Civil Appeal no: HBC 327 of 2009: Abbco Builders Limited v New India Assurance Company Limited

Key points

When construing the meaning of a contract, the intention of the parties is of primary importance. The intention of the parties is determined objectively from the language used in the context of the contract.
When claiming under an insurance contract, it is important that the insured prove the quantum of damages claimed by furnishing documentary evidence. If the quantum of damages cannot be specified, damages cannot be awarded.

Facts

Abbco Builders Limited (the plaintiff, Abbco) entered into a contract of insurance with New India Assurance Company Limited (the defendant, New India). Abbco alleged that New India wrongfully repudiated Abbco’s claim under the insurance contract. The claim related to water damage to a retaining wall, which led to its collapse. New India’s position was that the damage to the retaining wall was due to a flood, an excluded peril under the insurance policy. New India declined to indemnify Abbco for the collapse of the retaining wall. Issue

The main issue before the Court was whether the damage to the retaining wall was caused by flood or through runoff surface water hitting the retaining wall. If the damage was caused by flood, the defendant would not have wrongfully repudiated the contract. In order to determine whether the damage was due to flood, the Court needed to determine the meaning of the word “flood” in the context of the insurance contract. The Court examined a variety of case law that defined “flood” and the factual considerations that the court would need to take into account when determining whether damage was caused by a flood.[1] Held The Court applied section 29 of the Insurance Law Reform Act 1996, which outlines the rules of construction for insurance contracts. S29(a) states that the intention of the parties, ascertained from the face of the documents, prevails. The Court found that in this case the source of water was natural and external. It was accepted between the parties that the rain fall on the day of the incident was unusually heavy. There was a very high volume of water which resulted in the collapse of the retaining wall, but the area that went under water was comparatively small. As a result, the court found that the damage was not caused by flooding, and therefore was covered by the insurance agreement. New India had therefore wrongfully repudiated the contract. However New Inida argued that Abbco failed to prove the amount claimed as damages. Abbco had no documentary proof of the expenses incurred; this was important here because the wall had not been completed at the time it collapsed. Because Abbco could not give a detailed account of the expenses incurred as a result of the damage, their claim for damages was dismissed. In summary: The Court found that the defendant wrongfully repudiated the contract; the damage caused to the wall was not due to flooding, and therefore the insurance contract applied. However, because the plaintiff failed to prove the quantum of damages claimed, Abbco’s claim for damages was dismissed. Counsel for the defendant, Feizal Haniff, is one of the founding partners of Haniff Tuitoga, a member of Pacific Legal Network. Feizal has extensive commercial litigation expertise, and may be contacted at feizal.haniff@hanifftuitoga.com.fj for any inquiries. [1] Such considerations include a) whether the source of water was external or internal; b) whether the source of the water was external or internal; c) the quantity of water; d) the manner of its arrival; e) the area and character of the property on which the water was deposited; f) whether the arrival of water was an abnormal event. The Board of Trustees of the Tate Gallery v Duffy Construction Ltd (2007) EWHC 361. Disclaimer The information set out in this article is a general guide only about the laws in Fiji and is not intended as specific legal advice.