In Coromin Ltd v AXA Re & Ors [2007] EWHC 2818 (Comm), the Commercial Court considered whether Coromin was entitled to be indemnified by its reinsurers for the physical damage and business interruption losses suffered by its insured as a result of a defective mill motor at a copper mining and processing facility in Chile. The reinsurances covered damage caused by a design defect to items other than the item defectively designed but the effect of an electrical or mechanical breakdown extension was to bring within the cover the defective item itself. The reinsurers submitted that the extension did not apply because there had been no compliance with one of the four conditions of the extension.

In addressing the issues of policy construction, Mr Justice Cooke relied on the principles set out in the Court of Appeal in Absalom v TCRU [2006] 2LLR 129; namely, to examine and interpret the terms in their contractual context, take into account surrounding background matters and reject a conclusion that flouts business common sense. On the facts presented to him, the judge found that each of the four requirements of the extension were met in respect of the defective mill motor and so the extension applied. In addition, he found that upon the proper construction of the reinsurances, there was no requirement that the business which was interrupted be business which existed at the time of the incident. The definition of "Business" was very wide and included no qualification or limitation, in terms of scope or time. Whilst the case is fact specific, this decision does provide some general guidance on policy construction and demonstrates the importance courts place on the general commercial purpose of a policy when construing its terms.