By Ninsiima Irene
Advocate and legal consultant with M/s Angualia Busiku & Co. Advocates www.lawyers-uganda.com
The insured under a contract of insurance is entitled to be indemnified against loss that he suffers, at the time of effecting the policy, the risk insured must be the kind of risk the law envisages as one entitling the assured to be indemnified. Insurance provides cover against uncertainties/contingencies only. The subject of insurance must be the risk of a fortuitous loss. If the risk is certain, it cannot be the subject of insurance. Therefore there is a limit to all risks, it does not cover mere wear & tear because it is inevitable that it will happen, the natural behavior of the subject matter cannot be an uncertainty. Risk also does not include what the assured has himself caused-because he has injured the goods himself. Thus if the assured is seeking an indemnity, he must not have caused the injury himself. It is the duty of the assured/plaintiff to prove his case i.e. he must establish that the loss comes within the terms of the policies.
Therefore for every right he will claim under indemnity, there is a corresponding duty on the assured to prove his case. Where “all risk” are covered by the policy and not merely risks of a specified class or classes, the plaintiff discharges this special onus when he has proved that the loss was caused by some event covered by the general expression; and he is not bound to go further and prove the exact nature of the accident or causality which in fact occasioned the loss.
Nature of a fortuitous risk at common law
At common law the leading case on the nature of fortuitous risk is the House of Lords decision in British & Foreign Marine Insurance Company v Gaunt the facts of this case are that the plaintiff had insured wool which was to be transported from sheeps backs, trans ocean to Europe, and the policy covered all risks by inland damage or water right from the sheeps back station up to the ware house in Europe. On arrival the bales were found seriously injured/damages by water and evidence showed that the wetting took place after shearing and before the bales were put on board the ocean steamer. However, there was no specific evidence to show how the wetting took place, in the court of 1st instance the learned judge was of the view that the damages was by the wet and there was no evidence of any casualty causing the wetting so as to make the policy attach.
On appeal to the court of appeal this decision was overturned and no further appeal to the House of Lords; the court of Appeals decision was upheld.
Rowlat J in the Court of 1st instance had held that the whole evidence was consistent with the goods having been injured “without the interaction of anything fortuitous or anything which could be called a casualty within the meaning of the insurance contract. That the policy insured the assured only against risks and any evidence which does not show that the damage was due to something fortuitous doesn’t support the case when the underwriters are sued.
In overturning his decision, the master of Rolls said“ I think he treated the policy too much as one against specific perils in which it is necessary to prove specifically that the logs came within one of them and did not give sufficient attention to the fact that this was a policy of an unusual kind against “all risks” and that it was sufficient to show that the loss was occasioned by a casualty or something accidental without proving further in what the exact nature of the casualty consisted.
Viscount Finlay, held that there was sufficient evidence to justify the inference that this loss was due to something accidental, that due to some accidental circumstance may be by some want of care on the part of the men whose duty was to keep the goods covered or some other circumstances incidental to the journey, the goods were left uncovered when it was raining, thus the goods were damaged by risk covered by the policy, by accident or casualty without any willful misconduct on the part of the assured; that there is no justification in saying that in order to recover under such policy for the damage resulting in the goods being wet by rain, it had to be shown that there was an extra ordinary or unusually heavy fall or rain; it would be enough, if due to some accidental circumstances (as given above) the goods were left uncovered when rain was falling.
Lord Sumner; concurred with the above conclusions but added that all risk whatsoever means that there must be a casualty, that the argument of the appellants was that getting wet, when not under cover is not a thing that will happen to bales whenever it rains & therefore was not a loss arising from an “ unusual cause or casualty:- he disagreed with this & said that wear and tear, leakage and breakage generally arise not as sea perils but that all risks includes the risk that when it happens to be raining the men who ought to use the tarpaulins to protect the wool may happen to be neglecting their duty and such occurrence is fortuitous and was the cause of wetting in this case. Thus for wool to get wet in the rain is a casualty, though not a grave one, it is not something that is intended but it is accidental. That if a casualty was fortuitous it need not be a calamity. It is something which injures the wool from without, it is not from within, it would not happen at all if all men employed attended to their duty.
He went on to say that there are of course, limits to “all risks” the expression does not cover inherent vice or mere wear and tear or British capture. It covers a risk not a certainty. It has to be something which happens to the subject matter from without not the natural behavior of that subject matter nor does it cover a loss which the assured brings about by his own act. For then he has not merely exposed the goods to the chance of injury, he has injured them himself.
