Newsletter: October 2021 Case Notes
Note: This is a lightly edited version of case notes included in my newsletter sent to subscribers on 3 November 2021. If you would like to receive my insurance law updates, please fill out the form on this page.
Included in this update:
Supreme Court of New South Wales
Cutting Edge Services Pty Ltd v Raymond & Therese Penfold; Raymond & Therese Penfold v The Hollard Insurance Company Pty Ltd [2021] NSWSC 1322
The defendants to this proceeding owned a farm on which a fire destroyed wooden sleepers. The defendants did not own the sleepers but merely allowed the owners, a company owned by the defendants’ relatives, to store them on the property.
The company commenced proceedings against the defendants who cross-claimed against their insurer, Hollard.
In the primary claim, the defendants were found to have been negligent. After apportionment, the defendants were held to be liable for 80% of the plaintiff’s loss, which the Court assessed as $221,612. Consequently, the defendants were liable for $177,290. The defendants sought indemnity from their insurer, Hollard.
Hollard denied the defendants’ claim, relying on an exclusion excluding property not belonging to the defendants but in their physical and legal control. Instead, it allowed a claim for such property under ‘additional benefits’ cover, which was limited to $100,000.
Similarly to another case I discuss below, Steer v AMP Life Limited & AMP Superannuation Ltd, part of the defendants’ case relied on weak arguments about the cancellation or expiration of insurance contracts. The defendants argued that an earlier PDS than that relied upon by Hollard contained the applicable terms as a result of s58 of the Insurance Contracts Act 1984 (Cth). They did so in the belief that the earlier PDS’s terms were more favourable to them (spoiler: they weren't). Their argument was that s58 required Hollard to give notice of the ‘cancellation’ of the 2012 PDS before it could rely on the 2015 PDS. This argument was quickly resolved because, as the Court found, cover did not lapse. That was the harm to which s58 was directed. Consequently, it did not apply to this situation.
The remainder of the decision concerned argument over whether the destroyed sleepers were under the defendants’ control at the time of the fire. Here, again, the defendants’ approached construction of the contract in an idiosyncratic way (Hollard’s counsel submitted the principles relied upon by the defendants had been superseded in the past 22 years). The Court accepted Hollard’s approach to construction, which, broadly, was to construe the entire contract to ensure, as much as possible, congruent operation to the whole policy.
N Adams J found the sleepers were in the defendants’ physical and legal control. Consequently, Hollard had been correct in limiting liability to that offered by the additional benefits cover. The defendants’ cross-claim was dismissed.
Supreme Court of Queensland
Landel Pty Ltd v Insurance Australia Ltd [2021] QSC 247
In early 2019, monsoonal rain caused water damage to the plaintiff’s shopping centre in Townsville. The water entered the building through the roof on 31 January 2019. More entered the building and after flowing over land between 3 February and 4 February. The plaintiff’s property was insured under an Industrial Special Risks Policy insured by IAL.
IAL admitted liability for damage caused by water entering through the roof but did not paid the plaintiff’s claim in relation to that damage until the last day of trial. It also admitted liability for flood damage but claimed that liability was limited to $250,000 due to the policy’s limits for flood.
The proceeding in the Queensland Supreme Court concerned a dispute over whether the inundation damage occurring on 3-4 February was within the policy’s definition of flood. This dispute was determined on the expert evidence given concerning the origins of the inundating water. The Court found that there was a single proximate cause of the plaintiff’s loss, water overflowing from the Gordon Creek. This brought it within the policy’s definition of ‘flood’, being “the inundation of normally dry land by water overflowing from the normal confines of any natural watercourse or lake (whether or not altered or modified), reservoir, canal or dam.”
This proceeding largely turned on the extensive expert evidence adduced. Dalton J noted a number of problems with the way that evidence was presented, which are useful for experts and their instructing lawyers. In particular, Dalton J noted that while there is a tendency for lawyers to take a hands-off approach to expert reports, for fear of being accused of coaching, they should be involved in ensuring reports are presented in a way that assists the Court. Lawyers should be involved in editing reports for clarity and avoiding jargon, while not influencing the substance of the evidence. Her Honour’s comments on this and other issues concerning experts are between [18]-[35] of the judgment.
District Court of South Australia
Steer v AMP Life Limited & AMP Superannuation Ltd [2021] SADC 109
This life insurance judgment demonstrates the perils for business in regulatory changes, particularly for superannuation fund trustees.
In March 2019, the Treasury Laws Amendment Act (Protecting Your Superannuation Package) Act 2019 (Cth) inserted s68AAA into the Superannuation Industry (Supervision) Act 1993 (Cth).
Section 68AAA required superannuation fund trustee to cease insurance benefits in relation to members’ accounts that had been dormant for more than 16 months, where the member had not elected to maintain the insurance benefit. The obligation came into effect on 1 July 2019.
Ms Burns was a member of the AMP Retirement Trust (Fund) until she died. AMP Superannuation Ltd was the trustee of the Fund. Ms Burns was entitled to life insurance benefits under a group life insurance policy issued by AMP Life Limited. Ms Burns had left her employment in about 2014. Since then, she had not made any contributions to her superannuation.
In early 2019, AMP Superannuation wrote to her pursuant to its s68AAA obligations. The problem was that it wrote to her addressed to Ms Burns’ old work email account. Because she did not elect to maintain her life insurance benefit, on 1 July 2019, AMP Superannuation cancelled her benefit and stopped paying premiums in respect of it.
Ms Burns died in October 2019. Her estate subsequently claimed a life insurance benefit, which both AMP Life and AMP Superannuation denied.
The plaintiff raised a number of claims to support its claim for a life benefit. The only one that was successful was that against AMP Superannuation for its breach of duties under s52(2)(c) to act in Ms Burns’s best interests. Its breach came from its reliance on notices sent to Ms Burns’s old email address to send the required notices under s68AAA. Its failure to ensure that those notices made it to Ms Burns meant she was not given the opportunity to make the necessary election. Crucial to this finding was the ancillary finding that Ms Burns had not given consent to receiving emailed notices under the Electronic Transactions Act.
For insurers, the Court made a number of important, albeit relatively obvious findings about the nature of group life policies and their cancellation. Most importantly, it held that this case was not one in which cover was cancelled for non-payment of premiums. Instead, it was AMP Superannuation who, as the insured, had cancelled cover. As a result neither s201(5) of the Life Insurance Act 1995 (Cth) or s59 of the Insurance Contracts Act 1984 (Cth) applied.