Abstract

Defective workmanship - Application of Liability Insurance Cover - Relevant Exclusions

 

Article

There is a difference between on the one hand a contract whereby the insured promises to produce a product or perform a service for a customer, and his negligent performance causes the customer loss when use is made of the work, and, on the other hand, a contract whereby the insured promises to produce a result in which he uses the product of his own work, the negligence of which results in the non-performance of the promised result. The distinction is implicit in Delta Pty Ltd v Team Rock Anchors Pty Ltd [2017] QSC 115.

An example of the former is an insured’s provision of a negligent engineering design which the customer then uses in its own work and suffers damage to his work or other property and consequential loss as the result of the defective design.  The customer may recover for such loss in respect of the diminished value of his work and/or any other harm done by reason of the defective design. Such claims are properly within the scope of Liability insurance. Cover is engaged if the claim goes beyond the insured’s mere non-performance of his contractual obligation.[1]  

The comparable example of the other is the insured’s contract to produce a completed work which include the design, so that the defective work from the defective design does not amount to performance of that contract. The cover for this is not of the nature of Liability insurance. The difference is between liability for causing harm and liability for mere non-performance of the contract.

The distinction is analogous to the difference between the insured's liability for defective work under a contract whereby the defect causes harm to the other contracting  party's other propertyor work, and the insured's liability for breach of contract when no such harm is caused and liabillity is confined to the other contracting party's economic loss arising oout off the simple non-performance of the contract which results in that party's not receiving that for which payment was made. The latter is not covered by Liability Insurance. It is a simple business risk, and Liability cover would encourage non-performance of contracts on the bsis that the liability would be covered. This does not apply to unexpected further harm,which is within the general cover of Liability Insurance.

(Similar to this would be a claim by the customer in the first scenario, confined to mere financial loss from the inadequacy in value of the design for which consideration was paid, which merely arose from non-performance of the contract. For clarity of discussion, that will be disregarded.)

In the latter case, the loss from the defective design is suffered by the insured himself as a business risk in that it adversely affects his performance of his obligations under the contract for the work.  His liability lies in contractual non-performance only and any loss from it falls upon him in that he loses the financial benefit of the contract.  The loss is not suffered by the third party, who still has his contractual entitlement either to refuse payment or to be compensated for the financial consequences of the non-performance.

However, even in this latter case,the distiinction is manifested in the situation in which the insured’s non-performance of the contract causes independent harm to the third party by way of personal injury, damage to other property, or even independent economic loss. This is within the scope of Liabillity insurance, but the need of the added factor and the difference in the nature of the third prty’s remedy demonstrate the distinction.

The scope of Liability insurance is confined to liability for causing harm to a third party and not for the insured’s mere liability for failure to meet his contractual obligation. In the theoretical example given above, the third party’s claim arises not from harm caused by the defective work but from the non-performance of the contract.

If the loss flowing from and act, such as negligent design, fall on the insued alone, it cannot be a ‘wrongful act’ within the meaning of the insuring promise of a policy since it must cause compensible harm to a third party in order to be wrongful.  Further, such an act is not non-performance of the contract.  Non-prformance consists of failure to provide the finished product in connformity with the contract.

This characterisation is directly analogous with defective work in the performance of a contract, when Liability insurance does not provide cover unless the defect causes harm to the third party other than the mere non-performance of the contracted work. See Derrington & Ashton  - The Law of Liability Insurance 3^rd ed 8-36 et seq. Another example would be the insured’s failure failure to provide supervision and maintenance services during a running-in period, if that were required by the contract, resulting in a claim by the other contracting party for its costs of remedying the omission, though no other damage were sustained.  The insured’s loss from liability for failure to perform the contractual obligatioin which it had assumed could not be part of the cover of Liability insurance.  This may be contasted with the position where, for example, the insured’s omission causes physical harm to the other’s separate property, in which case the policy would apply, subject to its terms and conditions.

If the insured wished for protection against this loss, he could purchase suitable first party insurance cover for his unsuccessful performance of the contract. (That is not a Performance Bond by which the other party to the contract is to be indemnified by the insurer for loss due to the non-performance, but some courts refer to a Performance Bond in this context in order to demonstrate its difference from Liability insurance.)

