Allianz Australia Insurance Ltd v Inglis

[2016] WASCA 25

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   ALLIANZ AUSTRALIA INSURANCE LTD -v- INGLIS [2016] WASCA 25

CORAM:   McLURE P

BUSS JA
MITCHELL J

HEARD:   12 NOVEMBER 2015

DELIVERED          :   3 FEBRUARY 2016

FILE NO/S:   CACV 62 of 2015

BETWEEN:   ALLIANZ AUSTRALIA INSURANCE LTD

Appellant

AND

GEORGIA ANNE INGLIS
First Respondent

STEPHEN SWEENEY
Second Respondent

DANIEL SWEENEY
Third Respondent

ELAINE SWEENEY
Fourth Respondent

STUART INGLIS
Fifth Respondent

JAMES INGLIS
Sixth Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :WAGER DCJ

Citation  :INGLIS -v- SWEENEY [2015] WADC 34

File No  :CIV 1418 of 2012

Catchwords:

Insurance - Legal liability cover - Whether insurer liable to indemnify insured's liability under Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) - Exclusion of liability for injury to a person normally living with insured - Section 54 Insurance Contracts Act 1984 (Cth) - Scope of 'act' in s 54(1) - Distinction between an 'act' and 'state of affairs' - Scope of s 54(2) - Whether exclusion a restriction or limitation inherent in claim

Legislation:

Insurance Contracts Act 1984 (Cth), s 54
Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA), s 7

Result:

Leave to appeal granted
Notice of contention dismissed
Appeal allowed

Category:    A

Representation:

Counsel:

Appellant:     Mr J E Marshall SC & Ms J M Courtney

First Respondent           :     No appearance

Second Respondent       :     No appearance

Third Respondent         :     No appearance

Fourth Respondent        :     No appearance

Fifth Respondent          :     Mr G J Pynt

Sixth Respondent          :     Mr G J Pynt

Solicitors:

Appellant:     SRB Legal

First Respondent           :     No appearance

Second Respondent       :     No appearance

Third Respondent         :     No appearance

Fourth Respondent        :     No appearance

Fifth Respondent          :     D G Price & Co

Sixth Respondent          :     D G Price & Co

Case(s) referred to in judgment(s):

Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100

Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641

Greentree v FAI General Insurance Co Ltd (1998) 44 NSWLR 706

He Kaw Teh v The Queen (1985) 157 CLR 523

Johnson v Triple C Furniture & Electrical Pty Ltd (2010) 243 FLR 336

Maxwell v Highway Hauliers Pty Ltd (2014) 252 CLR 590

Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

1. McLURE P: The appellant seeks leave to appeal and, if leave is granted, to appeal from the decision of Wager DCJ on a preliminary question of law. The answer to the preliminary question involves the proper construction of an insurance contract between the appellant, Allianz Australia Insurance Ltd (Allianz), and Linda and Stuart Inglis and the proper construction of s 54 of the Insurance Contracts Act 1984 (Cth) (the ICA).

2. The insurance contract is an Allianz SureCover Plus Home insurance policy for the period 22 August 2004 to 22 August 2005 (the Policy).  The Policy insured Mr and Mrs Inglis' home at 57 Ravenswood Road, Maida Vale (the Ravenswood property) and its contents and also provided legal liability cover.

3. The preliminary question was answered on the basis of an agreed statement of facts to the following effect.  Mr and Mrs Inglis are the parents of James and Georgia Inglis.  On 17 October 2004, 12‑year‑­old James Inglis and 10‑year‑old daughter Georgia Inglis were present at the home of Daniel and Elaine Sweeney and their 11‑year‑old son Stephen Sweeney at 23 Rhodes Place, Maida Vale.  On that day Georgia Inglis suffered serious injuries as a result of being run over by a ride-on lawnmower (the lawnmower) driven by Stephen Sweeney.  The lawnmower was owned by Stuart Inglis and it was alleged, but not admitted, that the lawnmower was driven by James Inglis from his home to the Sweeneys' home.

