Welcome to our General Insurance Insights Newsletter, bringing you the latest case notes on key judgments from June and July 2024 affecting general insurers in Australia.
Princess Theatre Pty Ltd v Ansvar Insurance Limited [2024] VSC 363
The plaintiffs were the operators of several theatres in Melbourne. The plaintiffs held two industrial special risks policies with the defendant. The policies contained an extension that provided cover for consequential loss resulting from the interruption or interference with the plaintiffs’ business arising from the closure of their premises by order of a public authority consequent upon infectious disease.
The plaintiffs sought indemnity under the policies for around $20 million in losses sustained as a result of the closure of a number of their theatres during the COVID-19 lockdowns in Melbourne between 2020 and 2021. The closures followed a number of directions issued by the Victorian government and associated advice.
The defendant denied indemnity on the basis that the extension was not engaged and, even if it was, indemnity was excluded on the basis that a carve out for “quantifiable diseases under the Quarantine Act 1908” should be rectified and replaced with the words “list as a human disease pursuant to the Biosecurity Act 2015”. Otherwise, the defendant contended that, even if the extension was engaged, the plaintiffs’ losses were subject to a sublimit of $500,000 in the aggregate across two policy periods, a ‘rent receivable’ sublimit of $0 (i.e. for theatre hire fees) and ‘location of risk’ sublimits (which limited losses recoverable at each venue to their declared value).
The Court compared the extension in the defendant’s policy with other hybrid clauses that were considered in the LCA Marrickville test case, but also noted that its interpretation would ultimately rest upon the specific wording used. To that end, the extension had several unique features, including that it covered losses arising from closures “upon advice” of the government, not merely by order, and that the advice (or order) be “following”, rather than “as a result of”, an outbreak of an infectious disease. Based on those features, and other considerations, the Court accepted that the extension was engaged.
The Court also rejected the defendant’s rectification argument having regard to the decision of HDI Global Specialty SE v Wonkana No 3 Pty Ltd and the high threshold required for a Court to grant the equitable relief of rectification. That required clear, precise and convincing proof that a written contract did not reflect the common intention of the parties. The Court was not satisfied that there was sufficient proof to establish that intention in relation to the application of the Biosecurity Act 2015. The Court otherwise found that a $500,000 sublimit applied to the extension, but it applied to each venue during each policy period (rather than in the aggregate across both policy periods); the loss of theatre hire fees was not subject to a ‘rent receivable’ sublimit; and there was no ‘location of risk’ sublimit.
Ultimately, the Court ordered that the plaintiffs were entitled to indemnified for approximately $2.8 million in losses.
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Hornsby Shire Council v Salman [2024] NSWCA 155
The appellant was responsible for the care and control of a playground located within Lessing Park in Hornsby, NSW. The playground contained a swing-set built upon a blue wet pour surface, surrounded by an area covered with mulch and bark pieces. The respondent, who was a visitor to the playground, rolled her ankle and fell as she was walking towards the swing, which her nephew was using, and stepped from the mulch area to the wet pour area.
At first instance, the respondent argued that the appellant breached its duty of care by failing to ensure that the level of mulch did not fall below the level of the wet pour area and that the playground was maintained properly in accordance with the applicable Australian Standards. The trial judge found the appellant negligent and ordered it to pay $283,200 in damages to the respondent. That included a 15% discount for contributory negligence, as the respondent conceded that she was not paying full attention at the time of the incident and did not see the height differential between the two surfaces. The trial judge rejected that the appellant’s argument that the risk of harm posed by the step down was an ‘obvious risk’ for the purpose of s.5H of the Civil Liability Act 2002.
The appellant appealed on several grounds related to liability.
The Court of Appeal dismissed the appeal for the following reasons:
- The risk of harm was appropriately identified by the trial judge as the risk of someone falling and sustaining injury whilst walking between the mulch and the wet pour area. The Court of Appeal rejected the appellant’s argument that the risk of harm, as formulated, was too precise (or too broad).
- The height difference between the surface levels was neither obvious nor readily discernible. That was based on a number of factors, including that it was foreseeable that visitors to the playground may be focused on a child, rather than their footing, the respondent had not visited the playground before and had only been there for one hour prior to the incident, there was no evidence of other, similar incidents at the playground or other similar playgrounds controlled by the appellant, and, in the months prior to the incident, a playground safety inspector had prepared two reports in which it advised that the mulch area was too low and it needed to be built up to eliminate any trip points.
- If the appellant had followed the playground safety inspector’s advice to replenish the mulch and carry out regular inspections to check its levels, the risk of harm would have been reduced, and the incident potentially averted.
- The relevant Australian Standards provided that the level of the mulch and the wet pour areas should be even to avoid trip hazards. The appellant argued that those Australian Standards were not applicable. However, the Court of Appeal found that, by hiring a company to inspect the playground and report on the results, it could be inferred that the appellant acknowledged the applicability of those Australian Standards.