There is a good reason for the distinction as to the nature of the claim which is to be covered by Liability insurance. It is understandable that it is not intended to be a warranty for the insured’s performance of his ordinary contractual business obligations, the breach of which causes only economic harm in that the third party does not receive the economic benefit of the contract.^[2] It is not intended to cover him against his liability for providing defective work or products in breach of a contract if the loss arises purely from the inadequacy of his performance of his obligations .

For example, refusing or withholding of transport promised under a charter does not come within such cover because the harm is simply economic loss arising out of mere non-performance of an obligation. However, there are difficult areas within a twilight zone and the controversy is always resolved by the construction of the policy’s language. General principles of law control, but by their contract the parties make the law as to their rights and obligations inter se, and essentially the determination of what loss is covered by a policy must depend on the true construction of their insurance contract rather than on any overriding principle of law.^[3]

In its application, the nature of the injury and the risk which caused it are determinative.[4] The purpose and intent of Liability insurance are to protect the insured from liability for essentially accidental harm to another’s person or property rather than to provide cover for disputes relating to a contractual undertaking as to contractual rights.[5] It is not intended to cover simple non-performance of a promise to render some benefit, where the non-performance causes some economic harm to another party.[6] Cover of his liability for simple breach of contract would allow him to choose to take a risk for which he knows he has indemnity if his choice is wrong.[7]

Some jurisdictions suggest that Liability Insurance cover is engaged only by tortious liability or tortious liability that is the result of breach of a contract[8], and that there is a presumption against cover of liability for economic loss for breach of contract, but if the facts that produce the insured’s liability are tortious in nature, the issue of cover is not affected by the fact that a breach of contract is also involved.[9] The cause of action pleaded does not affect this since it is the nature of the insured’s actions in producing liability, namely, causing harm by a wrongful act, or a mere non-performance by an act or otherwise, that is relevant.[10] The economic loss doctrine goes to the issue as to remedies available between the primary parties which determines how a loss can be recovered, and not to the issue of cover of a claim for simple economic loss, which will be determined by the language of the policy[11], though it should be construed in the light of the purpose and nature of the insurance.

Breaches of contract in respect of defective work or products are not, and cannot be, automatically excluded from coverage in all types of insurance policies simply because they are usually excluded in Commercial General Liability policies, which require a causing of loss, rather than by the mere tendering of a non-performing work-product. But even extended cover will not protect a breach of a contract into which the insured enters after the indemnity contract, or the formal insurance contract goes into effect, or for damages arising from a delay, or by his failure to perform a contract or agreement in accordance with its terms. The question of cover must still be decided on the basis of the particular policy provisions.[12] There is a suggestion that the cover applies to such loss if it is caused by the faulty workmanship of a sub-contractor[13], but this is not correct since the cause of action against the insured is still his failure to perform his obligations under the contract.[14]

This alone should defeat any such claim to indemnity under Liability insurance, but as a matter of caution and for clarity insurers often add a ‘belt and braces exclusion relating to liability arising under a contract.  This should be read in the context of the whole of the policy, particularly the general insuring promise, and the general commercial context and purpose of this form of insurance.  It is trite that the broad general promise is modified and shaped by exclusions and conditions so they should be read together.

More specifically, as to an exclusion, the court should be wary of finding ambiguity by reference to the expression as in a stand alone provision, without first looking at the whole of the context for permissible aids to construction through its text and purpose.[15] It runs the danger of creating ambiguity where there is none.[16] Thus, an exclusion relating to liability arising from a contract should not be analysed alone and without regard to the nature of the loss referred to in the insuring promise and to the nature and purpose of Liability insurance generally as distinct from insurance of performance.

Perhaps more importantly, and having regard to the clear approach of the High Court as to the construction of exclusions, the clarity of its clear language should not be read down.  There seems to be little reason why an exclusion of a claim arising out of a contractual obligation should not encompass liability arising simply out of non-performance of a contractual obligation.  The usually broad scope of the nexus, árising out of’,  emphasises the point.