4. Georgia Inglis commenced District Court proceedings against Daniel, Elaine and Stephen Sweeney (the Sweeneys) claiming damages for negligently caused personal injuries. The Sweeneys issued third party proceedings against Stuart and James Inglis claiming an indemnity, or alternatively a contribution, under s 7 of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) (the Contribution Act) for the injuries suffered by Georgia Inglis on 17 October 2004 on the basis that her injuries were caused by the negligence and breach of duty of Stuart and James Inglis.  At all material times, Georgia Inglis normally lived with, relevantly, Stuart and James Inglis in the home owned by Stuart and Linda Inglis at the Ravenswood property.

5. Allianz declined to indemnify Stuart and James Inglis under the Policy in respect of the Sweeneys' claim against each of them under the Contribution Act, based on the meaning of cl 14 and cl 1(b) of the Policy.  Stuart and James Inglis issued fourth party proceedings against Allianz claiming indemnity under the Policy in respect of the Sweeneys' claims against them.

6. The preliminary question is whether, on the proper construction of the Policy, Allianz is liable to indemnify Stuart and James Inglis under the Policy for any liability they may have to the Sweeneys, or any of them, in the third party proceedings.

7. The third parties, Stuart and James Inglis who are the fifth and sixth respondents respectively (the third party respondents), were the only respondents that took part in the appeal.

The Policy and relevant findings

1. Clause 14 of the Policy is, relevantly, in the following form and terms:

   14.Legal liability - cover for injury to other people or their property

   {Applicable whether you have buildings and/or contents cover}
   We will cover your legal liability for payment of compensation in respect of:

   •death, bodily injury or illness, and/or

   •physical loss of or damage to property,

   occurring during the period of insurance which is caused by an accident or series of accidents attributable to one source or originating cause.
   This cover applies in respect of an accident occurring:

   •anywhere in Australia, or

   •elsewhere in the world, when you are temporarily outside Australia provided you normally reside in Australia.

   The maximum amount we will pay under this policy is $20,000,000 (Australian) arising out of any one accident or series of accidents attributable to one source or originating cause.

2. The exclusions, which immediately follow the insuring clause and are part of cl 14, include the following:

   What you are not covered for:

   1.We will not cover your legal liability for:

   b.Injury to any person who normally lives with you, or damage to their property;

   c.Injury to your employees, or damages to their property.

3. The Policy consists of a policy document containing details of the cover and its limitations, and a schedule which identifies the insured, the risk address, the cover(s) selected and the limits of liability.

4. In the schedule, the insured are Linda and Stuart Inglis, the risk address is the address of the Ravenswood property and the limit of legal liability cover is $20 million.

5. The Policy contains a definition clause which relevantly provides:

   'Risk address' means the land including yard and garden areas on which your home is located at the risk address stated in the current schedule.

   'We', 'our' or 'us' means [Allianz].

   'You' or 'your' means the person(s) named in the current schedule as the insured and those persons who live with you permanently who are any of the following:

   •any member of your own family and your spouse's or de facto's family.

6. The primary judge rejected the third party respondents' claim that the word 'you' in exclusion 1b means all the insured collectively with the consequence that the exclusion only applies to persons not covered by the Policy.  She held that legal liability cover under the Policy is for losses suffered by a person to whom a relevant insured has a legal liability, in this case only Stuart and James Inglis.

7. The primary judge also rejected the third party respondents' claim that exclusion 1b is, on its proper construction, confined to a claim for damages by a plaintiff not a third party claim for an indemnity or contribution under the Contribution Act.

8. As a result of the rejection of the respondents' contractual construction claims, exclusion 1b of the Policy would exclude Stuart and James Inglis' liability to Georgina Inglis on the agreed facts unless s 54(1) of the ICA applied.

Section 54 and relevant findings

1. It is necessary to set out s 54 of the ICA in its entirety:

   (1)Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act.

   (2)Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.

   (3)Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.

   (4)Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.

   (5)Where:

   (a)the act was necessary to protect the safety of a person or to preserve property; or

   (b)it was not reasonably possible for the insured or other person not to do the act;

   the insurer may not refuse to pay the claim by reason only of the act.

   (6)A reference in this section to an act includes a reference to:

   (a)an omission; and

   (b)an act or omission that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.

2. The issues in contention below were whether there was an 'act' for the purposes of s 54(1); if yes, was it an act that occurred after the Policy was entered into; and if an act, was it outside the scope of s 54(1) because it was a limitation or restriction inherent in the type or kind of insurance in issue.

