Authored by Donald Dinnie.
In this US Court of Appeals for the Sixth Circuit judgment of May 2026, a fire had occurred during renovations to the insured building requiring it to be torn down. The cause of the fire was unknown.
The court refused to support the insurer’s denial of coverage because the insured had failed to build a fence around its property which was a construction job site.
The policy required a “Fenced Jobsite”. That phrase was defined to mean “a fence, not less than six (6) feet in height, that completely surrounds the jobsite, with no openings unless gated. All gates to such fence shall be closed and locked, to secure against entry to the jobsite, during all non-working hours.”
However, building a fence around the perimeter of the entire property was impossible. There was no space to place a fence on the north, east and west sides of the property. To do so would have required the insured to either trespass on its neighbour’s property or obtain easements from them. The property and its southern neighbour shared a wall. The latter impediment was physical. It was not possible to build a fence that would prevent access to the southern wall. The court said in that regard “As everyone acknowledges, building that fence is impossible”.
The court concluded that it was impossible to comply with the purported precondition to coverage of a fence “that completely surrounds the jobsite…”. Even if the policy were read to require the type of fencing stated in the policy, the requirement was void with respect to the property at issue because of impossibility of performance. In addition, the court held that the insurer “cannot demonstrate prejudice” from the failure to build a fence. The cause of the fire was undetermined. That meant that it was impossible to conclude that a lack of a fence caused the fire. Without any evidence that the lack of a fence caused the fire, the court declined to conclude that the insurance companies have suffered prejudice.
The insured was entitled to coverage for the fire.
Under South African law, if a term of a contract objectively is impossible to perform it will not be enforceable.