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Exception and limitation 43 WCMS 1

Wallaby Grip Ltd v QBE Insurance (Aust) Ltd; Stewart v QBE [2010] HCA 9. French CJ, Gummow, Hayne, Heydon, Kiefel JJ in joint judgment. 30.03.10.

Kearns J awarded $356,510 to the second appellant, whose husband died in 2007 from mesothelioma, after commencing proceedings in the Dust Diseases Tribunal in negligence against his mid 1960s employer, Pilkington Bros, and its asbestos products supplier, Wallaby Grip.

Eagle Star Insurance Ltd was the employer’s workers compensation insurer at the time of the exposures, and its liabilities assumed by QBE, who was unable to produce a policy after notice in the proceedings.

QBE contended the plaintiff had the onus of proving its indemnity was beyond the $40,000 maximum apparent in the statutory policy contained in the 1926 Act regulation. The insurer contended that if the indemnity were agreed to be higher, documented endorsement would have been required.

The NSW Court of Appeal agreed, by majority: QBE v Stewart [2009] NSWCA 66.

The High Court unanimously restored the trial judgment.

Their Honours said [infra 21]: “A basis for the statutory scheme for which QBE contends would have to be found in the provisions of the Act. No such scheme is discernible.

"The regulations and the words of the policy cannot be used to construe, and thereby to alter, provisions of the Act which created them: The Great Fingall Consolidated Ltd v Sheehan 3 CLR 176 at 184; Australian Coarse Grains v Barley Marketing Board (1985) 157 CLR 605 at 625Hunter Resources Ltd v Melville (1988) 164 CLR 234 at 244Master Education Services PL v Ketchell (2008) 236 CLR 101 at 112.

"Moreover, the requirement in [1926 Act] s 18(3)(a), that a policy contain ‘only such provisions as are prescribed’, can only refer to provisions which are required, permitted or necessitated by the Act, in accordance with the regulation-making power given.

"The inclusion of a maximum amount for indemnity in all policies first obtained by employers was neither permitted nor required.”

Later [29]: “Professor Malcolm Clarke in The Law of Insurance Contracts 6th ed, 2009, p466 refers to three elements as ordinarily present in the circumstances necessary to the performance of the insurer's promise.

"The first is the insured event. Much may turn upon how it is described.

"The other two elements are the subject matter, which may be a class of persons, and the cause of the loss, usually referred to as the risk.

"The contract of insurance in this case identifies the insured event as the liability of the employer for injury to a worker arising at common law; the subject matter is workers, of whom Mr Stewart was one; and the risk was injury to a worker.

"Each of these elements was established. The question then is whether there is any other circumstance necessary to be established by Mrs Stewart before QBE could be said to be obliged to indemnify under the policy.”

And [32]: “The word ‘indemnity’ implies payment for the loss suffered, which is to say the whole loss.

"Many contracts of indemnity insurance involve a full indemnity.

"Nevertheless something less than payment of the full amount may be provided for under an insurance contract.

"This may be achieved by placing a cap or ceiling on the amount payable under the indemnity, which then operates as a limitation upon the amount recoverable. As was explained by the Privy Council in AMP Fire & General Insurance v Miltenburg [1982] 1 NSWLR 393 at 397, with respect to the statutory form of policy here in question, but for such a limitation, under the terms of the policy the insurer would be obliged to pay the sum awarded by a judgment: AMP Fire & General above.”

The Justices noted exception and limitation in insurance cases.

“The difference between the two is that an exception may prevent an insurer's liability from arising, whereas a limitation of the kind here in question operates after the obligation to indemnify has arisen and upon the amount payable pursuant to it.

"It limits the extent of the insurer's liability.

"What they have in common is the purpose of limiting an insurer's liability, where the circumstances necessary for it have otherwise been shown to exist.

"In each case the insurer should bear the onus of proving the limitation.” [infra 35]

Citing The Torenia [1983] 2 Lloyd's Rep 210, their Honours said [infra 36]: “In the present case it was necessary for Mrs Stewart to establish that a contract of insurance under the Act was in existence at the relevant time and that Pilkington was liable to her husband for his injuries. The first was admitted, the second was established by evidence.

"It followed that the claim was within the terms of the cover provided and the insurer's obligation arose. QBE had to do more than decline to admit that Pilkington was entitled to an indemnity greater than the statutory minimum, a matter which, in any event, had not been raised in the Further Amended Statement of Claim.

"It was required to establish what limit, if any, had been placed upon its liability to indemnify. It did not do so.

“This analysis follows upon the construction of the policy of insurance.

"Looking to the policy in its statutory setting, it may be observed that conditioning a worker's right to recovery to proof of the level of indemnity agreed between the employer and the insurer does not accord with the general purposes of the Act.

"It creates an obstacle to recovery, when the statutory intention was to facilitate claims against insurers. The Act does not provide a means by which a worker is informed of the arrangements made by the employer. A worker may never have seen the policy.” [37]

Appeals allowed with costs.

A1: B W Walker SC, D J Russell SC, inst Middletons. A2: D F Jackson QC, D R J Toomey, inst Turner Freeman. R: A J Sullivan QC, G F Little SC, D T Miller, inst Moray & Agnew.

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