3. The primary judge made the following findings. First, the relevant s 54 'act' was that, at the time of the accident, Georgia Inglis was normally living with the insured (that is, Stuart and James Inglis).

4. Second, the fact that Georgia Inglis was normally living with the insured could not reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract pursuant to s 54(2). Accordingly, neither s 54(3) nor s 54(4) applied.

5. Third, the insured having Georgia Inglis live with them on the date of the accident was not a restriction or limitation inherent in the actual claim by reference to the type or kind of insurance; it is a matter of detail of the Policy. 

6. Fourth, s 54(1) of the ICA applies in respect of the claim of Stuart and James Inglis for indemnity by Allianz. Allianz made no claim that its interests were prejudiced as a result of the relevant act (Georgia Inglis normally living with her father and brother). Accordingly, Allianz was not entitled to refuse to pay the claim by reason only of that act.

Grounds of appeal and contention

1. Allianz claims the primary judge erred in finding that:

   1.the fact that Georgia Inglis was normally living with the insured is an act for the purposes of s 54 of the Act rather than a state of affairs that pertained to and/or was a characteristic of her life as a 10 year old;

   2.the 'act' occurred after the insurance contract was entered into;

   3.the fact that Georgia Inglis was normally living with the insured could not reasonably be regarded as capable of causing or contributing to a loss in respect of which insurance cover is provided by the insurance contract pursuant to s 54(2) of the ICA;

   4.the class of persons who normally live with the insured is not a restriction or limitation inherent in the type of policy.

2. The third party respondents' contentions are to the effect that the trial judge should have found that:

   1.exclusion 1b does not apply because 'you' means all the insured and thus 'any person' means any person other than an insured under the Policy in which case the exclusion does not apply to Georgia Inglis;

   2.exclusion 1b does not apply to, and thus does not exclude, third party claims for contribution or indemnity under the Contribution Act;

   3.if s 54(2) applies, so too does s 54(5)(b), it not being reasonably possible for the insured or other person not to do the act.

Principles of contractual construction

1. As no party relied on any surrounding circumstances within the scope of that expression in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352, the meaning of the Policy is to be determined by what a reasonable person would understand the contractual language in the Policy to mean: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179. That is to be ascertained by reference to the text of the relevant provision in question, the context and the purpose or object of the Policy gathered from its terms as a whole.

2. There is no general rule of construction of insurance contracts that limiting terms, such as exclusion clauses, are to be construed strictly or narrowly.  In the leading case of Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, 510, the High Court held that the meaning of a limiting term:

   [I]s to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.

3. Ambiguity arises where the language of the contract is reasonably capable of having more than one meaning. In any event, having regard to the purpose and extent of the changes to the common law effected by the ICA, in particular by s 54, it is difficult to see any justification in principle for a general rule that requires limiting clauses in insurance contracts to be strictly or narrowly construed.

Meaning of 'you' - contention 1

1. The word 'you' is used frequently throughout the Policy.  Its meaning is informed by its context and the nature or type of insurance in question.  At its widest, 'you' means each person insured under the Policy, severally.  In the provisions of the Policy relating to home and contents cover, the 'you' is directed to those of the insured that have a proprietary interest in the property the subject of the cover.

2. In the insuring clause that forms part of cl 14 of the Policy, 'you' means, relevantly, each individual insured who is legally liable for the payment of compensation in respect of bodily injury occurring during the period of insurance which is caused by an accident anywhere in Australia.  In respect of the bodily injury to Georgia Inglis on 17 October 2004, the 'you', are Stuart and James Inglis severally, not all the insured.  'You' must have the same meaning in exclusion 1b.  Accordingly, exclusion 1b applies to an injury to any person other than Stuart and James Inglis.  I would dismiss contention 1.

Third party contribution claim - contention 2

1. The third party respondents claim an entitlement to an indemnity under the insuring clause forming part of cl 14 of the Policy in respect of the Sweeney's third party claim against them as joint tortfeasors for a contribution under the Contribution Act.  However, the third party respondents claim that exclusion 1b does not apply to a third party contribution claim under the Contribution Act.  They say it is confined to direct liability to the person who suffered the bodily injury the subject of the claim. 

