Calliden Insurance Ltd v Chisholm

The applicant insurer, Calliden Insurance Ltd, sought leave to appeal an interlocutory decision of the District Court of New South Wales. The respondent, the plaintiff, had been injured in the course of his employment and alleged negligence by an employee of Employ (No 14) Pty Limited, the insured. The insured company was subsequently placed into liquidation. The plaintiff sought leave under section 6(4) of the Law Reform (Miscellaneous Provisions) Act 1947 (NSW) to commence proceedings directly against the insurer, claiming damages for personal injury.

The central legal issue before the Court of Appeal was whether the insured's payment of a $25,000 excess, as stipulated in the insurance policy, was a condition precedent to the insurer's liability and, consequently, to the plaintiff's ability to commence proceedings against the insurer under section 6 of the Act. The insurer argued that because the insured's liquidator had declined to pay the excess and the insured lacked the resources to do so, this condition precedent had not been met, entitling the insurer to disclaim liability.

The Court of Appeal, in dismissing the application for leave to appeal, reasoned that the policy's definition of "excess" as the amount "the insured first bears" did not, on its proper construction, establish payment of the excess as a condition precedent to the insurer's liability under the policy. The Court found that the insurer's obligation to indemnify arose upon the insured incurring a legal liability, and the excess was merely the amount the insured was obliged to contribute towards that liability. The Court noted that the definition of "excess" did not refer to the word "claim" and that the conditions of the policy did not explicitly state that payment of the excess was a prerequisite for the insurer's engagement of indemnity. Therefore, the plaintiff was entitled to commence proceedings against the insurer pursuant to section 6 of the Act.