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The insuring clause of a policy covers any unforeseen and sudden physical loss or damage caused by;

(f) subsidence, landslip, rockslide or any other movement.

The same policy excludes - loss or damage or expense caused by gradual deterioration.

The policy does not define subsidence.

The Oxford English Dictionary describes subsidence as 'the gradual caving in or sinking of an area of land'.

An insurer is attempting to decline a claim for subsidence by suggesting it is gradual rather than sudden, but the definition of subsidence is gradual deterioration.

Does the insuring clause override the exclusion, or vice versa?

Crossley Gates replies...

The interpretation contended for by the insurer fails the business efficacy rule of contract interpretation. That rule says there is a presumption against an interpretation of a contract that renders part or all of the benefit of the contract completely redundant. No businessman would pay something for nothing.

Clearly, the policy is intended to cover damage caused by subsidence. An interpretation of an exclusion that completely removes that cover will not stand. A court will likely hold that the exclusion does not apply to that cover so that the policy has business efficacy.

March 2024

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