Welcome to my General Insurance Insights newsletter, bringing you the latest case notes on key judgements from June 2023 affecting general insurers in Australia.
Citiline Concrete Pumping Pty Ltd v Chubb Insurance Australia Ltd [2023] NSWCA 123
The appellant appealed the primary judge’s decision that the respondent was entitled to reduce its liability to nil and/or refuse a claim made under a Mobile Plant and Equipment Package policy in relation to damage to a concrete pump fitted on a truck pursuant to ss.28(3) and 56 of the Insurance Contracts Act 1984. The respondent had declined indemnity on the basis that the appellant had failed to comply with its duty of disclosure and made a misrepresentation by reporting, in its proposal form, that there had been no prior accidents or claims involving the concrete pump and by failing to inform the respondent of two prior incidents in which the concrete pump had been damaged and in respect of which claims were made against third parties. On similar grounds, the respondent contended that the claim was fraudulently made.
The Court of Appeal upheld the primary judge’s findings and dismissed the appeal. In doing so, it accepted that the appellant was aware, at the time of taking out the relevant policy, that the concrete pump had suffered damage on previous occasions and that a reasonable person in the circumstances would have known that the prior incidents matters relevant to the respondent’s decision to accept the risk and, if so, on what terms, even though those prior incidents occurred through no fault of the appellant.
FKP Commercial Developments Pty Limited v Zurich Australian Insurance Limited (No 2) [2023] FCA 582
The applicants were insured under a Design and Construction Professional Indemnity policy issued by the respondent in relation to the development of two apartment buildings. The applicants subcontracted the design and construction works, save for project management and construction management services. The owners corporation made a claim for damages against the applicants in relation to defective building works. The applicants sought indemnity from the respondent, but the claim was denied.
The proceeding was confined to the question of whether the applicants’ claim was captured under an extension of cover clause, which provided that the respondent would indemnify the applicants “for loss resulting from any claim arising from the conduct of any consultants, subcontractors or agents of the insured for which the insured is legally liable in the provision of the professional services“.
The court concluded the answer to that question was ‘yes’, because: (1) As a matter of fact, the claim against the applicants necessarily arose from the conduct of their sub-contractors; (2) Pursuant to the Home Building Act 1989, the applicants were legally liable for any breach of statutory warranties irrespective of whether the works were performed by them or their sub-contractors; (3) The extension cause did not require the claim against the insured to be caused by or result from the insured’s own provision of professional services, but merely that there was a connection (albeit not a causal one) between the insured’s legal liability and the provision of its professional services (including by another party).
MS Amlin Corporate Member Limited v LU Simon Builders Pty Ltd [2023] FCA 581
The court considered whether the respondent provided sufficient notification of facts to the applicant, its professional indemnity insurer, under s.40(3) of the Insurance Contracts Act 1984 in connection with claims made against it in relation to the use of combustible cladding products in the Atlantis Towers. The respondent had provided notice to the applicant, during the period of insurance, regarding the Lacrosse Tower fire and the use of those and similar cladding products. That notice included emails with the subject line “Potential Claim“, as well as a newspaper article and reports from the Melbourne Fire Brigade.
The court accepted that sufficient notice was provided. In doing so, it endorsed the decision in P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd’s Ltd [2021] NSWCA 136 that an expert opinion could constitute ‘facts’, as they are objective matters that bear on the possibility of a claim being made. In this case, the opinion of the Melbourne Fire Brigade meant there was a real and tangible risk it would form the same view (regarding non-compliance) in relation to other buildings that used the same or similar cladding products. The court said it did not matter that the emails did not identify the potential claimants to the claims, because the relevant claimants in respect of the Atlantis Towers were obvious. It also affirmed the established principle that notice does not need to be given in a single document.
Garrett v VWA [2023] VSCA 144
The applicant worked as an armed security guard. Whilst on a job, a fellow armed security guard pulled his loaded firearm and pointed it at the applicant’s head for no apparent reason. The applicant claimed damages against the respondent in respect of psychiatric injury, including PTSD and major depressive disorder, he suffered as a result of the incident on the basis that his employer was vicariously liable for the actions of the other security guard. At first instance, the court dismissed the plaintiff’s claim for damages.
In dismissing the appeal, the Court of Appeal drew upon the approach taken by the High Court in Prince Alfred College Incorporated v ADC [2016] HCA 37 regarding vicarious liability for intentional or criminal acts. That is, for vicarious liability to exist, the employment must not only provide an ‘opportunity’ for the wrongful act, but also the ‘occasion’ for it to occur.
In this case, whilst the ‘opportunity’ for the wrongful act may have arisen from the fact that the other security guard was employed as a security guard and he was provided with a gun to use in certain authorised circumstances, it did not provide the ‘occasion’ for that act. Rather, the security guard’s actions were of a kind completed disconnected from his role and were distinguishable from those cases where a security guard (simply) exercised excessive force in performing their duties.
Drummond v Gordian Runoff Ltd [2023] NSWSC 607
The plaintiff sought to challenge the defendant’s declinature of a claim made under a home warranty insurance policy issued under the Home Building Act 1989. The policy included a ‘last resort’ clause for loss and damage arising from a breach of warranty that could not be recovered from or rectified by the builder due to insolvency, death or disappearance. It also obliged the insured to provide a notification of facts or circumstances relating to the claim within six months of becoming aware of them.
The defendant denied indemnity because, although the plaintiff had provided notice to the defendant within six months of it becoming aware that the builder (who had defectively constructed its residential property) had been placed into liquidation, it did not provide notice of its loss during the period of insurance in breach of s.103BB of the Home Building Act 1989.
The plaintiff sought to rely on s.54 of the Insurance Contracts Act 1984, to prevent the insurer refusing the claim, despite its failure to notify the defendant in accordance with s.103BB of the Home Building Act 1989. The court rejected that argument, finding that the statutory provision operated outside of and separate to the terms of the policy. In other words, it was the “effect” of that statute not the contract of insurance that lead the defendant to decline the claim. Therefore, s.54 was not enlivened.
Should you have any questions regarding these decisions and their implications, please feel free to make contact with the authoring Partner.
