Commercial Union Assurance Co v Hazelwood-Smith (No 2)
[2000] VSC 137
•14 April 2000
| SUPREME COURT OF VICTORIA | |
| COMMON LAW JURISDICTION | Not Restricted |
No. 7789 of 1999
In the Matter of Section 109 of the Magistrates’ Court Act 1989
| COMMERCIAL UNION ASSURANCE COMPANY OF AUSTRALIA LTD | Applicant |
| v | |
| HARLEY HAZELWOOD-SMITH and BETTY HAZELWOOD-SMITH | Respondents |
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JUDGE: | Eames J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 March 2000 | |
DATE OF JUDGMENT: | 14 April 2000 | |
CASE MAY BE CITED AS: | Commercial Union Assurance Co v Hazelwood-Smith (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 137 | |
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Insurance – construction of policy – buildings and contents' policy – schedule identifies the residential property of the insured as being "the situation" - goods of insured destroyed in fire at another location before they have been moved onto the insured property – policy provides for coverage of goods "while away from your situation" - whether goods were capable of being "contents" if not, at some time, first located at "the situation".
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr. M. Fleming | Barker Gosling |
| For the Respondents | Mr. J.D. Mattin | Battley & Co Pty |
HIS HONOUR:
This is an appeal on a question of law brought pursuant to s. 109 of the Magistrates’ Court Act 1989. The appellant, Commercial Union Assurance Company of Australia Ltd (hereafter referred to as "the Insurer") appeals against a decision of a magistrate made in the Magistrates’ Court at Broadmeadows on 3 November 1999 whereby the Insurer was ordered to pay the sum of $40,000, together with costs, to the respondents, Harley Hazelwood-Smith and Betty Hazelwood-Smith (hereafter referred to as "the Insured Couple") pursuant to a policy of insurance issued by the Insurer to the Insured Couple.
The hearing before the magistrate, and also before me, was conducted on the basis of agreed facts, upon which counsel for the respective parties made submissions as to whether liability to provide indemnity existed under the terms of the contract of insurance.
The Agreed facts
The Insured Couple purchased a property at 294 Camp Road, Broadmeadows pursuant to an unconditional contract of sale. On 26 March 1998 the Insured Couple took out house insurance with the Insurer with respect to the premises at that location. On 26 May 1998 settlement of the purchase of the property was concluded. On 29 May 1998 the Insured couple took out a contents policy with the Insurer whereby contents were insured to a sum of $40,000. The Insured couple took out the insurance on the buildings and the contents as trustees for the Hazelwood-Smith Unit Trust.
For five years prior to entering the contract of sale the Insured Couple had lived at 1 Thompson Street, Campbellfield. A few days after taking out the contents policy, the Insured Couple commenced the process of moving their belongings from Thompson Street into their new home at 294 Camp Road, Broadmeadows, but on 2 June 1998, before any of the chattels to which this appeal relates were delivered to the new home, fire broke out at their premises in Campbellfield, and all of their belongings were destroyed.
There is no suggestion that the fire was other than a dreadful accident.
It is an agreed fact that the goods lost in the fire had never been at 294 Camp Road, Broadmeadows and it is agreed, too, that the Insured Couple had no other cover for contents, either with respect to 1 Thompson Street, Campbellfield or 294 Camp Road, Broadmeadows.
Although these were not agreed facts, it was submitted to the magistrate, without objection, that there was a delay between the date of settlement and the taking out of contents insurance, which arose because the Insured Couple used that time to install some additional security items which the insurance broker recommended they undertake. But for that delay, the goods may have all been moved to the premises some days earlier than the date the fire started. It was also stated to the learned magistrate that on the day of the fire some items had already been delivered to their new home. Neither of those facts was challenged before me, and neither is relevant to the issues which I must determine. What these additional facts illustrate, however, is that if the destroyed goods were not in fact insured, then the Insured Couple were the victims of most cruel misfortune.
It is agreed between the parties that the only relevant material which needs to be considered comprises the admitted statement of facts, the Schedule to the Insurance Policy and extracts from the Policy.
The learned magistrate did not have before her a full copy of the Insurance Policy, but merely four pages from that Policy. The parties, by consent, agreed that I should also have before me two additional pages of the Policy which were not placed before the magistrate. I have agreed to adopt that course.
The Terms of Insurance Coverage
(a) The Schedule to the Policy
The terms of insurance coverage are to be found in the Policy and the Schedule to that policy. The Schedule records that it is "to be attached to and read in conjunction with the company's policy".
The Schedule to the insurance policy records the address of the insured couple as being a Post Office Box at Campbellfield. In a box on the Schedule there is a heading with the title "Situation", and within that box the address 294 Camp Road, Broadmeadows is given. The Schedule records that the commencement date for the period of insurance is from 26 March 1998 and continues to 26 March 1999.
