An interesting case in Australia has reaffirmed that the phrase “wear and tear” in an insurance policy refers to damage caused by ordinary or normal loss. ‘Wear’ is concerned primarily with the result of using of the item. ‘Tear’ relates to the impact of ordinary causes such as weather on the item.
The insured leased a trucking depot to a third party company for a substantial annual rental. The premises included a hardstand area adjacent to a warehouse that had a load-bearing rating of 40 tonnes. The owner’s agent told the tenant it could not use its container forklift (with a potential weight in the order of 100 tonnes under load) on the hardstand because that would cause it to fail. Despite warnings, the forklift was used on the hardstand for unloading containers for eight months. The hardstand was damaged due to the weight of the container forklift and the insured claimed under its policy. The industrial special risks policy insured physical loss, destruction or damage not otherwise excluded. It excluded wear and tear. The insurer contended that, because the damage occurred by reason of the persistent use of the forklift over a period of eight months, the wear and tear exception applied.
The court rejected the insurer’s contention after analysing a number of definitions of wear and tear in dictionaries and previous decisions. Wear and tear is damage due to or sustained during ordinary usage. The court applied principles of interpretation that the words contained in a policy must be given a businesslike interpretation and their ordinary meaning should prevail unless the context requires otherwise. There was no contextual reason in the policy for giving the phrase a meaning other than its usual meaning. Both components of the phrase wear and tear were held to be concerned with the consequences of ordinary not extraordinary damage.
On the facts the court found that the operation of a massively overweight container forklift on the hardstand over a period of eight months despite warnings not to do so could not objectively be described as ordinary use. Because the damage was not caused by ordinary use, it was not wear and tear and the insured succeeded in its claim.
The court also found that a ‘reasonable precautions’ clause does not only apply to liability policies but also applies to policies of property insurance. The phrase does not exclude liability under the policy if the insured is negligent. Recklessness is required.
If you want to look at the case, google it under JSM Management Pty Ltd v QBE Insurance (Australia) Ltd [2011] VSC 339.
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