Lastly; that the description “all risks” does not alter the general law that only risks are covered which are lawful to cover.
Lord Birkenhead L.C held that in the construing policies, it is important to bear in mind that they cover “ all risks”. That these words of course, cannot be held to cover all damages, however caused, for such damage as is inevitable from ordinary wear and tear and inevitable depreciation is not within the policies.
Quoting the decision of Walton J in Schloss Bros v Stevens that all risk by land and water as used in the policy was intended to cover all losses by any accidental cause of any kind occuring during the transit. There must be a casualty. That damages covered by policies as these must be due to some fortuitous circumstance or casualty i.e. the risk must be that caused by anything fortuitous or anything accidental or anything called a casualty.
He went on to say that the damage/ loss occuring in this case as proved, did not occur and could not be expected to occur in the course of a normal transit and thus the inference remains that it was due to some abnormal circumstances, some accident or causality.
He expressed that court must given effect to the rule that the plaintiff must prove his case i.e. he must establish that the loss comes within the terms of the policies. However, where all risk are covered by the policy and not merely risks of a specified class or classes, the plaintiff discharges this special onus when he has proved that the loss was caused by some event covered by the general expression; and he is not bound to go further and prove the exact nature of the accident or casualty which in fact occasioned the loss. In this case; the respondent established that the loss must have been due to some casualty and consequently he was entitled to recover.
To what extent is unexpected or unintended loss/damages fortuitous?
The extent to which an unintended loss ia fortuitous or accidental was discussed in the case of Brenan a.k.a Marchildon- Smith v Economical Mutual Insurance Company . Here the claim by the insured, a landlord who had insured his premises let them to tenants who burned wax candles in there for 15 months which caused soot to be deposited on the walls. The insured’s’ claim under the policy for any loss occuring to the property failed because the loss was not fortuitous in the words of Whalen J; he said that the source of the damage was the deliberate lighting of wax candles by tenants and the depositing of the soot a natural phenomenon of burning wax. It was a certainty that soot would be produced and deposited on the wall as a natural consequence of burning wax. The production and deposit of soot from burning candles was not in any way accidental, it was an inherent and inevitable result.
Though the damage was not deliberately caused by the insured this was not in issue and fortuity can not exist where the insured has purposely caused the loss and could not aid the insured at all, that landlords must accept that tenants will use the leased premises, they will tread upon carpets, scuff paint surface & leave a variety of marks of use, such use is deliberate and expected by both land lord and tenant, and it would not be commercially sensible and it would give the insured land lord a windfall.
Insurance policies are typically renewed on a year to year basis, in the case of liability insurance many years can elapse between the insured’s accidental negligent conduct and a plaintiff suffering injury, loss or damage which of these does the policy regard as the “accident”, “the cause” or “the effect”?
The case of Pick Ford Black Limited V Canadian General Insurance Company discussed this. in that case, the insurer agreed under the policy to pay the insured sums which the insured would be legally obliged to pay for bodily injury, sickness or disease sustained by one or more person or caused by accident while at or about the work of general stevedoring but not any claims arising or existing by any accident occuring outside the dominion of Canada & the United States of America. The accident happened at sea during the shifting of the cargo, beyond the territory of Canada and United States, but the cause of this started with the negligence at the dockside within the territory while stowing the cargo at Halifax.
The trial judge held the insurers liable on ground that the accident took place where the chain of causation started but not where the event occurred; so as to bring the claim within the ambit of the policy. The trial judge was of the view that the interpretation to be given to the word “accident” in the policy, was the meaning to be given governed by where the chain of causation began which led to the accident but not the happening or the event. In this case the accident took place during /at the time of the shifting of the cargo, however the causation was the negligent act of stowage- this is where the chain of causation begun which led to the happening of the accident.
However, Ritchet J departed from this argument; that to construe the word accident in this manner would be to rob the word accident of its natural and ordinary meaning by interpreting it as connoting not the accident but the cause of the accident. That the policy was not concerned with the “cause of the accident” but the place where the accident “occurred”.
That the fact that an accident has occurred which could have been avoided by greater care or diligence does not automatically take it out of the range of accidents, it does not have to be an inevitable accident, that “negligence” and “accident” in such cases are not mutually exclusive they may co-exist.
From whose point of view is the fortuitous nature of the event to be judged? Is it objective or subjective, standard?
