SEELE AUSTRIA GMBH & CO V TOKIO MARINE EUROPE INSURANCE LTD

[2007] EWHC 1411 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Field, 21 June 2007

Insurance – Product liability – Insurance against damage caused by defects in property – Exclusion for damage deliberately inflicted to remedy a defect – Windows defective and leaked – Whether property damaged – Whether cost of removing cladding to repair windows recoverable under policy

Seele entered into a contract to design, procure and install roof glazing at a project in Paternoster Square, London. The work included the installation of “punched windows” in the spaces between vertical load bearing concrete columns and horizontal concrete floors. Following installation, cladding was inserted between the windows by a subcontractor. The windows once installed leaked, and it proved necessary to strip the cladding in order to resolve the problem with the installation of the windows. The employer sought damages of £1,237,709.48 representing the cost of removing the cladding and also loss by way of delay. Seele was co-assured under a Contractors’ All Risks policy which provided an indemnity against loss damage or liability with respect to “The whole of the works whether permanent or temporary including materials incorporated or to be incorporated therein and other things the property of the Insured or for which they are responsible.” Memorandum 18(1) covered loss or damage arising out of a defect in design plan specification workmanship or materials and provided indemnity for the cost of replacing or repairing any insured property. 18(2) covered insured property which was in a defective condition due to a defect in design plan specification materials or workmanship, and provided indemnity for insured property lost or damaged to enable the replacement or repair or rectification of insured property, but did not apply to other insured property free of defects which was unintentionally damaged. 18(3) indemnified the assured in respect of intentional damage necessarily caused to the insured property to enable the replacement repair or rectification of insured property which was in a defective condition. Field J held that there was no coverage.