2. The textual differences on which the third party respondents rely for that outcome is the expression 'in respect of' in the broader expression 'We will cover your legal liability for payment of compensation in respect of … bodily injury' in the insuring clause and the use of the word 'for' in the expression 'We will not cover your legal liability for injury to any person who normally lives with you' in exclusion 1b.  The words in italics in the insuring clause are absent from exclusion 1b.

3. In support of this construction, the third party respondents place particular reliance on the decision in Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100. The construction of the terms of the insurance contract in that case occurred in a different contractual and factual context and provides little guidance or assistance in construing cl 14 of the Policy.

4. The third party respondents' construction of exclusion 1b is not reasonably open in the circumstances.  The essence of the insurance cover in cl 14 is legal liability for payment of compensation in respect of, inter alia, bodily injury.  In that context, 'compensation' includes both legal liability for damages and payment of an indemnity or contribution under the Contribution Act.  The exclusions in cl 14 relate directly to, and form a subset of, the legal liability cover in cl 14.  It necessarily follows that the relevant legal liability referred to in the chapeau of exclusion 1b can only be legal liability for payment of compensation in respect of the matters in exclusion 1b that would otherwise fall within the scope of the insuring clause.  That construction reflects the text, context and purpose of cl 14 as a whole.  I would dismiss contention 2.

Whether an 'act' - ground of appeal 1

1. In Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115, this court considered in detail the case law relating to, and the legislative history, purpose, scope and effect of s 54 of the Act. In identifying the relevant act or omission in that case, the court declined to follow Johnson v Triple C Furniture & Electrical Pty Ltd (2010) 243 FLR 336 and held that there was an 'act' falling within s 54(1) that prevented the insurers from refusing to indemnify the insured. An appeal to the High Court on that issue was dismissed: Maxwell v Highway Hauliers Pty Ltd (2014) 252 CLR 590 (Maxwell HC).  However, the Maxwell cases are of no direct assistance in determining grounds of appeal 1, 2 and 3.

2. Section 54 of the ICA is remedial in character and its language should be construed so as to give the most complete remedy which is consistent with the actual language employed and to which its words are fairly open: Antico v Heath Fielding Australia Pty Ltd(1997) 188 CLR 652, 675.

3. No party advanced a claim in the appeal that the relevant 'act' in this case fell within either of the extended meanings in pars (a) or (b) of the definition of 'act' in s 54(6) of the ICA. That is, there was no relevant omission or any alteration in the state or condition of the subject matter of the insurance contract. That accords with my assessment.

1. The issue in this case is whether there was an act within the natural and ordinary meaning of that word. In its immediate context in s 54(1) and in s 54 generally, 'act' means something done or being done by a person. It is unnecessary to determine whether an act is confined to physical conduct, although that is what is relied on in this case.

2. In its natural and ordinary meaning, an act is different from a state of affairs or the result of an act.  These distinctions are well known in the criminal law.  See He Kaw Teh v The Queen (1985) 157 CLR 523, 564.

3. Allianz claims that the expression 'a person who normally lives with you' in exclusion 1b does not contain or constitute an 'act' under s 54(1) but rather is a state of affairs, or the status or description of a person.

4. The third party respondents claim that the act must occur or (if continuous) be occurring at the time of the accident in which Georgia Inglis suffered the bodily injuries.  That is mandated, they say, by the word 'lives' in the expression 'any person who normally lives with you' in exclusion 1b.  The 'act' on which the third party respondents rely is that, on the day on which Georgia Inglis suffered the bodily injuries, she was living with her father and brother, and normally lived with them.  The third party respondents did not contend that there was a relevant act by them, or either of them. 

5. It is not a requirement of exclusion 1b that the person who suffered the bodily injury (the claimant) be living with the insured at the time of the accident.  For example, the exclusion would apply if the accident occurred when the claimant was on holiday away from the place where he or she normally lived.

6. Exclusion 1b is a temporal exclusion in the sense that the factual basis enlivening the exclusion may change at any time after entry into the insurance contract and up to the end of the relevant period of insurance.  However, as a matter of construction, the applicability of exclusion 1b in relation to a claim is to be determined as at the date when any relevant legal liability to a third party is incurred.  The question at that date is 'does the claimant normally live with you?'.  That question can be answered in the affirmative regardless of where the claimant was actually living on that day.

