“I’m not paying you if that grain catches fire!”
An ethanol manufacturer stored grain at a refinery. An insurance policy obliged the insurer to indemnify the manufacturer.
The policy had exclusions for “spontaneous combustion… spontaneous fermentation or heating or any process involving the direct application of heat”: [4]
One morning, smoke was detected in one of the refinery’s bays. Emergency services attended, found a “burnt smell” in one bay, and significant damage in two others. These discoveries led to destruction of the relevant stockpiles.
The manufacturer made a claim.
An expert concluded the damage was caused by “self-heating”: [11].
This turned the parties’ attention to the exclusions. There had been negotiation between the parties before they entered into the policy, including re the exclusions: [20].
The Court counselled caution when applying the contra preferentum rule as there had been negotiations: [32]. The manufacturer noted the referee could not point to the cause of the self-heating, which might (or might not) have been rain.
The Court found the lack of precision about the cause of self-heating was not doubt that self-heating occurred: [36] to [38]. The manufacturer’s appeal was dismissed. The insurer did not have to pay out.
Pretty lit!
