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Policy interpretation comes down to the “natural and ordinary meaning”

A recent judgment from the Victorian Supreme Court’s Insurance List, Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420, provides a succinct summary (and helpful refresher) of the principles to be applied when interpreting a policy of insurance.

The case concerned the interpretation of a soil movement exclusion in a Home Building Insurance policy providing cover for a range of insured events including storm. A storm caused heave of the clay soil beneath the foundation slab of a building. This resulted in lifting of the home’s slab, walls and roof frame, which in turn resulted in cracking and other consequential damage.


It was necessary for the Court to determine whether “heave”, which was accepted to mean the upward movement of the earth supporting a building because of the expansion of clay soil, fell within the natural and ordinary meaning of the soil movement exclusion. The exclusion stipulated there was no cover for:

    “damage, loss, cost or liability caused by or arising from or involving:

  • erosion or washing away of soil, earth or gravel,
  • the washing away or movement of the surface of any path or driveway which has a surface consisting of a loose material such as gravel, stone or dirt,
  • soil movement or settlement,
  • subsidence or landslide unless caused by the insured event of earthquake, …”

It was concluded that, in the context of the policy as a whole, the natural and ordinary meaning of the soil movement exclusion is that damage to the building caused by any kind of soil movement is excluded. “Heave” was found to fall within the natural and ordinary meaning of the soil movement exclusion and the insurer had reasonable grounds to rely upon the soil movement exclusion to decline indemnity for rectification cost claimed by the insured.