This was discussed in the case of Campagnie Des Bauxites De Guinee V Insurance Co of North America.6 The plaintiff company (CBG) filed a suit against its insurers to recover for business interruption losses arising from various casualties at its bauxite mining and processing facility in the Republic of Guinea. The issue was whether the insure could recover in respect of business interruption caused by structural failure of its tippler building and crusher house. The cause of the damage was that the engineers had not followed the right specifications. The insurers denied liability on ground that insurance covers only risks not certainties, their argument was that the design failures made the failure inevitable thus this event was not fortuitous. The district court held that loss arising from an unknown design defect was not caused by a fortuitous event.
On appeal the issue was whether a loss caused by an unknown design defect was fortuitous?
It was held that the definition of a fortuitous event is that it is an event which so far as the parties to the contract are aware is dependent on chance. It may be beyond the power of any human being to bring the event to pass; it may be within the control of a third person, it may even be a past event, such as a loss of a vessel provided that the fact is unknown to the parties. Something in the nature of an accident or something unplanned and unintentional.
An assured cannot claim indemnity for loss arising out of Intentional acts and intentional harm: This is sometimes called “Courting the risk”:
If a risk arises out if the foreseeable result by an insured engaging in an inherently dangerous activity, such a loss can not be covered by insurance. In the case of Crisp v Delta Tile & Terrazo Co. & Great American Indemnity Company (third party)7 The plaintiff contracted the defendant to build a terrazzo floor in the basement of his property; the defendant had a supervisor who did not supervise his men during the grinding of concrete and so as such the dry grinding was done carelessly without sealing off the rest of the rooms of the plaintiff’s house from the basement, a lot of dust infiltrated the rest of the rooms; the plaintiff asked the defendant to report the matter to the defendants insurers; the defendant did not ; he brought his action against the defendant who was held liable to pay damages to the plaintiff , the defendant then sued his insurers to be
- 724 2d 369 1983 US App Lexis 14225
- 1960) O.J.No 438 (Ot.co.Co?)
indemnified against that liability to the plaintiff, the defendant was only covered against liability for accident.
The issue was whether the loss/damage was an accident? The trial judge held that the defendants were entitled to recover because what happened was an accident within the meaning of the policy, however on appeal by the insurers, the court of appeal overturned this decision and held that there was no accident within the meaning of the policy, that what happened was a natural, foreseeable and probable consequence of the defendants acts. That the defendants should have foreseen that such natural & probable consequences would ensue because the defendant or his workmen on the evidence had actual knowledge of what would happen if precautions which they failed to take were not taken. There was in this sense a deliberate courting of the risk with knowledge of the risk, there was an element of reckless conduct in the sense that they could not have cared whether or not the dust damage would ensue when they proceeded in the way they did with the knowledge which they had. The third party’s appeal was allowed.
Important to note is that the evidence was clear that the defendant & its workmen employed to grind the Terrazzo knew beyond any doubt what could be expected by any reasonable person with respect to dust permeating the house if inappropriate measures were taken to seal off the house and no such precautions were taken.
In the case of Trynor Construction Co. Lt V The Canadian Surely Co. The respondent’s claim was against the appellant insurers in respect of a motor vehicle (tractor) insurance against direct & accidental loss or damages from any peril except by collision with any other object. The damage happened when a bridge over which the motor vehicle was being driven collapsed. The issue was whether the damage was accidental, in other words, was the collapse of the bridge an accident? It was held that a word accident or accidental when used in a policy, has no “technical” or “restricted” “insurance meaning” that such words must be given their ordinary meaning. That accident has been defined in the case of Claxton v Travellers Insurance Company of Hartford and by other authorities to be the unusual and unexpected result attending the performance of a usual and necessary act. It is an unexpected event which happens as by chance or which does not take place according to the usual course of things. Any event which takes place without the foresight or expectation of the person affected by the event; or is an unusual effect of unknown cause and therefore not expected.
Quating Greenway v Saskatchewan Governmental Ins. Office9 he said that the word “unexpected” or a accident refers to an unlooked for mishap an untoward event which is not expected or designed, something fortuitous and unexpected, something brought about by chance, something which is not the reasonably foreseeable consequence of the insured’s act.
Citing Couch on Insurance10
“In other words, an accident is an undersigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated and not naturally expected”.
“meaning of accident” “……it covers any unlooked for mishap or an untoward event which is not expected or designed or any unexpected personal injury resulting from any unlooked for mishap or occurrence”
Citing Marshall Wells of Canada Ltd v Winnipeg & Fuel Co. Ltd where it was stated that the word accident is not a technical legal term with a clearly defined meaning, speaking generally but with reference to legal liabilities, an accident means any unintended and unexpected occurrences which produces hurt or loss.