These principles were not applied in Aquagenics (in liq) v Cert U/writers at Lloyd's NCP106108663 [2017] FCA 634; (2017) ANZIC 62-138, affd Certain U/writers at Lloyd's v Aquagenics (in liq) [2018] FCAFC 9.  The claim against the insured was simply for damages for breach of a contract to construct and provide a water treatment plant for the claimant or for a debt created by the contract in certain circumstances arising out of non-performance of the contract.  The breach and cause of  action was simply non-performance and rights flowing from it, and the award against the insured was simply for the third party’s costs of completing the work which was to be performed by the insured under the contract.

The contract work involved the exercise of professional expertise, and it was in its inadequacy in that respect that the product failed to conform to the contracted result because of the insured’s failure to conclude satisfactory pre-commissioning of the plant, and had breached its design and construction obligations. So, as the Court logically found, there was conduct of a professional nature. It was wrongful in that it produced a result that did not conform to the insured’s contractual obligations, but it was upofn the insured the loss from this cause fell because the third party retained its contractual rights or compensation for breach of them. The issue was necessarily whether it was a wrongful act of a professional nature which was covered by the policy.

Pertinent to this is whether the insured’s covered liability was for the wrongful act or for its failure to provide a product in accordance with the contract. The insuring promise read: “we agree to pay on your behalf all sums which you become legally obliged to pay (including liability for claimants’ costs and expenses) as a result of any claim … arising out of any wrongful act committed by you or on your behalf in the course of your professional activities.”  This requires that the claim should arise out of the wrongful act, in other words, whether the claim for breach of the contract arose out of the wrongful act.

In a way there would here have been no breach of contract but for the wrongful act, but a ‘but for’ nexus is not sufficient to establish the causal factor, albeit remote, necessary to the ‘arose out of’ nexus. The claim arose out of the non-performance of the contract and in a sense it might be said that this arose out of the wrongful act.  While this nexus used is very broad, it is sometimes limited by other factors, such as context.  In this case, it should be limited by the basic nature of Liability insurance, which is not intended to cover the business risk involved in the performance of a contractual obligation to provide a product or service. In the result, the claim did not arise out of the wrongful act, so that it was not within the insuring promise.

Virtually every breach of a commercial contract ex hypothesi involves a wrongful act.  To hold that a claim for a simple breach of contract arises out of a wrongful act within the meaning of this typical policy would mean that such Liability insurance covers the insured for any omission to perform a contractual obligtion.  If this is so, its business absurdity would strongly suggest an alternative construction.

The courts concentrated on the meaning of wrongful act without considering whetherit had the necessary relationship to the claim. They cited Derrington & Ashton on The Law of Liability Insurance 3^rd ed in support of the principle that the policy’s reference to a ‘wrongful act’ extends to deliberately wrongful conduct. They also cited it where it continued: But while an act that amounts to a breach of contract may come within the cover if it causes harm, the same reasoning does not apply to the insured’s liability under the contract to meet an obligation that is established by the contract or undertaking without any wrongful act or negligence. A claim by beneficiaries under a benefits plan for an acceleration of benefits in accordance with its established practice is not a claim alleging a wrongful act. The absence of any reference to negligence in the definition of “wrongful act” does not alter this.
Further, a simple breach of the insured’s contracted obligation to pay money is not the source of the liability to which the cover applies, even if it were to come within the description of the definition. This is not the form of liability that is addressed by a liability insurance policy. However, they did not discuss this.
The policy also contained an exclusion for any claim arising directly or indirectly from any liability that the insured assumed under an … agreement … unless such liability would have attached to [the insured] notwithstanding such … agreement.  It was held that the exclusion did not apply because the liability was imposed by law for breach of the agreement. With repect, this result is in error on both counts.

