Recent guidance from the Technology & Construction Court is worth keeping to hand for a rainy day.

No June on record has prompted more discussion on floods and flooding, particularly amongst insurers forced to mop up the damage. Yet until a recent and timely decision by Jackson J in the Technology & Construction Court (TCC), the meaning of the word “flood” has been surprisingly unclear.

The dispute in The Board of Trustees of the Tate Gallery v Duffy Construction Ltd & Anor1 arose from the Tate Gallery’s Centenary project, which included, inter alia, landscaping works at the Tate. The Tate’s trustees awarded the landscaping contract to Duffy. The contract required Duffy to maintain insurance cover of at least £5m against damage to the Gallery’s premises.

During the landscaping works, a flexible pipe was attached to a fire main water pipe to provide a water supply for the works. The main was subsequently damaged by Duffy’s piling subcontractor and Duffy and a subcontractor repaired it using a coupling and reducer to attach the main to the flexible pipe, and installing a valve to turn the water off.

Prior to the Easter weekend in 2000, the Construction Manager instructed Duffy to close the valve, which Duffy duly did. Over Easter, the coupling between the main and pipe failed, allowing water to escape and enter the Gallery, where it accumulated to 1.4 metres depth, causing serious damage. Insurers indemnified the trustees and sought to exercise their rights of subrogation against Duffy, claiming £5m damages.

The trustees’ policy was a “combined contract works and third party liability policy” taken out in 1998 before the contract with Duffy. Contractors as well as the trustees were insured under the policy and the insured property included “the works”. However, cover for contractors was restricted to “specified perils” including, “... storm, tempest, flood, bursting or overflowing of water tanks, apparatus or pipes …”. Duffy’s defence argued that as it was a co-insured, the trustees’ insurers could not bring a subrogated action against Duffy.

In a hearing of preliminary issues, the Court was asked to decide whether the damage was caused by a “specified peril” within the meaning of the policy and the contract, namely a flood or bursting or overflowing of water tanks, apparatus or pipes. Jackson J conducted a helpful review of relevant authorities, starting with Young v Sun Alliance & London Insurance Ltd2. Here, three inches of water gradually accumulating on the claimant’s downstairs lavatory floor from a natural water source was held not to be a flood.

The Court of Appeal, noting that the policy covered loss, damage or destruction from, “storm, tempest or flood”, cited the Oxford Dictionary definition of “a large movement, an irruption of water”. Lawton LJ observed that ““flood” in ordinary English is some abnormal, violent situation.”

Jackson LJ then considered the Court of Appeal’s judgment in Computer & Systems Engineering plc v John Lelliott (Ilford) Limitedi3 which resulted from the escape of 16,000 gallons of water after a subcontractor dropped a purlin which sheared through a pipe. Here, the Court held that damage from the escaping water was caused by “neither a flood nor a bursting of pipes or apparatus”. In the relevant contract (JCT 1980 Edition), “storm, tempest and flood” were followed by “bursting or overflowing of water tanks, apparatus or pipes”, which the Court decided justified a restrictive interpretation. Again, the Court regarded a flood as an invasion of property, “by a large volume of water caused by a rapid accumulation or sudden release of water from an external source”.

Perhaps more relevant to recent events is Rohan Investments Ltd v Cunningham4, also considered by Jackson J. Here, over the course of a fortnight, four inches of rain accumulated on the claimant’s roof and entered the house, causing damage. The claimant was abroad at the time. Notwithstanding the lack of evidence as to the means of water ingress, the Court found that the damage was caused by a flood. Auld LJ observed, “flooding may or may not result from such weather extremes. It may result from prolonged and steady rain and steady, slow build-up of water.” Whether there is sufficient water to constitute a flood was, he commented, is “largely a question of degree.”

Jackson J concluded that the earlier authorities did not provide rules of law as to the meaning of “flood” (or “burst”) in every policy or construction contract. He nevertheless derived four propositions relevant to interpreting the meaning of “flood” or “burst”:

1. Earlier decisions should be read having regard to

(a) the context in which the word(s) appear and

(b) the facts giving rise to the dispute.

2. Whether the arrival of water on property constitutes a flood the following are relevant:

(a) whether the source of the water was natural

(b) whether the source of the water was internal or external

(c) the quantity of water

(d) the manner of its arrival

(e) the area and character of the property upon which the water was deposited and

(f) whether the water was a normal event.

3. In determining whether a pipe or apparatus burst it is necessary to consider:

(a) whether it resulted from internal pressure rather than external intervention

(b) whether the integrity of the pipe or apparatus was broken and

(c) whether the incident was sudden and violent.

4. In construing “flood” or “burst”, the court should endeavour to “give separate content to each term or phrase used by the draftsman”.

In Duffy’s case, Jackson J held that the main and the flexible pipe coupled together constituted a pipe and that the coupling moving, forming an aperture, was a burst, notwithstanding that the movement may have been gradual. He concluded that not every burst pipe causes a flood, but in the present case, inundation to 1.4m depth did constitute a flood, although quantity is not the only determining factor. He said this process was analogous to the water ingress in Rohan and that it constituted an abnormal event. From now on, whether an event constitutes a flood is likely to turn on the application of the facts to the policy wording and/or contract, but Jackson J’s guidance is certainly worth keeping to hand for a rainy day.