Abstract

Article

Construction of Exclusions

The insuring clause and any exclusion clause must be read together in an harmonious way so that due effect is given to both and the right conferred by the former is not negated or rendered nugatory by the construction adopted in relation to the latter. Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2016] NSWCA 28; Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2017] AC 73; [2017] UKSC 57 at [7].

Where the question concerns the applicability of an exclusion, that exclusion must be construed in a way that does not negate or cause the indemnity provided by the insurance to be inappropriately circumscribed. Chubb Insurance Company of Australia Ltd v Robinson (2016) 239 FCR 300; [2016] FCAFC 17. Thus, the professional concept is likely to have a narrower connotation in an exclusion clause than in the insuring clause of a professional indemnity policy: Fitzpatrick v Job [2007] WASCA 63; (2007) 14 ANZ Ins Cas 61-731 at [264]; Major Engineering Pty Ltd v CGU Insurance Ltd (2011) 35 VR 458; [2011] VSCA 226 at [56], and a professional service exclusion may be confined to claims arising out of breaches of duty owed to persons who have retained the insured to perform such service in the course of its business. Fitzpatrick v Job (supra) at [268]; Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226; (2007) 14 ANZ Ins Cas 61-745 at [148]- [149]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

Cap and Collar Agreement

Under a conventional settlement, a claimant agrees to accept an ascertained sum, an accord executory whch deends on actual payment, or immediately accepts a promise to pay the settled sum, an accord and satisfaction, in discharge of the alleged underlying liability: McDermott v Black (1940) 63 CLR 161 at 183-185. The insured is not strictly legally liable to pay it as compensation for legal injury, but it is treated as such because it is a binding determination of the insured’s relevant liability. Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

Under a cap and collar agreement between the parties to an arbitration whereby the claimant agrees to a cap on the insured’s liability below the amount claimed if an award is madee, and the insured agrees to pay a certain sum even if the claim fails, the collar, the failure of the claim, involving the insured in liability only in respect of the agreement, means that such liability is not covered by the insured’s policy. The agreemment is not a settlement which had the effect of determining the insured’s liability for the alleged legal injury claimed. The arbitration process would have conclusively determined its existence and quantum, but the insured’s liability would have been incurred under the agreement, which would not be the same as his liability for the alleged wrong, which ex hypothesi, will have been determined to be non-existent. Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

Time of Occurrence

For the purpose of the policy’s limitation of cover of the insured’s liability and the costs of a defence to to the happening of an occurrence within the policy period, the time of the relevant occurrence iis the happening of the infliction of harm, including the happening of the causal circumstances at the time.  It is the time of the harmful event from faulty workmanship rather than the time of the performance of the work, and if it were performed during the policy period but the resulting harm was not inflicted until after the period, the cover wouold not apply unless a special extension provided for it. Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100. It must also be found that the harm caused by the event or state of affairs happened during the period of insurance and in connection with the insured’s business.

The ordinary meaning of “event” is something which happens at a particular time, at a particular place and in a particular way: Axa Reinsurance (UK) Plc v Field [1996] 1 WLR 1026 at 1035, but if its definition adds “including continuous or repeated exposure to substantially the same general conditions”, its meaning extends beyond a single happening to the existence of a continuing state of affairs. In Australian Rail Track Corporation Ltd v QBE Insurance (Europe) Ltd [2013] NSWCA 175; (2013) 17 ANZ Ins Cas 61-971; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100. But the harm caused by the event or state of affairs must have happened during the period of insurance and in connection with the insured activity.

Settlement by Insured

The insured may make a reasonable settlement where the insurer breaches the contract by denying liability and refusing to defend or settle: Parker v Lewis (1873) L.R. 8 Ch App 1035 at 1059-1060; General Omnibus Co v London General Assurance Co Ltd [1936] IR 596 and the dictum of Lord Esher MR in Captain Boyton's World's Water Show Syndicate Ltd v Employers’ Liability Assurance Corporation Ltd (1895) 11 TLR 384; St Louis Dressed Beef and Provision Co v Maryland Co [1906] USSC 62; (1906) 201 US 173. An insurer which elects not to defend the claim against the insured will be bound by a reasonable settlement made between the insured and the claimant despite that it had not repudiated the contract of insurance. Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 at 373-374; Distillers (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 26; Penrith City Council v Government Insurance Office (1991) 24 NSWLR 564 at 571; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at [64], 626; Hennessy Glass Aluminium Systems Pty Ltd v Eagle Star Trustees Ltd v Hennessey Glass & Aluminium Systems Pty Ltd [1999] 1 Qd R 210 at 219; Hurlock v Cncl of the Shire of Johnstone [2002] QCA 256 at [28]- [31]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100. See  J.E. Marshall SC and J.A.C. Potts, “Indemnity for Settlements: Proof of underlying liability” (2008) 19 ILJ 97 for a comprehensive review of the authorities. The insured can prove the existence and quantum of his legal liability by proving that he entered into a settlement agreement with the claimant that was objectively reasonable. Distillers (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 9-10, but he must show that he was legally liable to the claimant, that the liability was covered, and that any amount of settlement was reasonable. QBE Insurance Ltd v Nguyen (2008) 100 SASR 560; [2008] SASC 138. As to whether an insured’s ability to rely on a reasonable settlement agreement is dependent upon prior repudiatory breach by the insurer and acceptance of the repudiation by the insured, see generally Allianz Australia Insurance Ltd v BlueScope Steel Ltd (2014) NSWLR 332; [2014] NSWCA 276 and Vero Insurance Ltd v Baycorp Advantage Ltd [2004] NSWCA 390; (2004) 23 ACLC 119 at [48]- [49]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

