Factual and Procedural Background
In 1990, the Respondent, hereafter “Company B,” purchased a dilapidated 12-unit apartment building in The City with the intention of renovating and re-letting it, including adding a third storey. In July 1992, Company B’s representative (“Respondent’s Representative”) sought insurance coverage from the Appellants (“Company A”). Company A’s local agent (“Appellants’ Agent”) declined to insure the unoccupied building itself but recommended a Contractors All Risks (“CAR”) policy for the renovation works. Company B accepted this advice, and a CAR policy with a B$700,000 sum insured (for “Item 1 – Contract Works”) was issued on 31 July 1992, effective from 27 July 1992 for one year.
On 3 December 1992, the building suffered extensive fire damage. More than four years later, in February 1997, Company B commenced proceedings claiming the full B$700,000 under the policy. At first instance, Judge [Evans] held that (i) the pre-existing building itself was not insured under the CAR policy and (ii) the policy was not a valued policy, requiring Company B to prove its actual loss, which it had not done. The Court of Appeal of The State reversed both findings. The present judgment arises from Company A’s further appeal to the Judicial Committee of the Privy Council.
Legal Issues Presented
- Whether the pre-existing building (as distinct from the renovation “Contract Works”) was covered by the CAR policy issued to Company B.
- Whether the CAR policy was a “valued policy,” thereby fixing the loss at B$700,000 irrespective of actual damage, or merely set a maximum sum insured, obliging Company B to prove its actual loss.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Rowlinson Construction Ltd v Insurance Company of North America (UK) Ltd [1981] 1 Lloyd’s Rep 332 |
Contractors All Risks policies insure “contract works,” not pre-existing structures, unless expressly stated. |
The Board adopted this reasoning to conclude that Company B’s existing building—like the retaining wall in Rowlinson—was outside the definition of “Contract Works” and therefore uninsured. |
Court's Reasoning and Analysis
1. Interpretation of the Policy. The Board noted that Item 1 of the schedule insured only the “Contract Works,” expressly defined as renovations to the 12-unit building. The permanent works were covered only until occupation or certification, and Exception 9 excluded damage to any portion of the permanent works already taken into use. A pre-existing structure not being rebuilt is neither permanent nor temporary works; therefore, it falls outside the insured property.
2. Relevance of Extrinsic Evidence. The Court of Appeal had relied on pre-contract discussions and the magnitude of the B$700,000 figure to infer that the building must have been insured. The Board held that where contractual language is clear, such extrinsic material is inadmissible or, if admissible, irrelevant. Significantly, the Appellants’ Agent had refused to insure the unoccupied building, reinforcing the written contract’s scope.
3. Valued Policy Argument. Although unnecessary given the first conclusion, the Board addressed the issue to clarify the law. A valued policy fixes loss at an agreed value; a stated “sum insured” merely sets a ceiling. In a CAR context—where the value of works fluctuates—an agreed value is impractical. The policy contained no language converting the B$700,000 limit into an agreed value, and clause 5 required the insured to particularize the amount of each loss item, confirming an indemnity framework.
4. Procedural Delay. The Board expressed concern that thirteen years elapsed between writ and trial, observing that such delay is incompatible with the interests of justice and should be mitigated through active case management procedures.
Holding and Implications
HOLDING: Appeal ALLOWED; the order of Judge [Evans] reinstated, dismissing Company B’s claim.
Implications: The decision re-affirms that CAR policies cover only contract works as defined, not existing structures, absent explicit wording. It also clarifies that a stated “sum insured” is not an agreed or valued amount unless unequivocally expressed. While the ruling turns on established principles, it serves as authoritative guidance on policy construction and underscores the judiciary’s disapproval of prolonged litigation delays.