He then concluded that from theses authorities, the element of unexpectedness is the principle and over riding element that must be present before one can say that there has been an accident and that the test to apply in determining whether an event was unexpected is whether or not it was the reasonably foreseeable consequence of the act of the person to whom it happens.
That the case of Crisp v Delta Tile & Terrazzo Company is an example of an occurance which was held not to be an accident because the damage in respect of which the action was brought
9 (1967) 59 W.W.R 673 10 Vol 105 41:6.
11 3rd Edition Vol.22 P. 294
was foreseeable beyond doubt. That the importance of the Crisp case is that it puts into category what is reasonably foreseeable mishap caused not only by persons who know what the result of their actions will be but who also deliberately court the risk with knowledge of the risk and with reckless conduct on their part. That it is the deliberate courting of the risk and the reckless conduct which preclude recovery or indemnification.
That on the strength of these authorities, the damage to the tractor was accidental. That the collapse of the bridge was unexpected, an unlooked for mishap, fortuitous and un designed. That the driver did not know what would happen and there was thus no deliberate courting of the risk or an element of reckless misconduct. Of course there was an element of risk in what he did, the decision he took was wrong but this was just an error in judgment rather than a deliberate courting of risk and his conduct fell short of being reckless misconduct. The decision to cross over the bridge was only taken after an inspection of the structure had been made and looked alright.
Just how cognizant of the risk of harm may an insured be before the loss is judged not to have been fortuitous?
It must be an unlooked for mishap or occurance-but not a calculated risk. In the case of
Canadian Indemnity Co. (Third Party) & Appellants & Walkem Machinery V Washington Iron Works & Arrows Ltd, the insured, claiming indemnity knew that it was dangerous to leave an unsupported hot water tank but still did it any way, which was the cause of the injury. In such a case; this could not be regarded as an accident covered by the policy.
Where a policy does not cover “international” acts of the insured does this extend to both intentional and reckless acts?
In the case of Co-Operative Fire & Casuality Company, Edmond Saindon V Armnad Sirois13it was stated that an act or omission which involves a calculated risk or amount to a dangerous operation from which injury or damage results is not done or omitted with intent to cause the injury or damage in the absence of a specific finding that there was such intent
The facts of this case were that the insured intentionally raised a lawn mower up to the face of the plaintiff to scare him having regard to the fact that the blades of the lawn mover were whirling , the act likely to cause injury and in that case reckless. The exclusion of the insurer’s liability was expressed as applying only “to bodily injury or personal damage caused intentionally by or at the direction of an insured.” It was held that the evidence did not support a finding of fact that the respondent intended to cause the injury (whereas he intentionally raised the mower to the face of the plaintiff, he did not have the intention of causing injury). That the original raising of the lawn mower as itself was not enough to establish intention to cause the injury.
In this case several American Insurance cases in line with this view were cited in support of courts decision
- Lumbermen’s Mutual Co. v Blackburn a case where a rock was thrown at a boy by one of his schoolmates and it caused injury for which damages were recovered. Thereafter a suit was brought against an insurer of one of the defendants under a home owners policy which like the present one contained an exclusion clause “bodily injury or property damage caused intentionally by or at the direction of the insured”, it was held that the exclusion did not apply because under it there must be an intention to inflict actual injury, that the intention must be to commit the injury –not just an intention to throw a stone.
- Vermount Mutual Insurance V Dalzell where the state court of appeal considered a claim against an insurer arising on the facts that a pumpkin was thrown at a passing vehicle with the result that the wind shield shattered and serious injuries were sustained by the motorist. It was held that the insurer could not properly invoke an exclusion clause, like the one above; that there was no evidence of intention to injure at most there was only an intention to frighten.
- A similar decision was reached in an earlier case of Morrill v Gallagher where a lit fire cracker was thrown into a room occupied by the plaintiff in an attempt to frighten him but he suffered a hearing impairment and nervous disorder.
Thu, there is a distinction made between injury caused intentionally and injury cause recklessly as brought out by the above cases
In every indemnity contract of insurance, the risk covered must be a fortuitous risk, it must arise from an unintended harm, accident or casualty or unlooked for event. The duty of the assured is to prove that the loss is one of such a nature, in case “all risks” are covered, all he needs to show is that the loss was due to an accident or something fortuitous and does not need to show what exact type of risk it was. However the assured cannot recover in respect of loss arising out of his intentional and deliberate acts because in such a case there is a deliberate courting of the risk.
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