Abstract

Article

Construction

There is danger in bringing to contractual interpretation a false paradigm of structure by assumptions not justified by the parties’ agreed words. Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907.

As with all commercial contracts, policies of insurance are intended to be read and understood by the commercial parties to them. The process of construction is the giving effect to the parties’ objective intentions. The Policy is to be construed by giving business sense to a business document, being that which businesspeople in the course of their ordinary dealings would give the document: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at 656–657 [35]; Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2003] UKHL 12; [2004] 1 AC 715 at 737 [10]. That there may be overlap between different clauses of a policy does not require the business person to give meaning to the different clauses to eliminate their overlap with refined precision. Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907.

For the principles governing the construction and interpretation of a policy, see Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126 at [151]–[152], [353] and [394]–[395]; Todd v Alterra at Lloyd’s Ltd [2016] FCAFC 15; 239 FCR 12 at 22–23 [42]; and Chubb Insurance Company of Australia Ltd v Robinson [2016] FCAFC 17; 239 FCR 300 at 323–326 [98]–[104].

Lockdown and an Industrial Special Risks policy

A typical Industrial Special Risks policy promises indemnity for the physical loss, destruction or damage to the insured’s property, and for business interruption loss from physical loss, destruction or damage of the insured’s property brought about by insured perils. Its protective core is physical loss or destruction of or damage to revenue or turnover or profit generating property, but physical interference with the property is not the only way an insured can suffer loss of revenue, turnover, or profit. The policy’s extension of the meaning of the word, “Damage”, to include “loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe” has given rise to an issue whether the reference to catastrophe extends the cover to loss of income flowing from the compulsory shut-down of the insured’s premises on the order of the governmental authorities as a community precaution because of a general threat from the presence of the pandemic virus, COVID-19, though it was not suggested to be actually present at or near the premises.

However, the extension usually refers to the physical loss of property and not to the loss of use of the property or loss of custom or financial loss. If the insuring promise is expressed to depend on the contingency of “any building or any other property or any part thereof used by the Insured at the Premises for the purpose of the Business being physically lost, destroyed or damaged by any cause or event not hereinafter excluded (loss, destruction or damage so caused being hereinafter termed ‘Damage’)”. The reference to physical harm is plainly relevant to the point. But this is not Catastrophe insurance. It does not provide cover for the business consequences brought about by the spread of any disease. It is not an insured peril.

Further, the construction conforming with the whole policy would construe the words, “conflagration or other catastrophe”, in the extension to refer to events or occurrences of a kind causing physical loss or destruction of or damage to the property in that they are apt to be an insured peril. The loss referred to is the physical loss of property not the loss of use of the property or loss of custom or financial loss.

In respect of a section of cover referring to “Spoilage”, the Policy may cover loss, destruction of or damage to stock and/or merchandise caused by deterioration, putrefaction, contamination or changes in temperature arising from any cause whatsoever other than work bans, shortage of fuel or the deliberate withholding of electricity supply under The Indemnity - Material Loss or Damage. Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907

Causal Expressions

The relational prepositional phrase “resulting from” is wider than a proximate cause, requiring a common sense evaluation of a causal chain: Kooragang Cement Pty Ltd v Bates (1994) 35 NSWLR 452 at 463–464. ”. The relational prepositional phrases “occasioned by or happening through” denoted a wide scope of causal relationships: Switzerland General Insurance Co Ltd v Lebah Products Pty Ltd (1982) 2 ANZ Insurance Cases 60-498 at 77,826 and 77,827; Mercantile Mutual Insurance (Aust) Ltd v Rowprint Services (Victoria) Pty Ltd [1998] VSCA 147 at [24]; Prime Infrastructure (DBCT) Management Ltd v Vero Insurance Ltd [2005] QCA 369; 13 ANZ Insurance Cases 61-661 at [29] and [60]. Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907

Occurrence

An “occurrence” is an “event”: something which happens at a particular time, at a particular place, in a particular way: Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026 at 1035; Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664 at 683–686; Mann v Lexington Insurance Co [2001] 1 Lloyd’s Rep 1 at 5–6, something which happens at a time, and place, and in a particular way: Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1; 2 WLR 123 at [67]; and the word “incident” was given a similar meaning in Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448 (Comm) at 119 [404]. Disease that spreads is not something that occurs at a particular time and place or in a particular way: Arch Insurance (UK) Ltd [2021] UKSC at [69]. Just as a conflagration is an event so is a “catastrophe” and in that respect the Insurers called in aid the causes of construction of noscitur a sociis and eiusdem generis: Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 at [30]. “Conflagration” provides the genus. A “conflagration” is, it was submitted, a large fire which causes widespread destruction. The word “catastrophe” should take its meaning eiusdem generis because of the words “or other”: The Sun Fire Office v Hart (1889) 14 App Cas 98 at 103–104. The meaning should be taken from context. It can mean in the vernacular severe or adverse outcomes. It takes its meaning from “conflagration”, not as a fire but as a sudden, large scale event which causes widespread damage to property.zzz

