C.A.R. Policy - Accidental and Unexpected Loss or Damage
In a recent judgement, CC 1076/99 Neve Ganetal et al v. Israel Phoenix Assurance Co. Ltd. et al , the Tel Aviv District Court ruled on the proper interpretation of an 'insured event' under a Contractors All Risk Policy.
In this case, the insured constructed a project comprising two buildings. After casting the roof of the second floor of the first building, it transpired that the structure had erroneously been erected about six meters away from its planned location.
The insured had to demolish the building and rebuild the entire project. This resulted in a significant delay in the completion of the project and substantial increase of costs. In addition, compensation to third parties had to be borne.
The policy defines an insured event as: '...accidental and unexpected physical loss or damage to the project or part thereof ...'
Accordingly, there are three cumulative prerequisites which had to exist in order for the loss to be considered as an 'insured event'.
(1) Physical loss or damage- the Court determined that although there was no damage to the building itself, nevertheless the decrease in the value of the project due to the error, the expenses which were incurred therefor, etc., should all be considered as 'damage' for the purpose of policy coverage. Moreover, the term 'loss' should be interpreted broadly enough to cover not only damage to the building itself, but also a decrease in the value of the property.
(2) Accidental- improper planning and faulty building cannot fall under the definition of accidental loss. The term 'accidental' refers by its very nature to a sudden event which is not a result of the natural sequence of events. Faulty workmanship cannot be considered as an accident.
3) Unexpected- Since it was determined by the Court that the occurrence cannot be regarded as accidental, accordingly, it was held that the above occurrence is also not an unexpected event.
In view of the above, the Court determined that the insured is not entitled to indemnification under the policy in respect of the losses sustained as a result of the error, and his claim under the policy was dismissed.
It should be noted however, that an appeal was filed to the Supreme Court on the District Court's decision, which is still pending.