Catchwords

INSURANCE - GENERAL - POLICIES OF INSURANCE - CONSTRUCTION - respondent insured under an Industrial Special Risks Insurance Policy issued by the appellants - one of respondent's machines collapsed causing damage to machine and other machinery - parties in a statement of facts agreed the collapse of the machine was initiated by the final severing of an internal fatigue crack in a defective weld in one of the machine's undercarriage legs which was the result of faulty workmanship at the time of its original construction - policy of insurance contained 'Perils' exclusions - 'Perils' exclusions clause 4 included 'faulty workmanship' and 'gradual deterioration and developing flaws' - 'Perils' exclusions clause 4 contained proviso that 'this Exclusion ... shall not apply to subsequent loss, destruction of or damage ... occasioned by a peril (not otherwise excluded) resulting from any event or peril referred to in this exclusion' -

respondent applied for a declaration the appellants were liable to indemnify it under the policy for approximately $8M for the cost of repairing the machinery - primary judge found the application of the proviso did not require two separate causes and would apply where there was subsequent damage that was not excluded by a term of the policy other than 'Perils' exclusions clause 4 - application granted on two alternative bases - first that the damage was subsequent in time and effect to the failure of the defective weld and not otherwise excluded by the policy - second that if 'peril' were interpreted as 'danger' the damage occasioned by the faulty workmanship resulted in the peril that loss of structural integrity would lead to a failure of the entire structure and once that eventuated it caused subsequent damage not otherwise excluded by the policy - whether the primary judge erred in determining that the phrase 'occasioned by a peril (not otherwise excluded)' did not encompass the exclusions in the 'Perils' exclusions clause 4 - whether the primary judge erred in determining the meaning of 'peril' - whether there was subsequent damage to bring into effect the proviso to 'Perils' exclusions clause 4