Liabillity for simple non-performance of a contract without more is not liability for a wrongful act in this context.  The insured’s liability is due to the claimant’s not receiving what was promised and paid for, not for loss caused to it because of the insured’s wrongful act in producing a defective design. The cover of the policy was confined to liability for the wrongful, nnot for non-production of a result which the insured was paid to produce.   This distinction is in line with the reasoning extensively followed as explained above, and is adveted to in a passage from Derrington & Ashton on The Law of Liability Insurance 3^rd ed, cited in the judgment, which however did not advert to this issue.  See also paras 8.6 & 8.37 of that work.

Instead of being read within the context of the nature of the policy and in harmony with the insuring promise so that together they would clarify the limitation on the insuring promise and the significance of the exclusion, the exclusion was read in isolation and found not to apply.  But apart from that, the rejection of the exclusion was defective One ground of the trial court decision was that the liability was imposed by law.  That is irrelevant.  The exclusion applies to liability  for any claim arising directly or indirectly from any liability that the insured assumed under an agreement.  The insured assumed the liability to perform its contract, and the claim arose, a very broad nexus, arose from the assumption of that liability to perform.

The exclusion would not apply if the insured’s libility had been incurred by a wrongful act of a professional nature other than the non-performance of the contract. It applies only to liability assumed by the insured by the insured. Having found that the liabililty was incurred by reason of a wrongful act of a professional nature, the appellate court logically found that the exclusion did not apply.  The issue turns on whether the covered liability was incurred, as distinct from mere non-performance of a contractual obligation.  The court found that this turned on the terms of the pol icy.

The original judgment sought support from an argument that damages for non- performance of a contract are confined to the cost of completion, whereas the relevant contract permitted further consequential damages. First, this fails to recognise that the measure of damages is variable according to the agreement of the parties to the contract, as in this case. Secondly, the issue is irrelevant since, properly  read, the exclusion applies to all liability provided that it arises from the assumed liability to perform the contract, and is not limited to the measure of damages that might usually apply. The claim arose totally from the assumed liability to perform the contract.

It also contended that the insured did not, by agreement, assume a liability more extensive than the limit of the ordinary liability otherwise imposed by general law. But the assumption of an obligation to perform contractual obligations is more extensive than the ordinary liability otherwise imposed by general law. It is enforced by law only because the insured has assumed it, in contrast with the general law’s imposition of liability for harm done otherwise than through the assumed liability, for example, liability in tort or contract for harm other than that arising from the assumed liability.

There are other ways in which liability may be assumed by contract, and more particularly by the insured’s contractual assumption of the liability of another for that other’s wrongdoing, or the contractual assumption of lliability to indemnify that other for its liability arising from its wrong.  These are obviouscases where the insurer would ordinarily be unwilling to provide cover by Liability insurance.  But the same can be said of the insured’s assumption of liability from the business risk of performing a service or providing a product when the loss from non-performance would contractually fall upon it. That the broad words of the exclusion which are sufficient to encompass this risk do not apply to it requires an a priori assumption that for some reason they are limited to the other areas of application which,with respect, has no apparent justification.  It also fails to advert to the reasonableness of such an exclusion, since it is hardly commercial that General Liability Insurance should cover an insured against  loss from ordinary business risks.  

It is true that liability arising from the assumption of liability to perform a contract is more oblique than the direct assumption of the liability of another to an injured party, since non-performance is required before liability in damages is payable. But the exclusion merely refers to liabillity arising out of a contract, and the nexus has a very broad scope. A claim for statutory contribution falls within a statute limiting compensation payable by a party in an action “to recover damages or compensation in respect of personal injury”: Unsworth v Commissioner for Railways (1958) 101 CLR 73. So is liability for contractual damages whose measure is the liability to pay tortious damages for the same injury: QBE Underwriting Ltd as managing agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd [2018] NSWCA 55.

It is true that in Zurich Australian Insurance v Regal Pearl at [117]-[118], Spigelman CJ, discussing an exclusion similarly worded to cl 7.6, save that it referred to liability accepted by the insured, said: “The commercial purpose of providing cover against risks in a product liability policy should, absent clear words to the contrary, be understood to encompass the range of obligations normally associated with such liability in Australian law. The wording of the policy presently under consideration does not contain any clear words to the contrary.
The use of the words ‘accepted by’, where twice appearing, together with the reference to any such contract ‘requiring acceptance’ indicates that something distinctive and out of the ordinary, by way of additional liability, must arise before the exclusion clause takes effect. The implied terms of merchantable quality and fitness for purpose with respect to product liability are so common that only clear words will be found to exclude them in a policy purporting to give cover for product liability. Clause 12(b) does not contain any such clarity.”

