Exclusion Clauses considered by Court of Appeal: Persimmon Homes & Ors v Arup [2017]
Further to recent cases like Zurich v Maccaferri [2016], the Court of Appeal has provided additional guidance on the proper interpretation of limitation and exclusion clauses in insurance contracts.
The Court of Appeal has upheld two exclusion clauses in favour of the defendant/respondent engineer. The wording of the exclusion clauses was sufficiently clear to demonstrate the risk allocation agreed by the parties; accordingly, neither the contra proferentem rule nor the Canada Steamship principles would allow the claimant developers to interpret the clauses in such a way as to exclude liability. This decision is the latest in a recent line of authority from the Court of Appeal (and higher courts - see Impact Funding v AIG) in relation to the proper interpretation of limitation and exclusion clauses.
In commercial contracts to which UCTA does not apply there is a growing recognition that parties should be free to allocate risks as they see fit, and limitation and exclusion clauses should be interpreted in accordance with the natural meaning of the words used, not more widely.
In the context of major construction contracts: “…Exemption clauses are part of the contractual apparatus for distributing risk. There is no need to approach such clauses with horror or with a mindset determined to cut them down. Contractors and consultants who accept large risks will charge for doing so and will no doubt take out appropriate insurance. Contractors and consultants who accept lesser degrees of risk will presumably reflect that in the fees which they agree.”
The Canada Steamship principles now have limited effect in relation to the interpretation of exclusion clauses.
For more on this, please see the full article on elexica.
