Abstract

Article

Construction, Commerciality, Limits

The interpretation of a policy of insurance will start and usually finish by reference to the ordinary meaning of the words used. Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 384. But as commercial documents policies of insurance should produce a commercial result and so should be given a businesslike interpretation: Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) [2018] FCAFC 119; (2018) 360 ALR 92 at 100 – 101 [33]. The parties should be assumed to have intended to produce a commercial result so as to avoid its making commercial nonsense or working commercial inconvenience. Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656 – 657 [35]; Re Golden Key Ltd [2009] EWCA Civ 636 at [28]); Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85 at 111 [78]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [51]. References to a commercial result do not invite a consideration of the actual financial consequences for each of the parties of a particular construction in the events which have occurred. Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228.

Construction, Purpose

It may be necessary to consider the words which the parties actually used and the purpose which the clause was intended to achieve. As a composite exercise, construction is neither totally literal nor purposive; Arbuthnott v Fagan ; Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd [2001] EWCA Civ 1047 [13]; Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 350. But the purpose of a provision is not some vague and malleable notion to which reference can be made to guide the construction of ambiguous provisions, but must be logically and rationally ascertained from its language, the surrounding circumstances, and its general nature: Australian Aviation Underwriting Pty Ltd v Henry (1988) 12 NSWLR 121. It has its limits. Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228.  Cover for loss arising from the consequence of a high risk would normally be excluded: Derrington D and Ashton R, The Law of Liability Insurance (3^rd ed, LexisNexis, 2013) 10-2 p 1828: or specifically included only at an appropriately priced premium. zzz

Circumstantial Background, must be proved and mutually known.

In the absence of evidence it is not to be assumed that the parties were mutually aware of the state of the law and that they would mutually have turned their minds to its implications and with the same result. And the extent of the insurer’s losses from particular catastrophic events is not, without evidnce, a matter of surrounding circumstances,and particularly if it is not shown to be known to the insured. Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228.

Declaratory Judgment, Construction, Agreed facts must be Complete

If the parties to a declaratory judgment seek the application of the proper construction of a provision to a set of stated hypothetical facts, the set of facts stated must include all facts necessary to the correct construction. The Court cannot assume hypothetical facts outside those postulated.  For example, if an exclusion is based on the causation of loss from an officially declared emergency from a disease, it is insufficient to postulate that the loss was caused by the existence of a disease which has been declared to be an emergency rather than that it was caused by the declared emergency.   Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228.