This was cited in QBE Underwriting Ltd as managing agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd (supra) to the same effect.  However, in both cases, the claim against the insured was for tortious harm causing independent harm through its omission to perform its obligations under its contract.  That is not the same as a claim against the insured for the claimant’s simple financial loss for the depleted value of the product or services promised by the insured under the contract through the insured’s non-performance of its contract without other consequential harm.  If the claimant’s claim against the insured were merely for damages for want of value received because of a defect in the quality of the product or services, the insured’s business risk in failure to meet its contractual obligations is not within the risk covered by Liability insurance, and the insured’s assumption of its liability to perform its contract could well be within the ordinary meaning of the language of such an exclusion in its usual form, particularly if it refers to liability ‘arising out of’ a contract.

Exclusion - Contractual Assumptionof Liability

Reference was also made in the triial judgment  to Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328 at [103][117], but it is distinguishable on many grounds. Those issues are outside the scope of this discussion. In that case, the Court referred to the variability of the application of this exclusion according to its varying text and context, which were very different from hose in Aquagenics.

At the appeal, the rejection of the exclusion was based on the following reasoning: Senior counsel accepted that reliance on exclusion 6 would fail if the Court was of the view (as we are) that there was a claim, during the policy period, for a wrongful act committed in the course of professional activities. Exclusion 6 was said to apply if the liability was in connection with an obligation to produce compliant works within a contract price. We are of the view that for the reasons we have given the liability should not be so construed. Since the Court held as it did on the primary issue, its decision on the effect of the exclusion followed the concession of the insurer’s Senior Counsel.

The above approach,that it is not the purpose of Liability insurance to cover the insured’s common contractual business risks, is inherent in Impact Funding Solutions v IAG Insurance (2017) AC 73 (SC). It must be acknowledged that the terms of the exclusion and the relevant circumstances were different, but the approach of the intermediate appellate court, that it was significant that the insured’s liability was incurred through a wrongful act in the coourse of its insured business, was overruled.

It is true that the most obvious application of the exclusion is in circumstances where the insured is primarily not liable but assumes it, asin the case of assuming the liability of another person who is the wrongdoer; but this does not justify denial of its application to other forms of assumption of liability which comeswithin the clear and broad  language which is used and which conform to the naturallimitation on Liability Insurance cover - that it is not a guarantee of performance of a contract.

It has been said that in respect of an exclusion as to any liability or obligation assumed by an insured under any agreement or contract excect to the extent that the liability or obligation would otherwise have been implied by law, if the claim relates to the results of the insured’s defective workmanship in the performance of a contract, it is arguable that the liability or obligation is not one which is assumed by it under their agreement within the meaning of the Policy, but that arguably, the exclusion covers liability assumed by explicit and voluntary act and that in such a case the liability is imposed by law as a consequence of the breach of the agreement; Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328. A fortiori, if the claims are not only contractual.

With respect, it may be arguable that the first proposition is tenable, but it would not be correct. A Liability insurance policy does not cover the insured’s ordinary business risks, including faulty workmanship which does not harm other property, and this exclusion fortifies that position. If as in Regal Peal the exclusion is defeated because the insured’s liability is imposed by law for breach of contract, that would apply to any contractual assumption of liability since the obligation to perform it would be imposed by the law, and the exclusion would have nno work to do. If an insured assumes a liability to perform work, the law’s opertion is merely to enforce his assumed liability.

An exclusion as to the cost of performing, correcting or improving any work undertaken by an insured does not apply to the amount claimed if it is not the cost of performing, correcting or improving work undertaken by the insured because that work had already been done and was of no value, and the claim is for the cost of new work in its place; Graham Evans & Co (Qld) Pty Ltd v Vanguard Insurance Co Ltd & Ors (1986) 4 ANZ Ins Cas 60-689; [2015] EWCA Civ 176; [2017] NSWSC 579; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusions - Defective Workmanship

In respect of a claim agaiinst the insured arising out of defective workmanship under a contract for the application of a product to a structure, anumber of exclusions may be put in issue.

