Wear and tear

Property and other first party covers generally exclude liability for loss caused by wear and tear. In JSM Management Pty Ltd v QBE Insurance (Australia) Ltd [2011] VSC 339 the Supreme Court of Victoria has decided that that phrase is to be given a narrow meaning, applying only to losses which are ordinarily the result of use or natural forces. Extraordinary losses are within the scope of cover.

JSM: the facts

JSM was the landlord of a trucking depot, which it had leased to GLP for a period of five years commencing 27 October 2007, at an annual rental of AUS$1m. The lease required GLP to keep the premises in the same condition as at the start of the lease, subject to fair wear and tear. The premises included a hardstand area adjacent to a warehouse. GLP had been advised by JSM that the hardstand had a load-bearing rating of 40 tonnes and that it would not be able to use its container forklift (potentially weighing 100 tonnes). GLT ignored that advice and the forklift was used on the hardstand over a period of about eight months. The evidence showed that JSM had been fully aware of what had been going on and could, had been so inclined, terminated the lease or addressed the issue in some other way. In the event, the hardstand was damaged by reason of the use of the forklift. That raised the question of the insurance.