The owners entered a contract with Metricon Homes to ‘design and construct’ their brand new home and, in June 2008, proudly took possession of the house. Throughout the period January 2011 to May 2014, the house sustained damage arising from defective design and workmanship. In particular, there were significant issues with the house’s concrete slab and timber roof trusses, as well as other defects.
The owners were successful in recovering damages from Metricon. Metricon then made a claim under its products and public liability insurance policy with Great Lakes Insurance (GLI) for rectification costs, defence costs and the settlement sum paid to the owners.
GLI denied indemnity under the policy on the basis that Metricon’s obligation to pay the owners did not arise out of ‘damage to property’ as required by Section 3 of the policy but as a result of Metricon’s failure to construct the house in accordance with its contractual obligations.
The Supreme Court did not like GLI’s argument. It found that when given its ordinary meaning, ‘damage to property’ included damage to the house and therefore the cover applied to cover Metricon’s claim.
However, GLI relied on the ‘professional services exclusion’ (amongst others) and argued that Metricon’s liability to the owners arose out of its failure to render ‘professional services’. The Court found that although Metricon had engaged engineering subcontractors to design the concrete slab and roof trusses (both of which were the principal cause of the damage), the provisions of those designs by Metricon to the owners under the ‘design and construct’ contract constituted a ‘professional service’. Metricon’s claim was therefore ultimately defeated by the operation of the professional services exclusion clause.
Metricon Homes Pty Ltd v Great Lakes Insurance SE
The scope of ‘professional service’ in the context of exclusion clauses continues to be elusive. In this case, the insured must have been disappointed that an insurer, which ran every available argument, succeeded on the basis that, in effect, building a house is a ‘professional service’.