An exclusion in respect of property damage to products if the damage is attributed to any defect in them or to their harmful nature or unsustainability will not apply if the damage is not damage to a product. For example, in the case of the application of an epoxy coaating to a well, the well itself is unlikely to be construed as a product and the cause of the damage claimed may be attributable not to the epoxy coating product, but its faulty application: Aspen Insurance UK Ltd v Adana Construction Ltd [2015] EWCA Civ 176; [2017] NSWSC 579; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.I

An exclusion concerning loss of use of tangible property which has not been physically injured, or lost or destroyed resulting from a delay in or lack of performance by or on behalf of an insured person in relation to any contract or agreement; or the failure of the products to meet the level of performance, quality, fitness or durability expressly or implied, warranted or represented by an insured person is not triggered by a claim which is not for loss of use and it is not a claim resulting from delay, or, possibly,if it is not a loss resulting from lack of performance, as opposed to defective performance, or is not a loss resulting from failure of the product to meet performance criteria; Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2013] FCAFC 130; (2013) 305 ALR 412; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

In respect of a Product Efficacy exclusion, excluding cover of liability arising from the failure of products to meet the level of performance, quality, fitness or durability expressly or implied, warranted or represented by an insured person, it is arguably inapplicable if the damage was not the result of the failure by the product to meet the said standard, but by the insued’s defective workmanship in using it; Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336; [2017] NSWSC 579; M(2013) 305 ALR 412; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

An exclusion in respect of any products warranty or guarantee given by you or on your behalf does not apply to a claim based upon the failure of contracted work dueto defective workmanship in the application of a product: (2013) 305 ALR 412; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Product Efficacy Exclusion

It is arguable that a Product Efficacy exclusion does not apply if the damage to property which is the subject of the claim was not the result of the failure by the product to cure, alleviate, monitor, detect or retard, within the meaning of the policy, but by the insured’s defective workmanship in its application: Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Contractual Liability

In respect of an exclusion of any liability or obligation assumed by an insured person under any agreement or contract excect to the extent that the liability or obligation would otherwise have been implied by law, it is arguable that the insured’s liability or obligation for breach of a contract to perform work is not one which is assumed by it under the agreement within the meaning of the policy. Arguably, the exclusion covers liability assumed by explicit and voluntary act as distinct from the liability is imposed by law as a consequence of the breach of the agreement; Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328. A fortiori, if the claims are not only contractual.  As to the first proposition, the better argument is that the claim is only the enforcement of the liability which was contractually assumed by the insured. In any case, Liability insurance does not cover the insured’s simple non-performance of a business contract unless it causes harm to the property of another. See Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion - Damage to products

In respect of an exclusion of any liability for property damage to the insured’s products after is has ceased to be in his possession or under his control if the damage is attributed to any defect in them or to their harmful nature or unsustainability, it may be arguable that it does not apply if the damage is not damage to a product, and if the cause of the damage was arguably attributable not to the product, but its faulty application; Aspen Insurance UK Ltd v Adana Construction Ltd [2015] EWCA Civ 176; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion - Cost of Performing, Correcting or Improving Work

It may be arguable that the amount claimed is not the cost of performing, correcting or improving work undertaken by theinsured if it had already been done and was of no value, and the claim was for new work in its place; Graham Evans & Co (Qld) Pty Ltd v Vanguard Insurance Co Ltd & Ors (1986) 4 ANZ Ins Cas 60-689; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion – Claim for Loss of Use or Resulting from Delay.

The claim must be for loss of use or resulting from delay, and may not be a loss resulting from lack of performance rather than defective performance; and it may not  be a loss resulting from failure of the product to meet performance criteria; Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2013] FCAFC 130; (2013) 305 ALR 412; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627. This has been discussed above in relation to the Product Efficacy Exclusion.