R & B DIRECTIONAL DRILLING PTY LTD (IN LIQUIDATION) V CGU INSURANCE LTD (NO 2)

[2019] FCA 458, Federal Court of Australia, Chief Justice Allsop, 5 April 2019

Insurance (liability) - Defective installation of metal sleeve allowed concrete to penetrate conduits for cables - Whether physical damage to metal sleeve - Exclusion for property under assured's control - Exclusion faulty workmanship - Exclusion for assumed liability

R & B was appointed as subcontractor for work on a substation. It was appointed to install under a railway line a 650 mm steel sleeve to carry five conduit pipes for cables. After the installation, concrete was to be pumped into the void in the sleeve. Unfortunately, while the concrete was being pumped in, concrete entered into one of the conduits, rendering that conduit useless. It proved necessary to remove the hardened concrete and the five conduits, leaving the steel sleeve undamaged, and then to repeat the work. A claim was made against R & B for the repair costs. R & B was insured by CGU against liability in respect of "property damage ... happening during the period of insurance within the territorial limits as a result of an occurrence in connection with your business or products". The term "property damage" was defined as: "(a) physical injury to or loss of or destruction of tangible property including loss of use of that property at any time resulting therefrom; (b) loss of the use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by physical damage or destruction of other tangible property". The policy excluded "Property damage to property owned by or in the physical or legal control of an insured person". It also excluded "The cost of performing, correcting or improving any work undertaken by an insured person". There was no cover for any liability or obligation assumed under contract except to the extent that it would have arisen by operation of law.