Abstract

Article

Other Insurance Clauses

The common law approaches the problem of other insurance clauses in both policies by two steps. First, it construes each policy to determine whether there is an overlap in coverage. As a clause of this kind is included in the polilcy by the insurer for its own benefit alone, itwill be construed contra proferentem: Jauvin v L’Ami Michel Automobile Canada Ltée (1986) 33 DLR (4th) 576.

If one policy has an insurance clause and the other not, the former escapes. Evans v Maritime Medical Care Inc. (1992) 87 DLR (4th) 173, just as if one merely has an excess cover and the other not. Nanyang Insurance Co Ltd v Commercial Union Assurance Plc[1996] 1 SLR(R) 441. One clause may be absolute and the other not, in which case the insurer with the absolute clause will escape liability and the other’s policy must respond. Deaves v CML Fire and General Insurance Co Limited [1979] HCA 12; (1979) 143 CLR 24; National Employers’ Mutual General Ins Association Ltd v Haydon [1980] 2 Ll Rep 149; Australian Eagle Insurance Co Limited v Mutual Acceptance (Insurance) Pty Ltd [1983] 3 NSWLR 59. Secondly, if neither policy responds due to the existence of other, the ‘other insurance’ clauses cancel each other out and both insurers are liable. Weddell v Road Transport and General Insurance [1932] 2 KB 563 at 567-8.

Thus, a provision that the policy simply does not cover liability which forms the subject of insurance by any other policy prevails over a qualified provision which allows for escape by converting it into excess cover unless there is valid and collectible insurance, which is designed to cause the cover to drop down to the primary layer in the event that the other policy cannot be collected because the other insurer is insolvent. Allianz Insurance Australia Limited v Certain Underwriters at Lloyd's of London subscribing to policy number B105809GCOM0430 [2019] NSWSC 453 Competing ‘excess’ clauses cancel each other out. Foster v QBE European Underwriting Services (Australia) Pty Ltd [2018] NSWSC 440; General Accident Insurance Co of Australia Ltd v Sun Alliance Insurance Ltd (1989) 17 NSWLR 80;. Lambert Leasing v QBE Insurance (Australia) Ltd (2016) 93 NSWLR 166; [2016] NSWCA 254 If one clause provides only excess cover when there is other insurance and the other provides only excess to excess, there is mutual repugnancy. Family Insurance Corporation v Lombard [2002] 2 SCR 695; 2002 SCC 48. Ifone pollicy provides for rateable proportion and the other for excess, the latter escapes. Australian Eagle Insurance Co v Mutual Acceptance (Insurance) Pty Ltd[1983] 3 NSWLR 59, it has been held in New Zealand in Commercial Union Assurance Co of NZ Ltd v Murphy [1989] 1 NZLR 687. And an escape clause prevails over an excess clause. Commercial Union Assurance Co of NZ Ltd v Murphy [1989] 1 NZLR 687.

Contribution between Insurers

Equitable contribution between insurers may be ordered following payment by one insurer of the policy holder’s claim for indemnity would provide the other insurer with a defence to a like claim against it. Albion Insurance Co Limited v Government Insurance Office of New South Wales [1969] HCA 55; 121 CLR 342. The remedy extends to the insured’s claim for indemnity  for damages paid to the claimant, and the costs of defending, including the paying insurer’s own costs and expenses in conducting the defence to the claim on the insured’sbehalf.  Government Insurance Office of New South Wales v QBE Insurance Ltd (1985) 2 NSWLR 543 at 544 and HIH Casualty & General Insurance Limited (In Liquidation) v Insurance Australia Limited [2005] VSC 342; (2006) 14 ANZ Ins Cas 61-685 and on appeal – Insurance Australia Limited v HIH Casualty & General Insurance Limited (In Liquidation) [2007] VSCA 223; 18 VR 528. In a principle informed and shaped by “natural justice, exemplified by equality, the search for a common obligation ‘should not be defeated by too technical an approach’”: Mahoney v McManus [1981] HCA 54; 180 CLR 370; HIH Claims Support Limited v Insurance Australia Limited [2011] HCA 31; 244 CLR 72 at 88; QBE Insurance Australia Limited v Allianz Australia Insurance Limited [2020] FCA 589; Vero Insurance Limited v QBE Insurance (Australia) Limited [2011] NSWSC 593; 16 ANZ Ins Cas 61-912 not followed.

Employers’ Liability Exclusion

Typically, this exclusion denies cover for liability for injury to any person under a contract of employment, service or apprenticeship with or for the provision of labour only services to the Insured where such injury arises out of the execution of such contract.” The use of the word, “or”, divides the provision so that the two limbs must be addressed separately. The first is liability for injury to a person under a contract of employment, service or apprenticeship with the insured. The second is liability for injury to a person under a contract for the provision of labour only services to the insured.