7. Whether a 'person normally lives with' an insured requires that the claimant and the insured (or each insured if more than one) cohabit the same premises over an extended period.  The conduct of the claimant and each insured over that extended period will be relevant in determining the ultimate question; it will not be the conduct of any single person, be it the claimant or the insured.  Where the ultimate fact (did the claimant normally live with the insured at the relevant time) depends on the drawing of an inference from the conduct of all relevant persons over an extended period and does not depend on there being any act on the relevant day, the ultimate fact is not an 'act of the insured or of some other person'; it is properly characterised as a state of affairs or description of a relationship.  It is analogous to exclusion 1c where the actions of both parties will inform and determine whether the relationship of employer and employee exists.

8. I am mindful that s 54 is remedial in character. However, I am satisfied that the fact that a person normally lives with an insured does not constitute an 'act' within the meaning of s 54(1). I would uphold ground of appeal 1.

9. As a consequence, the appeal must be allowed and the primary judge's orders set aside. However, I will deal with the remaining grounds of appeal and contention on the assumption that the fact that Georgia Inglis was normally living with the insured at the time of the accident is an act for the purposes of s 54(1) of the ICA.

The timing of the 'act' - ground of appeal 2

1. Allianz contended that if the fact that Georgia Inglis was normally living with the insured is an act for the purposes of s 54, the act occurred before the Policy was entered into. It is accepted that Georgia Inglis was continuously living with the insured both before and after entry into the Policy.

2. Section 54(1) applies to 'an act that occurred after the contract was entered into'. The fact that Georgia Inglis was normally living with the insured before (and after) entry into the Policy does not take the act outside the scope of s 54(1). Section 54 is intended to apply to temporal exclusions in the nature of exclusion 1b which is responsive to factual changes during the period of the insurance cover. If during the period of insurance a claimant ceased to normally live with the insured before any relevant legal liability was incurred, the exclusion would not apply.

3. If the facts after entry into the Policy support an inference (as they do in this case) that on the date of the accident Georgia Inglis was normally living with the insured, that would be an act that occurred after the Policy was entered into for the purpose of s 54(1) of the ICA. I would dismiss ground of appeal 2.

Whether s 54(2) of the ICA applies - ground of appeal 3

1. Section 54(1) of the ICA does not apply if, inter alia, the act is one to which s 54(2) applies. Section 54(2) only applies 'where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract'.

2. It was no part of Allianz's positive case below that s 54(2) of the Act applied. The assumption of all parties was that it did not. However, the third party respondents accept that the issue can properly be raised in the appeal.

3. As is clear from its text, s 54(2) requires a prospective assessment of the capacity of the relevant act to cause or contribute to a loss in respect of which insurance cover is provided. It is not a hindsight analysis of whether the loss actually suffered was caused or contributed to by the act. Matters of actual causation are addressed in s 54(3) and s 54(4).

4. Allianz's claim is to the following effect. First, in the context of the insurance cover in cl 14, a 'loss' for the purposes of s 54(2) is the financial loss to the insured by reason of the insured incurring legal liability for payment of compensation in respect of bodily injury caused by an accident. Second, an act which is capable of causing or contributing to the incurring of legal liability is both something which would give rise to a duty of care or something which would make an accident more likely to occur. Third, persons who normally live in the insured's home are a class most likely to suffer an injury in the home because of regular and frequent interaction. Fourth, an insured is more likely to owe a duty of care to a person who normally lives with the insured.

5. The third party respondents maintain their position that s 54(2) does not apply to exclusion 1b. Their case as a whole is that (1) s 54(2) does not apply to exclusion 1b; (2) s 54(1) applies to exclusion 1b; (3) exclusion 1b gives rise to no relevant prejudice for the purposes of s 54(1); (4) as a consequence, exclusion 1b can never justify the refusal of the payment of a claim by Allianz. It is unnecessary to determine the correctness of proposition (3) in this appeal.

6. The primary object of s 54 is to strike a fair balance between the interests of an insurer and an insured with respect to a contractual term designed to protect the insurer from an increase in risk during the period of insurance cover: Maxwell (HC) [20]. The proper scope and application of s 54(2) may vary according to the type of cover. The following relates to legal liability cover.

