Abstract

Exclusion - Claim for Loss of Use or Resulting from a Delay

Exclusion -Cost of Performing, Correctingor Improving Work

Exclusion - Damage to Products

Exclusion - Contractual Liability

Exclusion - Product Efficacy

Diect Action Claim - Leave to Proceed

Article

Direct Action Claim – Leave to Proceed

 

In proceedings under s 5(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), for leave to proceed against an insurer, leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law. The claimant must have an arguable case against the insured and that the policy responds to it, that is on a construction which can seriously be put and is not untenable, and there must be a real possibility that if judgment is obtained the insured would not be able to meet it; Opes Prime Stockbroking Ltd (in liq) (Scheme Administrators Appointed) v Stevens [2014] NSWSC 659; Oswald v Bailey (1987) 11 NSWLR 715; Tzaidas v Child [2004] NSWCA 252; (2004) 61 NSWLR 18; Bede Polding College v Limit (No 3) Ltd [2008] NSWSC 887. The claimant bears the burden of proof of these matters; Nettle v Mathieson Group Pty Limited & Anor [2007] NSWCA 98; Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd [2007] FCAFC 60; , but the court has a residual discretion to refuse leave even if these requirements are met; DSHE Holdings Ltd (receivers and managers appointed) (in liq) v Abboud [2017] NSWSC 579; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Product Efficacy Exclusion

It is arguable that a Product Efficacy exclusion does not apply if the damage to property which is the subject of the claim was not the result of the failure by the product to cure, alleviate, monitor, detect or retard, within the meaning of the policy, but by the insured’s defective workmanship in its application: Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Contractual Liability

In respect of an exclusion of any liability or obligation assumed by an insured person under any agreement or contract excect to the extent that the liability or obligation would otherwise have been implied by law, it is arguable that the insured’s liability or obligation for breach of a contract to perform work is not one which is assumed by it under the agreement within the meaning of the policy. Arguably, the exclusion covers liability assumed by explicit and voluntary act as distinct from the liability is imposed by law as a consequence of the breach of the agreement; Zurich Australian Insurance Ltd v Regal Pearl Pty Ltd [2006] NSWCA 328. A fortiori, if the claims are not only contractual.  As to the first proposition, the better argument is that the claim is only the enforcement of the liability which was contractually assumed by the insured. In any case, Liability insurance does not cover the insured’s simple non-performance of a business contract unless it causes harm to the property of another. See Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion - Damage to products

In respect of an exclusion of any liability for property damage to the insured’s products after is has ceased to be in his possession or under his control if the damage is attributed to any defect in them or to their harmful nature or unsustainability, it may be arguable that it does not apply if the damage is not damage to a product, and if the cause of the damage was arguably attributable not to the product, but its faulty application; Aspen Insurance UK Ltd v Adana Construction Ltd [2015] EWCA Civ 176; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion - Cost of Performing, Correcting or Improving Work

It may be arguable that the amount claimed is not the cost of performing, correcting or improving work undertaken by theinsured if it had already been done and was of no value, and the claim was for new work in its place; Graham Evans & Co (Qld) Pty Ltd v Vanguard Insurance Co Ltd & Ors (1986) 4 ANZ Ins Cas 60-689; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627.

Exclusion – Claim for Loss of Use or Resulting from Delay.

The claim must be for loss of use or resulting from delay, and may not be a loss resulting from lack of performance rather than defective performance; and it may not  be a loss resulting from failure of the product to meet performance criteria; Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2013] FCAFC 130; (2013) 305 ALR 412; Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627. This has been discussed above in relation to the Product Efficacy Exclusion.