In a lawsuit filed against a local insurance company regarding property damages caused by a typhoon, Kim & Chang served as the counsel to an insurance company (the “defendant”) and secured a partial victory for the defendant, specifically with respect to the interpretation of a Property All Risk Cover clause in a comprehensive property insurance policy¹.

The plaintiff had subscribed to the defendant’s comprehensive property insurance policy (the “insurance”) to cover potential property damages to the plaintiff’s factory and machinery within the factory.  When the typhoon caused property losses (the “accident”), including displacement of, and damages to, some of the factory pillars and roof monitor, among others, the plaintiff claimed that all risks emanating from the factory, including the accident, had to be covered by the insurance even if there had been some latent construction defects in the building, such as poorly bolted pillars.  Insisting that although costs to repair the latent defects may be excluded from coverage, damages such as pillar displacement should still be covered in accordance with the “ensuant damages” clause that effectively limits the scope of exclusions, the plaintiff claimed against the defendant damages caused by the displacement of the pillars of the factory building, leakages in the roof and damages to the roof monitor.

The insurance provides that under the “Property All Risks Cover” clause, “sudden and accidental direct physical destruction of or damage to the property . . . directly and wholly attributable to any cause, except as hereinafter provided” is covered, but exclusions include “the cost of replacing, repairing, or rectifying defective parts, materials, workmanship, design or defect or omission in design or specification or latent defect.”  The core issues of this lawsuit were: (i) whether the coverage should extend to “damages from any cause that does not fall under any of the exclusions” or be limited to damages “directly and wholly attributable to any cause,” and (ii) whether the displacement of the factory’s pillars was “directly and wholly” attributable to the typhoon.

We crafted detailed legal arguments on proper interpretation of the insurance policy by thoroughly researching and analyzing diverse authoritative sources and foreign case laws on the interpretation of the “Property All Risk Cover” clauses in comprehensive property insurance policies.  In addition, after carefully examining the facts in the root-cause analysis report that was prepared immediately after the accident, we successfully petitioned for additional court appraisals on the disputed causes of the loss and also supplemented and reinforced expert evaluation reports along with cross examinations of expert witnesses.

As a result, the expert appraiser confirmed that the displacement of the factory’s pillars was not “directly and wholly attributable to” the typhoon.  Further, we were able to obtain for our client a favorable court ruling that the coverage of the “Property All Risks Cover” in this insurance was limited to the damages “directly and wholly attributable to” the typhoon, and therefore, damages from the displacement of the factory’s pillars were not covered by this insurance.