7. The relevant risk relating to the legal liability cover the subject of cl 14 is the risk of the act in question causing or contributing to an accident resulting in harm for which the insured would be legally liable to pay compensation. For the purposes of s 54(2), the act in question must be one that is reasonably regarded as legally capable of satisfying the causation elements or requirements of legal liability for a loss. In particular, the act must be reasonably regarded as legally capable of satisfying the requirement that the act could potentially cause or contribute to an accident and any consequential harm and loss. The fact that a claimant normally lives with the insured may, for the reasons given by Allianz, increase the risk of a financial loss in respect of which cover is provided, but it is incapable of satisfying the causation requirements for legal liability. If there was an 'act', the increase in risk of financial loss may arguably constitute prejudice for the purposes of s 54(1) but it does not bring the act within s 54(2).

8. This construction of s 54(2) is consistent with and positively supported by s 54(3), s 54(4) and s 54(5) which, together with s 54(2), comprise a connected subset of the legislative scheme. The third party respondents' fall‑back reliance on s 54(5)(b) reveals the high artificiality of seeking to apply s 54(5) to an act that is legally incapable of satisfying the causation elements of legal liability.

9. I would dismiss ground of appeal 3 and contention 3.

Inherent restrictions/limitations - ground of appeal 4

1. Allianz submits that the High Court in FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641 created a new basis upon which s 54(1) of the ICA might not apply, by reference to the concept of restrictions or limitations inherent in the claim in order to accommodate the result in Greentree v FAI General Insurance Co Ltd (1998) 44 NSWLR 706. According to Allianz, the High Court in FAI failed to appreciate that the outcome in Greentree could be explained by reference to s 54(2), adopting the construction of s 54(2) rejected in ground 3. However, Allianz recognises that the 'new basis' in FAI has become entrenched (for the time being) by the High Court decision in Maxwell (HC). 

2. Allianz's submission, based on the current law, is that the insureds' claims were in respect of liability of a kind not dealt with by the Policy because it was not for injury to a person within the classes of cover; accordingly, the reason for refusal was not some act or omission of the insured or some other person but because the Policy did not extend to the claim.

3. The High Court in Maxwell (HC) said:

   A restriction or limitation that is inherent in the claim which an insured has in fact made, in the sense in which the plurality in FAI used that terminology, is a restriction or limitation which must necessarily be acknowledged in the making of a claim, having regard to the type of insurance contract under which that claim is made.

Thus, as explained in FAI, the making of a claim under a 'claims made and notified' contract necessarily acknowledges that the indemnity sought can only be in relation to a demand made on the insured by a third party during the period of cover.  The section does not operate to permit indemnity to be sought in relation to a demand which the third party omitted to make on the insured during the period of cover but made after that period expired.  Similarly, the making of a claim under a 'discovery' contract, of the type in issue in FAI itself, necessarily acknowledges that the indemnity sought can only be in relation to an occurrence of which the insured became aware during the period of cover.

The making of a claim under an 'occurrence based' contract, the type of insurance contract in the present case, necessarily acknowledges that the indemnity sought can only be in relation to an event which occurred during the period of cover.  That restriction or limitation is inherent in a claim which is made under such a policy [23] ‑ [25].

1. The temporal exclusion in 1b is not a restriction or limitation which must necessarily be acknowledged in the making of the claims in this case.  On my reading of Maxwell (HC), what must be acknowledged in the claims is that the third party respondents were insured under the Policy for legal liability, that bodily injury the subject of the claims occurred during the period of insurance and was caused by an accident within the geographic area covered by the Policy.  I would dismiss ground 4.

Conclusion

1. I would grant leave to appeal, uphold the appeal, set aside the orders made by the primary judge on 1 April 2015 and dismiss the notice of contention.  I would hear from the parties as to the terms of the consequential orders.

2. BUSS JA:  I agree with the orders proposed by McLure P.  Like her Honour, I would hear from the parties as to the terms of the consequential orders.

3. I agree with McLure P, for the reasons she gives, that ground 1 of the appeal has been made out.  I also agree with her Honour, for the reasons she gives, that each of the contentions in the third party respondents' notice of contention should be dismissed.

4. It is unnecessary, in the circumstances, to consider grounds 2, 3 and 4 of the appeal.

1. MITCHELL J:  McLure P has set out the background to this appeal.  I adopt the definitions used in the President's reasons.