The first limb is limited to cases where theinjured claimant was under a contract with the insured.  The second does not require that the person be in the contractual relationship,andit is sufficient if the injury occurred simply under a contract by any party for the provision of labour only services to the insured.  However, the contract must be limited to the provision of labour only services to the insured, which defeats the engagement of the exclusion if the contract provides for more than that. Marketform Managing Agency Ltd for and on behalf of the Underwriting Members of Syndicate 2468 for the 2009 Year of Account v Ashcroft Supa IGA Orange Pty Ltd [2020] NSWCA 36.

IT Liability insurance

Under IT Liability insurance the main cover is Professional liability and Product liability. Unintentional breach of copyright cover can usually be includeded as an additional protection. PC Case Gear Pty Ltd v Instrat Insurance Brokers Pty Ltd (in liq)[2020] FCA 137.

Brokers’ Liability

The principal duties of an insurance broker to a client are as follows.

The broker is an entity which carries on an independent business of placing insurances upon the instructions of clients. Its agency is with the client”: Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd [1981] VR 981; Caldwell v JA Neilson Investments Pty Ltd 69 NSWLR 120., rather than the insurer. Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited 160 CLR 226.

It owes co-extensive duties to its client concurrently in contract and tort to exercise reasonable skill: Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] 157 CLR 149. However, tort law will not impose any additional duty on the broker beyond the scope of the contractual retainer: Astley v Austrust Ltd [1999] 197 CLR 1; Sali & ors v Metzke & Allen [2009] VSC 48; Townsend v Roussety & Co (WA) Pty Ltd 33 WAR 321. Although the elements necessary to establish an entitlement to damages differ in contract and tort (Astley at [47]), the broker’s duty The nature and content of its duty to its client will depend on its client’s instructions,  their contract carries an implied term that the broker will exercise reasonable skill and care in the performance of its duties. Marvin Manufacturers (Aust) Pty Ltd v Chambers of Manufactures Insurance Limited & Ors (1992) 7 ANZ Insurance Cases 61-122; Brooklyn Lane Pty Ltd v MIC Australia Pty Ltd [2001] 11 ANZ Insurance Cases 61-487

This extends to ascertaining the client’s needs: Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57; Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; 69 NSWLR 120; Horsell International Pty Ltd v Divetwo Pty Ltd [2014] 18 ANZ Insurance Cases 61-991. Unless its scope is not otherwise confined, this requires the broker to become sufficiently familiar with the client’s business: see Fine’s Flowers Ltd v General Accident Assurance Co of Canada (1977) 81 DLR (3d) 139, and to take reasonable care to inform the client of the availability of suitable forms of cover to enable the client to provide instructions as to the types and levels of cover that it wishes to choose: Elilade Pty Ltd v Nonpareil Pty Ltd [2002] 124 FCR 1.

If there is disparity in expertise between them, the broker should make appropriate inquiries, and it not for the client to anticipate what the broker ought to do: Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] 2 NSWLR 7. If there is a recurring retainer, the broker should inquire about matters of which it has not made adequate past inquiry. Kotku Bread Pty Ltd v Vero Insurance Ltd [2012] QSC 109.

The broker will have an understanding of the general principles of insurance law and agency, but its duty does not include explaining the law to the insured other than highlighting legal pitfalls which might arise under valid cover. Fanhaven; Geoffrey W. Hill & Associates (Insurance Brokers) Pty Limited v Squash Centre (Allawah North) Pty Limited (1990) 6 ANZ Insurance Cases 61-012; Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541; Horsell; Strategic Property Holdings No 3 Pty Ltd v Austbrokers RWA Pty Ltd [2012] NSWSC 1570.

If the client provides ambiguous instructions and would be left substantially under insured if they were followed, the broker warn it of their consequences and confirm them: Geoffrey Hill; Horsell.

When the client has instructed certain cover, the broker must use reasonable care and skill to procure it. The broker must ensure that the policy obtained is suitable for the purposes for which it is sought by the client: Horsell. If the broker cannot obtain the cover requested, it must seek the client’s alternative instructions: Geoffrey Hill; Provincial Insurance; Brooklyn Lane; Caldwell; Horsell; Fine’s Flowers.

A broker is not required to explain the effect of each term of the policy in detail: Marvin Manufacturers,but it should draw the client’s attention to any onerous or unusual terms, and should explain their nature and effect: Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 (Comm); Horsell. However, it should explain all the details of terms of a considered policy which might apply to the client and exclude the cover. McNealy v The Pennine Insurance Co Ltd [1978] 2 Lloyd’s Rep 18; Caldwell; Provincial; Elilade. This is not necessary in every circumstance but depends on the facts of each case, including the expertise and experience of the broker and the client, the history of the relationship, their communications from time to time, the nature of the client’s activities, and whether the circumstances were such that it was reasonable for the client to rely on the advice given by he broker. Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1968] 122 CLR 556; Tepko Pty Ltd v Water Board [2001] 206 CLR 1.

