The High Court recently considered an insurance claim for a collection of 30 Lladro porcelain pieces, depicting vintage cars and other figures, that were damaged in the February 2011 Canterbury earthquake. The Lladro pieces were valuable, with their replacement cost amounting to a startling $210,065.
The insured held contents insurance. The policy provided limited cover for works of art. Works of art were defined as including ornaments and sculptures. The policy specified that the most the insurer would pay for works of art was $5,000 per item, but not more than $20,000 in total for any one event, unless the works of art were specified on the policy schedule.
The insured did not specify the Lladro pieces on the policy schedule.
The main issue for determination in Newbery v AA Insurance Ltd ( NZHC 2457) was whether the Lladro pieces were ornaments and/or sculptures under the definition of works of art. The insured argued that the Lladro pieces should be covered for their full replacement value as they fell into the broad scope of contents under the policy, rather than the limited categories of works of art. He argued that neither of the words 'ornament' nor 'sculpture' accurately described the Lladro pieces and they should instead be described as 'figurines'.
The Judge noted that the subjective interpretations of the words 'ornament' and 'sculpture' were irrelevant in defining the ordinary meaning of a word within a policy. He instead considered whether a reasonable insurer and a reasonable insured would understand the terms 'ornaments' and/or 'sculpture' as referring to the Lladro pieces.
The Judge heard evidence from experts with relevant knowledge in art collection and valuations as to the common use of the words ornament and sculpture within the art world.
The Judge construed the meaning of the word 'ornament' in broad and general terms. He disagreed with the insured's suggestion that an ornament represented a small item or trinket of lower value, or something akin to bric a brac. He instead determined that an ornament includes an item that has no practical use, but which is owned and on show for display because of the value which the owner places on the appearance and design of the item.
The Judge found the meaning of the word 'ornament' was so broad that even if the Lladro pieces were described as figurines, as the insured contended, they would still fall within the definition of 'ornament'. As ornaments, the insured's claim was subject to the sub-limit for works of art of $20,000 in total.
This decision is a useful reminder of one of the principles of policy interpretation that words used in a policy are interpreted objectively, not subjectively through the eyes of the insured, and unless they are specially defined, the starting point is to give them their ordinary dictionary meaning.
If you have any questions, or require further information regarding any aspect of this update produced by Solicitor Zoë Bowden, please contact us.