2. Section 54(1) of the ICA will not operate unless 'the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim … by reason of some act of the insured or of some other person'. In a case where s 54(1) operates 'the insurer may not refuse to pay the claim by reason only of that act'. No party suggested that s 54(6) of the ICA, which expands the reference to an 'act', applied in the present case.

3. Section 54 of the ICA operates by reference to the effect of the contract of insurance on the claim which the insured has in fact made. In considering the application of s 54 to a particular case, close attention must be given to the claim which the insured has made, the effect of the contract of insurance between the parties, and the reason for the insurer's refusal to pay that claim: FAI [39], [40]; Maxwell HC [21] - [22].

4. The insureds' claim in this case is found in the statement of claim in the fourth party proceedings. Stuart and James Inglis claim that they are entitled to be indemnified by Allianz under the Policy in respect of the third party claim made against them by the Sweeneys. The third party claim is made under s 7 of the Contribution Act for indemnity, alternatively contribution, in relation to Georgina Inglis' primary claim against the Sweeneys. Georgia Inglis' primary claim against the Sweeneys is for compensation for an injury she suffered on 17 October 2004, when Stephen Sweeney drove a mower onto her.

5. Allianz filed a defence to the fourth party claim.  In that defence, Allianz admitted that the liability of Stuart and James Inglis asserted in the third party claim was a:

   liability for payment of compensation in respect of bodily injury occurring during the period of insurance which is caused by an accident or series of accidents attributable to one source of originating cause

   within the meaning of cl 14 of the Policy. 

6. Allianz denied liability to indemnify Stuart and James Inglis in respect of the third party claim because exclusion 1(b) provided the Policy did not cover 'your legal liability for injury to any person who normally lives with you' and Georgina Inglis lived with Stuart and James Inglis at all material times.

7. The effect of the Policy is that Allianz is entitled to refuse to pay the claim by reason of the circumstance that, on 17 October 2004, Georgina Inglis was a person who normally lived with Stuart and James Inglis.  Stuart and James Inglis have advanced arguments about the proper construction of exclusion 1(b), which seek to deny that effect to the Policy.  I agree with McLure P's reasons for rejecting those submissions.

8. I also agree with McLure P, for the reasons she gives, that the circumstance that, on 17 October 2004, Georgina Inglis was a person who normally lived with Stuart and James Inglis was not an 'act' for the purposes of s 54(1) of the ICA.

9. To identify Georgina Inglis as a person who normally lived with the insured is to describe the character of her relationship with the insured, rather than her conduct.  Her relationship with Stuart and James Inglis bore that character at the time of entry into the Policy, and maintained that character throughout the life of the Policy.  The character of their relationship may have been a product of the mutual conduct of Stuart, James and Georgina Inglis in relation to each other over time.  But the status of Georgina Inglis at the time of her accident as a person who normally lived with the insured did not depend on anything in particular Georgina Inglis did.  The effect of the Policy was that Allianz could refuse to pay the claim by reason of the character of Georgina Inglis' relationship with Stuart and James Inglis at the time of the accident, rather than by reason of anything in particular Georgina Inglis did.  Georgina Inglis' status at the time of the accident as a person who normally lived with Stuart and James Inglis is not an 'act' of Georgina Inglis.

10. It follows that the Policy did not have the effect, but for s 54, that Allianz may refuse to pay Stuart and James Inglis' claim 'by reason of some act of the insured or of some other person'. That condition for the operation of s 54(1) of the ICA was not satisfied. Therefore, s 54(1) could not operate to prevent Allianz from refusing to pay the claim by reason only of Georgia Inglis being a person who normally lived with Stuart and James Inglis on 17 October 2004. Ground of appeal 1 is made out.

11. Given the success of ground 1, it is unnecessary to deal with grounds of appeal 2 ‑ 4. Allianz's alternative arguments on the latter grounds proceeded on the rejected premise that the circumstance that, on 17 October 2004, Georgina Inglis was a person who normally lived with Stuart and James Inglis is an 'act' for the purposes of s 54(1) of the ICA. I would reserve consideration of issues raised by grounds 2 ‑ 4 for a case in which they require determination.

12. It follows that the appeal should be allowed, and the orders made by the District Court on 1 April 2015 set aside.  I would hear from the parties in relation to consequential orders which they may seek.