Leeds Beckett University v Travelers Insurance Co Ltd [2017] EWHC 558 (TCC) – accidental damage, gradual deterioration, and faulty or defective design

In Leeds Beckett University v Travelers Insurance Co Ltd [2017] EWHC 558 (TCC), [2017] Lloyd’s Rep IR 417, [2017] Bus LR 2022, the Court had to decide whether catastrophic damage to a building was ‘accidental’ and therefore within the insuring clause of a property policy, and (if so) whether such damage was excluded from cover on the grounds that it was caused by or consisted of ‘gradual deterioration … its own faulty or defective design or materials’. Coulson J’s decision is considered by Alison Padfield of 4 New Square.


The judgment runs to 292 paragraphs, much of which is taken up with factual matters, and the judge recorded his surprise, given the amount of evidence that was called at trial, that the proceedings had been started under CPR Part 8, on the basis that no evidence was required to determine the claim.

Happily, a lengthy rehearsal of the findings of fact – interesting though they are – is not required in order to understand the judge’s reasoning. In short, the University built a new accommodation block on a site shared with an old brewery building. Ordnance survey maps over a period of 80 years had shown a watercourse which ran under the new building. Fifteen years later, cracks appeared overnight in the internal leaf of a wall, and it was discovered that concrete blocks which supported the building at one end had been subject to water containing sulphates running under the building and had turned to ‘mush’.

The judge found that it was:

entirely predictable that, unless the old watercourse (and the springs that fed it) was dealt with in a proactive and sensible way, there was always going to be a significant problem with groundwater flowing against the inner leaf of the eastern wall where the old watercourse had once run’ (paragraph 173).

He then summarised the position (at paragraph 198):

The exposure of the blockwork to the leaching and sulphate attack that arose from the constantly flowing water reduced the blockwork of the inner leaf of this large wall to a mush. That was an extremely unusual event: indeed, a number of the engineers who were involved had not seen that phenomenon before. However, it is easy to see why this case was so unhappily unique: those same engineers had doubtless not seen a building built across an old watercourse, with springs known to arise in and around the footprint of the building, with no plan or design to deal with either.

Even more succinctly, as one of the engineers retained to advise insurers after the cracks had appeared said to another in an internal email: ‘Would you build over a stream?


The policy provided cover for damage to the property insured, and defined ‘damage’ as ‘accidental loss or destruction of or damage’. The judge briefly reviewed the authorities on the meaning of ‘accidental’ in the context of insurance, and held that, because the flowing water ran up against the relevant blockwork from completion in 1996, and in consequence the leaching and the sulphate attack progressively weakened the structural strength of the concrete blocks until they failed in December 2011, the collapse was inevitable at some point during the period of insurance. The review of the case-law was somewhat cursory. For example, the judge referred to C A Blackwell (Contracts) Ltd v Gerling General Insurance Co [2007] EWHC 94 (Comm), [2007] Lloyd’s Rep IR 511, in which he said the court left open the question of whether the defence of inevitability advanced by insurers required the peril inevitably to occur at the particular time that it did occur, or whether it was enough that the event would be inevitable at some point during the period of insurance. This summary suggests that HHJ Mackie QC had decided that in order for damage not to be fortuitous, it must at the very least be inevitable during the period of insurance. In fact, HHJ Mackie QC rejected insurers’ submissions on fortuity as too restricted and their assumptions about what was inevitable as not supported by the evidence, and simply accepted that the damage caused by the incidents in question was fortuitous (this issue was not considered on appeal in the Gerling case: [2007] EWCA Civ 1450, [2008] Lloyd’s Rep IR 529).

The judge’s decision

It is inherent in the judge’s remarks that if the collapse was inevitable but not necessarily during the period of insurance, this would not be sufficient for the damage not to be accidental. This is a question which will obviously depend on the facts, but it seems unlikely that there is a hard and fast rule to this effect. As the judge found as a fact that the damage was inevitable during the period of insurance, his remarks were to this extent obiter dicta.

Overall, the judge considered the scope of cover and the exclusions separately, and (at paragraphs 207 and 208) that the policy should be construed by applying the ‘ordinary rules of construction’ summarised by Lord Neuberger in Arnold v Britton [2015] UKSC 36, [2015] AC 1619. The better view might be that the damage was indeed accidental and therefore within the insuring clause, and that whether it was within the scope of the policy construed as a whole depended on the construction and application of the exclusion clauses: see Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57, [2017] AC 73 (Lord Hodge said at paragraph 7: ‘The extent of AIG’s liability is a matter of contract and is ascertained by reading together the statement of cover and the exclusions in the policy. An exclusion clause must be read in the context of the contract of insurance as a whole. It must be construed in a manner which is consistent with and not repugnant to the purpose of the insurance contract’).


