The insured company make “tilt panels” on construction sites. Tilt panels are horizontal concrete slabs that will eventually become walls of a building. To make a tilt panel, the company pours concrete into a framework that is lying on a foundation slab. Once the concrete has dried, a crane lifts the panel off the slab and into a vertical position.
One crucial element of tilt panel construction is making sure that the panel comes away from the foundation slab, undamaged. The company normally achieves this by painting a release agent on to the slab before it pours the concrete. Unfortunately, during a job in January 2017, light rain washed away or diluted the release agent. When it came time to lift eight tilt panels, they stuck to the slab. All eight were damaged; four were unusable. The slab was also damaged.
The company made a claim with its insurer for around $33,000.
THE INSURER’S VIEW
The insurer declined the claim based on an exclusion clause that said the policy did not insure property in the course of construction or installation or erection.
THE COMPANY’S VIEW
The company complained to FSCL. It said that demoulding the tilt panels from the slab and the framework is part of the manufacturing process, rather than the construction process. It also said that the tilt panels were at that stage not ready for installation/erection.
FSCL REVIEW
We noted that the insurance policy did not define the words “construction” or “installation” or “erection”. In interpreting this policy, we had to consider the normal (dictionary) meanings of the words. We also noted that dictionary definitions of “manufacture” supported the company’s view. Manufacturing is making something from raw materials. The “something” that is manufactured is a discrete element that will be used/incorporated as part of an overall construction (such as the putting together of a building).
We considered that the manufacturing process was at an end (meaning the construction/installation/erection process began) once the tilt panels were complete. In our view, the tilt panels were not complete until they had been demoulded and released. They could not be used in the construction, or installed or erected, until then. Until they were demoulded and released, they were still in the manufacturing phase.
OUTCOME
We issued a notice of recommendation, upholding the company’s complaint. The insurer accepted our interpretation of the wording of the insurance policy. The insurer reassessed the insurance claim and agreed to pay.
KEY INSIGHTS
From time to time, we are called upon to interpret the wording of insurance policies. It is important that the wording is precise. Important words should be defined, particularly if the insurer thinks they should have a slightly different meaning from the normal dictionary meaning.
One crucial element of tilt panel construction is making sure that the panel comes away from the foundation slab, undamaged. The company normally achieves this by painting a release agent on to the slab before it pours the concrete. Unfortunately, during a job in January 2017, light rain washed away or diluted the release agent. When it came time to lift eight tilt panels, they stuck to the slab. All eight were damaged; four were unusable. The slab was also damaged.
The company made a claim with its insurer for around $33,000.
THE INSURER’S VIEW
The insurer declined the claim based on an exclusion clause that said the policy did not insure property in the course of construction or installation or erection.
THE COMPANY’S VIEW
The company complained to FSCL. It said that demoulding the tilt panels from the slab and the framework is part of the manufacturing process, rather than the construction process. It also said that the tilt panels were at that stage not ready for installation/erection.
FSCL REVIEW
We noted that the insurance policy did not define the words “construction” or “installation” or “erection”. In interpreting this policy, we had to consider the normal (dictionary) meanings of the words. We also noted that dictionary definitions of “manufacture” supported the company’s view. Manufacturing is making something from raw materials. The “something” that is manufactured is a discrete element that will be used/incorporated as part of an overall construction (such as the putting together of a building).
We considered that the manufacturing process was at an end (meaning the construction/installation/erection process began) once the tilt panels were complete. In our view, the tilt panels were not complete until they had been demoulded and released. They could not be used in the construction, or installed or erected, until then. Until they were demoulded and released, they were still in the manufacturing phase.
OUTCOME
We issued a notice of recommendation, upholding the company’s complaint. The insurer accepted our interpretation of the wording of the insurance policy. The insurer reassessed the insurance claim and agreed to pay.
KEY INSIGHTS
From time to time, we are called upon to interpret the wording of insurance policies. It is important that the wording is precise. Important words should be defined, particularly if the insurer thinks they should have a slightly different meaning from the normal dictionary meaning.
