IFSO Case Study

A client held vehicle insurance with the insurer for his tractor. He made a claim, because a clutch circlip dislodged inside the tractor and became caught in the tractor’s transmission, requiring nearly $18,000 of repairs.

The insurer declined the claim, because the policy excluded loss to the engine or transmission systems of the vehicle.

His broker argued that the damage was covered, by the policy’s extended cover for loss resulting from “entanglement, ingestion, or entry of any foreign object into [the tractor]” (“the ingestion clause”). He believed that the circlip was foreign to the transmission and the policy did not specify that a foreign object must come from outside the vehicle.

The case manager’s assessment

The broker provided an example of another policy wording, which specifically stated that the foreign object must be extraneous and foreign to the vehicle. He believed that the ingestion clause should be interpreted in his client’s.

The case manager considered the principles of construction and did not agree that the interpretation of the ingestion clause was unclear, considering the natural and ordinary meanings of the words.

The ingestion clause covered damage caused by the entanglement, ingestion or entry of any foreign object into the tractor. The circlip dislodged internally, which meant it came from inside the tractor. The case manager also considered the dictionary definition of “foreign” in the Shorter Oxford English Dictionary (5th edition) (“the dictionary”), which included, “[a]lien in character; extraneous, dissimilar …”.

On the basis of the dictionary definition, the case manager believed that, in order to be considered “foreign”, the object must be external to and not part of the tractor. Although the circlip may have been foreign to the tractor’s transmission system, it was not foreign to the tractor.

The claim was for damage caused by a mechanical failure inside the tractor; it was not caused by ingestion or entry of any foreign object into the tractor and the insurer was not required to pay the claim.

Sept 2019

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