The judge went on to consider the application of the exclusions, in case he was wrong about the damage not having been accidental (and his remarks in relation to the exclusions were therefore all obiter dicta).  He held that the exclusion in respect of damage caused by or consisting of (amongst other things) gradual deterioration or faulty or defective design or materials applied, so that even if the damage had been accidental, the insured would not have been entitled to an indemnity. The judge also concluded that a proviso that the exclusion ‘shall not exclude subsequent damage which itself results from a cause not otherwise excluded’ did not apply, either because there was no subsequent damage, or (if that was wrong) because any subsequent damage resulted from gradual deterioration or by faulty or defective design, which were excluded.

Gradual deterioration

The judge rejected a submission that ‘gradual deterioration’ meant the deterioration of the thing itself, without any influence from an external source, concluding that deterioration inevitably involved an interaction between the property being insured and its environment or the circumstances in which it existed (on the facts, the circumstances in which it was designed and built). In reaching this conclusion the judge referred to the fact that ‘gradual deterioration’ was in a list which included ‘frost’ and ‘change in water table level’, which were classic examples of property being damaged by its circumstances and were not inherent in the property itself, and were instead part of the circumstances in which the property existed. This was an application by the judge of an established principle of construction which is sometimes referred to by the Latin phrase noscitur a sociis (which translates as ‘it is known from its associates’).

Otherwise, there was no dispute as to the meaning of deterioration, which was ‘the process of becoming progressively worse’.

As to ‘gradual’, the judge rejected a submission that this could be a speedy process which happened in stages, and said that it was intended to convey something which developed over time. In support of this construction, the judge referred to Burts and Harvey Ltd v Vulcan Boiler and General Insurance Co Ltd [1966] 1 Lloyd’s Rep 1, in which Lawton J, applying an exclusion for ‘gradually developing flaws and defects’ in a policy of insurance, said that it did not apply where a crack in the tube of a heat exchanger in a chemical plant allowed water to mix with a gas to form a very corrosive acid which then caused damage: the split in the tube was not a gradually developing flaw but a sudden breakdown. Coulson J said, apparently basing this on Burts and Harvey Ltd, that if ‘deterioration’ was itself progressive, because it took place over time, ‘gradual deterioration’ must mean a process that may go even more slowly. In fact, Lawton J in Burts and Harvey Ltd contrasted a sudden and dramatic event with a gradual one, and was not required to consider whether gradual might mean progressive but not necessarily over a long, as opposed to a relatively short, time.

Coulson J also referred to AMEC Civil Engineering Ltd v Norwich Union Fire Insurance Society Ltd [2003] EWHC 1341 (TCC), another case about concrete (the rusting of steel reinforcements in concrete blocks in a sea wall), in which HHJ Seymour QC construed ‘gradual deterioration’ in the phrase ‘wear, tear or gradual deterioration’ in an exclusion clause in a policy of insurance as meaning ‘a deterioration which is progressive by degrees, as opposed to sudden and catastrophic’.

Coulson J found that the deterioration of the wall had taken place over many years, and possibly over the lifetime of the building. The damage to the concrete wall was therefore not sudden, dramatic and catastrophic, and was a gradual deterioration. If therefore this had been accidental damage, it would have been excluded.

Faulty or defective design

Coulson J said that it was well-established that, in order to bring themselves within an exclusion such as that for faulty or defective design, an insurer was not required to demonstrate negligence or personal blame, and referred to Hitchins (Hatfield) Ltd v Prudential Assurance Co Ltd [1991] 2 Lloyd’s Rep 580; and that all that the insurer had to demonstrate was that the design was not fit for its purpose. The judge went on to apply that test, concluding on the basis of his earlier reasoning that the design of the groundwater drainage (and/or the designed interaction between the designed interaction between the drainage and the structure of the building) was unfit for its purpose, and was faulty and defective. He said that he was in no doubt that this was the insurer’s best point, and that, on his analysis of what had happened, ‘the proposition that the design was not fit for its purpose is unanswerable’ (paragraph 248). In case there were room for the smallest doubt at that stage about the strength of the judge’s views on this issue, he said that the building had been designed in a ‘particularly slipshod and ultimately calamitous way’ (paragraph 249); and that ‘[t]he over-arching problem with the design of the groundwater drainage system here was that, in many ways, there was simply no design at all’; ‘there was no strategic or proactive drainage design of any kind’ (paragraph 250).


Overall – and perhaps inevitably, given the extensive factual and expert evidence, the length of the judgment and the strength of the judge’s views as to what went wrong with the design of the building – there are areas where it would have been helpful to have greater analysis of previous case-law as it applied to the insurance policy wording. In construing and applying the exclusions separately from the insuring clause, the judge did not refer to the decision of the Supreme Court in Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57, [2017] AC 73 (see above). Nor did he consider the effect of the wording ‘caused by or consisting of’ in terms of the degree of causal connection required in order for the exclusions to apply. The judgment is nonetheless interesting, in particular as an illustration of the application of this type of exclusion clause. These and similarly-worded exclusions are frequently invoked by insurers in the context of property damage, but less frequently considered by the courts.

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