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Australia: Insurance coverage for 'property damage' caused by affixing combustible cladding

Courts have long grappled with the question of whether incorporating defective materials into property is 'property damage' for the purpose of an insurance policy. Helpfully for contractors and property owners, the Federal Court of Australia in The Owners – Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3) [2023] FCA 814 held (albeit on an interlocutory basis) that in the circumstances of this case the affixing of combustible cladding onto buildings caused 'property damage' for the purposes of the relevant insurance policy. The decision is helpful for policyholders seeking coverage under property or liability insurance policies that are triggered by 'property damage' in circumstances where defective materials are incorporated into otherwise undamaged property.

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