The words, “conflagration or other catastrophe”, suggest an identifiable and discrete event, not a state of affairs, just as when the words “occurrence” or “event” are used in an insurance policy to mean something which happens at a time, and place, and in a particular way: Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1; 2 WLR 123 at [67]; and just as the word “incident” was given a similar meaning in Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448 (Comm) at 119 [404]. Like a conflagration, a large fire which causes widespread destruction, a “Catastrophe” is something which happens at a time and place and in a way. Just as is an event so is a catastrophe and in that respect the forms of construction of noscitur a sociis and eiusdem generis: Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 at [30] may assist if “Conflagration” provides the genus. The word “catastrophe” should take its meaning eiusdem generis because of the words “or other”: The Sun Fire Office v Hart (1889) 14 App Cas 98 at 103–104. The meaning should be taken from context. It can mean in the vernacular severe or adverse outcomes. It takes its meaning from “conflagration”, not as a fire but as a sudden, large-scale event which causes widespread damage to property. Disease that spreads is not something that occurs at a particular time and place or in a particular way: Arch Insurance (UK) Ltd [2021] UKSC at [69].

Mitigation of Risk

For the concept of preventing, retarding and minimising in other clauses in other policies, see Allstate Explorations v QBE Insce (Aust) [2007] VSC 380; 14 ANZIC 61-743.zzz

If possible, an expression should be given work to do and not be left with an empty lack of operation. Effect must be given to it if it possibly can be: Lewis v Barnett [1982] 2 EGLR 127 at 128.

Loss of Use

The term, loss, may be apt to pick up loss of use. Kraal v Earthquake Comm [2015] 2 NZLR 589 at [38].

Expert Evidence

The admissibility of expert evidence, as allowed by the Evidence Act requires that opinion evidence should be based on specialised knowledge transcending mere “subjective belief”: Honeysett v The Queen [2014] HCA 29; 253 CLR 122 at 131; Daubert v Merell Dow Pharmaceuticals Inc [1993] USSC 99; (1993) 509 US 579 at 590.

Purpose of Liability Insurance

The commercial purpose or objective of Liability insurance is the indemnification of an insured party against its liability to third-parties for its acts or omissions. Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 405; Corestaff NT Pty Ltd v Insurance Australia Ltd [2021] QSC 195

The contra proferentem rule

The contra proferentem rule may be applied only if after ascertaining the literal or grammatical meanings and evaluating them against the text, context and purpose of the contract, there is still real doubt as to its meaning. Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370; (2016) 93 NSWLR 561 at [140]; Corestaff NT Pty Ltd v Insurance Australia Ltd [2021] QSC 195. In resolving ambiguities, a reasonable construction is preferred. Alex Kay Pty Ltd v General Motors Acceptance Corp & Hartford and Fire Insurance Co [1963] VR 458

Onus of Proof

.The insured bears the onus of invoking the primary cover afforded by an insurance policy together with any proviso to any exclusion to the cover, whilst the insurer bears the onus of invoking any such exclusion. Australian Paper Manufacturers Ltd v American International Underwriters (Australia) Pty Ltd  [1994] 1 VR 685; Corestaff NT Pty Ltd v Insurance Australia Ltd [2021] QSC 195

Exclusion

In construing whether a claim falls within a policy exclusion, it is necessary to focus on the facts which give rise to the claim and not the form in which the claim is asserted. Australia and New Zealand Bank Ltd v Colonial and Eagle Wharves Ltd [1960] 2 Lloyd’s Rep 241; Government Insurance Office of New Wales v Council of the City of Penrith [1999] NSWCA 42; Onley v Catlin Syndicate Ltd as underwriting member of Lloyd’s Syndicate [2018] FCAFC 119 ; DMS Maritime Pty Limited v Royal and Sun Alliance Insurance Plc, [2018] QSC 303 at [84], affd [2019] QCA 264; Corestaff NT Pty Ltd v Insurance Australia Ltd [2021] QSC 195.zzz

Arising out of

Expressions such as arising out of should not be construed narrowly. Vero Insurance Ltd v Witherow: [2004] VSC 272  Arising from is not materially different to arising out of. Corestaff NT Pty Ltd v Insurance Australia Ltd [2021] QSC 195. They involve the notion of at least some causal or consequential relationship, although that may be indirect rather than proximate (Dickinson v Motor Vehicle Insurance Trust [1987] HCA 49; (1987) 163 CLR 500 at 505.); QBE Insurance (Australia) Ltd v SLE Worldwide Australia Pty Ltd[2005] NSWSC 776. Their interpretation in different contexts, including compulsory third party insurance, does not determine its meaning in the usual context. However, guidance can be derived from authorities in which such phrases are used in comparable cases involving indemnity clauses. Samways v WorkCover Queensland[2010] QSC 127

Although the words are wide the relationship should not be too remote, a weak causal relationship, but one of substance though less than that required by such as caused by or as a result of. More is required than the mere existence of connecting links: The words require the existence of a causal or consequential relationship.

Attributable to

The phrase “attributable to” has been described in Derrington and Ashton “The law of liability insurance” (2013) 3^rd ed, vol. 1 at pp 498-9. as follows:

“‘Attributable to’ ... is wider than proximate cause and refers to any act, event or state of affairs which could properly be described as a cause, ranging according to its context from a loose causal connection to proximate cause [Royal Exchange Assurance v Kingsley [1923] AC 235 at 244], depending on the purpose of the relationship involved [Beazley Underwriting Ltd v The Travelers Companies Incorporated [2011] EWHC 1520].”