compress as he and Mr Sprecak expected, and while attempting to slew the boom and lower the panel into place, the boom collapsed damaging the crane beyond repair.
- Mr Hitaua had about 12 seconds to appreciate the ramp was not compressing and, had he been looking at the spirit level, he would have known the crane was not being operated on level ground. The primary judge rejected Mr Hitaua’s evidence that he was “always looking at the spirit level” but also found, however, that he must have appreciated the ramp was not compressing from looking at the spirit level.
Matton sought indemnity under an accidental overload clause which covered “insured damage caused by or resulting from accidental overloading which is non-deliberate and clearly unintentional…” in respect of the damage and loss of the crane.
Decision at first instance
The primary judge held, amongst other things, that Matton was not entitled to cover as the word “overloading” was not intended to include a situation where the crane was “overloaded because it was operated on a slope”2 rather than initially overloaded but otherwise operated in the manner in which it was designed to be used.
On appeal, the Supreme Court of Queensland, Court of Appeal, considered three primary questions:
- Did the primary judge err by construing the word “overloading” as not comprehending the “structural overloading” which caused damage to the crane?
- Did the primary judge err in finding that:
- The overloading was not “accidental” overloading within the meaning of the accidental overload clause.
- The damage to the crane was not “accidental, sudden and unforeseen”.
The Court of Appeal held that the primary judge erred in construing the word “overloading” so as to exclude “structural overloading” caused by operating the crane on a slope. However, on the questions of “accidental” overloading and “accidental, sudden and unforeseen” damage their Honours found as follows:
- Fraser JA accepted there was no reliable evidence to prove, subjectively or objectively, that overloading of the crane was “accidental” from Matton’s or Mr Hitaua’s perspective. Fraser JA considered that Mr Hitaua’s knowledge and acceptance of the risk of collapse could not amount to an “accident” under the policy.
- McMurdo P held that preparing the ramp with the expectation that it would compress “was not so hazardous and culpable that the subsequent overloading and the resulting damage could not be called an accident.” McMurdo P considered that whilst Mr Hitaua “deliberately took the risk, he was by no means inviting the disaster which ensued.”3
- Morrison JA held that in light of Mr Hitaua’s and Mr Sprecak’s expectations that the ramp would compress, the failure to realise did not amount to “courting, inviting or wooing” the risk”4 or “deliberately incurring the risk”.”5
The 2:1 majority of the Court of Appeal therefore held that cover was available to Matton in respect of the damage and loss of the crane.