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Value Constructions Pty Ltd v Badra [2024] NSWCA 181
The appellant was a builder and had the management and control of a residential construction site in Peakhurst, NSW. The first respondent was a worker who was injured on the site. He was employed by the second defendant, who did not have the required employer’s liability insurance. Accordingly, the third defendant, the Workers Compensation Nominal Insurer, was joined to the proceeding and represented the second defendant in all aspects.
The first respondent was injured at the site when he walked over black plastic which had been placed over a large open drainage hole (by the second defendant) in the floor of a garage. The primary judge found both the appellant and second defendant liable in negligence.
Two of the main issues raised on appeal were:
- Whether the concealment of the drainage hole was something which the appellant knew or ought to have known such that it constituted a breach of the appellant’s duty of care.
- Whether any breach by the appellant rendered it liable, given the argument that the second defendant’s actions, rather than those of the appellant, were the proximate cause of the first respondent’s injuries.
The Court of Appeal held that the appellant breached its general duty of care as occupier on the basis that the primary judge found the appellant knew that the drainage hole was uncovered on the morning of the incident and failed to take reasonable precautions to ensure it was adequately covered. To that end, the risk of persons accessing the premises falling through an inadequately covered drainage hole existed prior to and independently of the drain hole being covered by black plastic by the second defendant.
In terms of causation, the Court of Appeal noted that, pursuant to s.5D of the Civil Liability Act 2002, the test was not whether the relevant acts or omissions were the proximate cause of the harm, but whether the relevant negligence (on the part of the appellant) was a necessary condition of the occurrence of the harm. In this case, even though there were other conjunctive causes of the incident, that test was satisfied.
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Gibson (a pseudonym) v Askim Pty Ltd ATF the Askim Trust trading as Central Café Group [2024] ACTSC 203
The plaintiff was a casual kitchen hand at a café owned by the defendant located in Gungahlin, ACT. In February 2017, five patrons of the cafe contracted salmonella poisoning. During an investigation carried out by The ACT Department of Health, a sample of frozen cooked chicken was found to contain the same type of salmonella bacteria, namely salmonella typhimurium, that the patrons had contracted. Accordingly, it was determined that the defendant had committed numerous breaches of the Food Act 2001 and the café was immediately closed.
The plaintiff claimed damages against the defendant on the basis that she also contracted salmonella poisoning whilst working at the café and suffered long term physical and psychological effects, including the development of a food phobia.
The defendant disputed that it was liable for the plaintiff’s injuries on that basis that she failed, on the balance of probabilities, to establish that:
- she contracted salmonella poisoning at the café;
- the risk of salmonella poisoning was foreseeable and not insignificant;
- the defendant failed to take precautions that a reasonable person would have taken in the circumstances to avoid the risk of harm from salmonella poisoning; and
- the negligent conduct of the defendant was a necessary condition of the harm.
The defendant also argued that the plaintiff was only seriously ill for approximately two weeks, not months, as she alleged. During the period the plaintiff claimed she was critically unwell and bedridden, she was arrested for shoplifting, drug possession and associating with other offenders.
The Court accepted that the plaintiff contracted salmonella whilst handling raw meat and chicken in the course of her work at the café, based upon an inference it drew from the available evidence, including in relation to the plaintiff’s work duties, the lack of food hygiene standards at the café, the test results pertaining to the sample of chicken and the number of patrons that contracted the same salmonella bacteria. The Court also found that the defendant breached its duty of care by failing to provide soap to employees who prepared food and to take reasonable precautions to ensure the proper refrigeration of that food. In terms of causation, the Court accepted the expert evidence that, if the relevant steps had been taken, the risk of a food handler contracting salmonella would have been significantly reduced.
The Court otherwise accepted that the plaintiff was not as ill as she alleged or that she suffered ongoing injuries to the extent claimed. On that basis, the amount of damages awarded was significantly less than that claimed.
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Sawyer v Steeplechase Pty Ltd [2024] QSC 142
The first defendant was the principal contractor for a construction project. It engaged the third defendant to undertake concreting works.
The plaintiff was a concreter employed by the third defendant. He brought a damages claim in relation to two events: a discrete lifting incident involving the carrying of steel mesh sheets on 22 August 2016 and concreting duties over a period of time between August 2016 and July 2017. The Court accepted that the worker’s injuries were caused by the former, but not the latter.
Whilst the third defendant admitted it breached its duty of care (with its defence focused on medical causation and quantum), the third defendant denied that it owed any duty of care to the plaintiff.
Based on the Leighton Contractors v Fox line of authorities, the Court accepted that, in some circumstances, a principal contractor will owe a duty to use reasonable care to ensure a safe system of work for independent contractors, but those circumstances did not exist in this case. The decisive factors included that the third defendant supplied its own labour and devised and controlled its own system of work, the work the first defendant was undertaking was self-contained and did not require co-ordination with other onsite activities, and it was not necessary for the first defendant to retain and exercise supervisory power over the first defendant’s system of work with respect to the manual handling of mesh sheets, nor did it do so. Accordingly, the claim against the first defendant was dismissed.
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This article was written by Ashley Harding, Partner and Madeleine Dashiell, Solicitor