Essentially, the broker must provide advice and assistance to enable it to make an informed decision about its insurance requirements, and to instruct as to what insurance cover to procure. Elilade. But usually it will not owe a client a general duty to prevent loss or a risk of loss: Marvin Manufacturers; Kotku Bread at [214]; Messagemate Aust Pty Ltd v National Credit Insurance Brokers (Pty Ltd) [2002] 85 SASR 303.

For expert evidence as to the obligations of a reasonably competent insurance broker, see PC Case Gear Pty Ltd v Instrat Insurance Brokers Pty Ltd (in liq)[2020] FCA 137. To prove a breach will usually require proof that the policy obtained does not cover the risks that have occurred and that proper care and skill would have ensured that a policy which did so was obtained. The issue of loss requires an assessment of hypothetical conduct of the insured in the absence of the breach: Ferrcom Pty Ltd v Inbush (NSW) Pty Ltd (1997) 9 ANZ Insurance Cases 61-339; Tosich v Tasman Investment Management Ltd [2008] FCA 377; 250 ALR 274 Rosenberg v Percival [2001] 205 CLR 434.

The client must act reasonably to mitigate its loss, Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited [1998] HCA 38; 192 CLR 603, but he onus rests on the broker to prove that it acted unreasonably in that respect: TC Industrial Plan Pty Limited v Robert’s Queensland Pty Limited [1963] 180 CLR 130; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] 77 ALJR 768; 196 ALR 257.

Both at common law and under statutory modification, contributory negligence consists in the objective failure of a plaintiff to take reasonable care for the protection of its property, and the defendant bears the onus to prove that its negligence contributed to its loss: Anderson v Eric Radio & TV Pty Ltd [1965] 114 CLR 20; Joslyn v Berryman [2003] 214 CLR 552. Causation is central to the defence: Ackland v Commonwealth of Australia (2007) Aust Torts Reports 81-916; Caswell v Powell Duffryn Associated Collieries Limited [1940] AC 152.

The client’s failure to communicate a relevant fact to its broker may amount to contributory negligence: Carradine Properties Ltd v DJ Freeman & Co (a firm) (1982) 126 Sol J 157; Wyndham City Council v Terra Culture Pty Ltd [2018] VSC 81; Rybak v Senneh Pty Ltd [1996] NSWCA 460. However, given the general nature of the retainer, and the allocation of responsibilities which it implicitly entails, this may be varied by circumstance, such as when theclient has had no experience with the type of insurance and it was for that reason that advice and assistance were sought. Marvin Manufacturers (Aust) Pty Ltd v Chambers of Manufactures Insurance Limited & Ors (1992) 7 ANZ Insurance Cases 61-122. It may be incumbent on the broker to make appropriate inquiries, not for its client to anticipate what the broke ought to do: Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] 2 NSWLR 7.

Client’s Settlement with Claimant

A party relying on a settlement as proof of his loss has the onus of proving that it was reasonable. This requires proof not only that the result was reasonable but also that the negotiations were conducted with proper care and skill. The settlement must reflect the plaintiff’s true prospects of success if the proceedings had been conducted with care and skill because otherwise it will merely reflect his impaired prospects. BNP Paribas v Pacific Carriers Ltd [2005] NSWCA 72.

The damages should be calculated according to the difference between what the client would have recovered under the policy the broker ought to have arranged and the amount that the insured recovered under the settlement, as long as the settlement reached by the insured was reasonable, though the broker had no control over the decisions whether to settle and at what figure. The reasonableness of the settlement must be judged objectively, not subjectively, by reference to material available to the parties at the time of the compromise. There is no single standard for what was it reasonable: there will be a range. It will almost always require consideration of the respective chances of the parties’ success so the outcomes must always be imperfect and imprecise. The legal advice provided to the client leading to the settlement of the claim, as distinct from the factors which led to it, the risk involved in the litigation and the reasoning which led to the settlement, is in itself not proof of the reasonableness of the settlement advised, but it tends to negative unreasonableness. The evidence of the legal advisers and those who conducted the negotiations is not irrelevant or inadmissible, subject to issues of  legal professional privilege and the rules under which the mediation was conducted.

The reasonableness of a settlement by a client with a third party may be relevant to the conclusion as to whether the broker caused it and to the remoteness of the loss. The possibility of a settlement to compromise a dispute will, alone, be a natural consequence of the broker’s breach of contract, but if it is so unreasonable that the loss does not arise naturally from the breach or, at the time of the contract, have reasonably been in their contemplation as the probable result of a breach, it does not represent the loss flowing from the breach. Such reasonable contemplation is essential for breach of contract, Burns v MAN Automotive (Aust) Pty Ltd [1986] 161 CLR 653, and in negligence, Wyong Shire Council v Shirt [1980] 146 CLR 40 , but it does not disentitle the client to damages that the broker did not contemplate the precise extent of the client’s loss: Mount Isa Mines Ltd v Pusey [1970] 125 CLR 383; Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310; Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2017] FCAFC 102. The reasonableness of a settlement may also be relevant to the quantification of loss, having regard to the client’s duty to mitigate damages by settling for a lower sum.