 

Occurrence

An  “occurrence” is not the same thing as the damage that results from it, but rather to the occasion of causing it which gives rise to the insured’s liability if that is part of the insuring promise. GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558 (“GIO”). The course of the insured’s normal operation is not itself an “occurrence” under the policy. Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100. Whether there is an occurrence may require three elements: it must have been an event, which, if the definition prmits, could include continuous or repeated exposure to substantially the same general conditions, the event must have resulted in the covered harm, and and, if the insuring promise so requires it, the harm must hve been accidental or was neither expected nor intended by the insured. From the commencement of the formation of the cause, even an omission, to the time of its causing the relevant harm would be a continuing state of affairs Australian Rail Track Corporation Ltd v QBE Insurance (Europe) Ltd [2013] NSWCA 175; (2013) 17 ANZ Ins Cas 61-971; Metricon Homes Pty Ltd v Great Lakes Insurance SE [2017] VSC 749 at [60]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

Because it is the proximate cause that is relevant on this question, the original act of negligence that led to the development of the state of affairs which proximately caused the harm is no part of the occurrence. Distillers (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1; Windsurf Pty Ltd v HIH Casualty & General Insurance Ltd [1999] QCA 360; Pickford & Black Ltd v Canadian General Insurance Co (1976) 64 DLR (3d) 179; ; Metricon Homes Pty Ltd v Great Lakes Insurance SE [2017] VSC 749 at [60]; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

 In the United States, the majority of jurisdictions hold that faulty workmanship is an occurrence: Ibid, but it is properly regarded as the occasion of the causing of the relevant harm by the faulty workmanship.

 Professional Services Exclusion

A profession involves the application of skill and judgment in services which fall within the scope of a vocational discipline which is generally regarded as a profession.Chubb Insurance Company of Australia Ltd v Robinson (2016) 239 FCR 300; [2016] FCAFC 17. It is not confined to one of the learned professions: FAI General Insurance Company Ltd v Gold Coast City Council [1995] 2 Qd R 341 not followed. Project management is not properly regarded as a profession, but property management activities of a real estate agent nay be so, and fact that a particular task or step may require little intellectual activity or skill, such as serving a pleading in accordance with rules of court, does not mean that it is not part of a professional activity for hile in isolation it my not have that character, it may do so as part of the overall activity which does. Suncorp Metway Insurance Ltd v Landridge Pty Ltd (2005) 12 VR 290; [2005] VSCA 223; Kyriackou v ACE Insurance Ltd [2013] VSCA 150; Metricon Homes Pty Ltd v Great Lakes Insurance SE [2017] VSC 749; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

If the claimed liability arose from the insured’s rendering or failure to render professional advice or service and it was its quality of that advice and service that is the real basis of the complaint, the exclusion is not evaded by a claim of misleading and deceptive conduct by a representation as to the quality of the service if the giving of that advice is part of the professional service by an entity that professed and possessed professional expertise in the field and the making of the representation was intimately connected with the rendering of services within that field. It is immaterial whether the insured was paid for the professional bby way of representation.Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.

Services

An action would not constitute the rendering of any service to the claimant if it were no more than in the insured’s own interests to assist it in obtaining a contractual payment. Chubb Insurance Company of Australia Ltd v Robinson (2016) 239 FCR 300; [2016] FCAFC 17.  

Exclusion of Properety Damage to Insured’s Product

This provides that the insured is not covered for Property Damage to its Products if the damage was attributable to any defect in it. Care may be necessary to identify precisely the identity of the insured’s product.  Services may not produce a product. Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100.