Abstract

Article

Insurer Preparing Document

Where an insurance company prepares the document, it is bound to make its meaning as clear as possible: Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; [1920] HCA 64; BNY Trust Company of Australia Limited v MMJ Real Estate (WA) Pty Ltd (No 2) [2018] NSWSC 1938.

Contra Proferentem

The contra proferentem rule is one of last resort, applying only when ambiguity remains after all other avenues of construction have been exhausted: Beefeater Sales International Pty Ltd v MIS Funding No 1 Pty Ltd [2016] NSWCA 217; BNY Trust Company of Australia Limited v MMJ Real Estate (WA) Pty Ltd (No 2) [2018] NSWSC 1938.

Insolvency Exclusion:

In a Directors and Officers policy, this provides that the Insurer shall not be liable under any Cover or Extension for any Loss in connection with any Claim arising out of, based upon or attributable to the actual or alleged insolvency of the Company or any actual or alleged inability of the Company to pay any or all of its debts as and when they fall due. If the relevant loss does not arise out of nor originate in, or spring from, or have its foundation in the company;s insolvency, but rather from another cause such as the loss of an opportunity, the exclusion would not be engaged, albeit that the loss of opportunity was suffered because of insolvency. A mere ancillary connection of theloss to insolvency is not sufficient here to engage the phrase, ‘arising out of or in any way connected with’. Kyriackou v ACE Insurance Ltd [2013] VSCA 150; Major Engineering Pty Ltd v CGU Insurance Ltd [2011] VSCA 226; (2011) 35 VR 458;  Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055, affd [2019] FCAFC 96. The approach which requires that the relevant claim be based in whole or in part upon the insolvency of the company appears to be consistent with the position adopted in Timothy Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm) (at [84]). It is at odds with the usual effect of such a nexus and draws its distinction from the influence of commercial necessity and circumstantial context. More than that would substantially defeat the indemnity granted by the policy and render it practically illusory and ‘repugnant to the purpose of the insurance of that type. Impact Funding Solutions Ltd v Barrington Support Services Ltd [2016] UKSC 57; [2017] AC 73.

“Arising out of”, ‘Arising from’, “Caused by” and “Attributable to”

 “Arising out of” requires that there be some causal connection, but less proximate than “caused by”. It is the equivalent of originates in, springs from, or has its foundation in the causal factor. It is wider than ‘arising from’ and requires less causal nexus. In respect of the nexus, “attributable to”, the verb, attribute, is defined as “regard something as belonging to or being caused by”. Concise Oxford Dictionary. Although this refers to causation, it need not be direct I there is both a necessary and sufficient condition for finding that the loss can be attributed to the factor. McConnell Dowell Middle East LLC v Royal and Sun Alliance Insurance PLC [2008] VSC 501. It is not sufficient to look to the specific causes of action alleged rather than at the underlying facts. Quintano v BW Rose Pty Ltd [2008] NSWSC 793; Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055, affd [2019] FCAFC 96.

Directors and Officers Insurance

Directors and Officers insurance is a specialist form the general approach of which is to protect directors and officers from the customary risks in performing their role. It has unique features arising from the fact that the primary insureds are directors and officers of companies whose functions involve onerous common law and statutory duties and have the potential for heavy civil and criminal liability for breach to a multiplicity of claimants, including their company, fellow directors, shareholders, employees, creditors or customers or a regulator. Due to the broad scope of the liabilities the policy contains a large range of exclusions related to the wrongful act giving rise to the insured’s liability or the identity of the claimant. Oz Minerals Holdings Pty Ltd v AIG Australia Ltd [2015] VSCA 346.