Under the section headed "Interest/Property Insured" and which also contains a column for "Sum Insured" the following appears:
SECTION INTEREST/PROPERTY INSURED SUM PREMIUM
INSURED1. BUILDINGS
INCLUDING REPLACEMENT BENEFIT
MORTGAGEE AS ABOVE
SITUATION AS ABOVE
CONTENTS$100000 OTHER CONTENTS $40000
COMMENCEMENT DATE 29/05/98
SPECIAL CONTENTS $NIL
TOTAL SUM INSURED FOR ALL CONTENTS
EXCESS APPLICABLE TO ALL ABOVE $100
LIABILITY LIMIT - $20,000,000'OTHER CONTENTS' INCLUDES 'VALUABLE ITEMS' TO
A TOTAL OF $5000 WITH AN ITEM LIMIT OF $1250$40000
2. VALUABLE ITEMS
OTHER VALUABLE ITEMS – ITEM LIMIT $1250 $NIL
SPECIAL VALUABLE ITEMS $NIL
TOTAL SUM INSURED FOR ALL VALUABLES$NIL
INSURED: H & BM HAZELWOOD-SMITH AS TRUSTEES
FOR THE HAZELWOOD-SMITH UNIT TRUSTYOUR POLICY HAS BEEN ALTERED AND THIS SCHEDULE REPLACES ANY PREVIOUS SCHEDULE FOR THE ABOVE PERIOD OF INSURANCE AS FROM 02/06/98
It is to be noted that under the reference to "buildings" the words "situation as above" appears, and at a place above that, on the Schedule, is the box which shows the "Situation", as being 294 Camp Road, Broadmeadows.
(b) The Insurance Policy
The extracts from the insurance Policy, which are relevant to the present appeal, appear as follows.
The broad scope of coverage is specified at page 9 of the Policy, under the heading "Buildings and Contents", where the following words appear (I have highlighted some words for the purpose of my analysis):
"If you only insure buildings the cover provided for destruction, loss or damage does not apply to contents.
If you only insure contents the cover provided for destruction, loss or damage does not apply to buildings.
Your buildings and contents are insured while at your situation. Cover for your contents while away from your situation is not provided unless we say so." (my emphases)
On page 8 of the Policy there is a section headed "Words that have a special meaning". The Policy notes that:
"In this policy there are words that have a special meaning. These words are listed below. If the meaning of a word is not shown below, we tell you on what page the meaning is printed. Wherever a word with a special meaning is printed in this policy, it will be shown in bold print."
The following words with a special meaning, as listed in that section, and which are relevant for present purposes, are defined as follows:
"Contents:This is on pages 23 and 24 under 'What are contents'
Situation:This is the place where the buildings and/or contents are located. We will show this place on all schedules we give you."
On page 23 of the Policy, under the heading "What are contents", some twenty-four paragraphs follow. I note portions only of the first three paragraphs, which are as follows:
"Household goods that are not used for earning income.
Goods while they are at your situation and that you use for earning your income. You would normally receive a taxation deduction for these. We will pay up to $500 dollars in total for these items. This does not include office and surgery equipment.
Office and surgery equipment while it is at your situation and that you use for earning your income".
At page 26 of the Policy, the following section appears, which I will quote in full, although only portions of it were the subject of argument before me. The section reads as follows:
"Cover for contents away from your situation
Your contents are insured while they are away from your situation, but still in Australia.
Your contents are not insured if they:
(a) are on the way to, or from, or in, commercial storage.
(b) have been away from your situation for more than a continuous period of 90 days, other than sporting equipment that is stored within a clubroom.
(c) are in transit during a permanent removal.
(d) have been removed permanently from your situation, without our permission.
The following items of contents are not insured while away from your situation:
Accessories and spare parts for motor vehicles, motor cycles, mini bikes, caravans, trailers and watercraft
Tools, instruments, equipment and goods that you use for earning your income.
Office and surgery equipment that you use for earning your income.
If you selected Cover 1 – Listed Events, cover for storm, rainwater, wind or impact by vehicle:
only applies when the contents are in a residential building, boarding house, motel, hotel, club, nursing home or hospital where you are staying, or for sporting equipment stored within a clubroom.
does not apply while the contents are in a tent, vehicle, caravan, trailer, aircraft or watercraft.
If you selected Cover 1 – Listed Events, cover for theft does not apply while your contents are away from your situation. Sporting equipment is covered when it is in a locked clubroom.
If you selected Cover 2 – Blue Ribbon Accidental Damage, your contents will also be insured in New Zealand.
In the extract from the Policy appearing in the last paragraph I have numbered certain sub-paragraphs (a) to (d). That numbering does not appear in the Policy, but has been done by me for ease in understanding these reasons.
The learned magistrate found that the goods which were destroyed by fire were "contents" which were insured under the Policy of Insurance. Her Worship adopted the submission then made by counsel for the Insured Couple, that the provision which stated that "Your contents are insured while they are away from your situation, but still in Australia" provided the answer to the question, and that provision did not specify that the goods had first to be at the situation before they could be called "contents" and before they would then be contents "away from your situation".
Her Worship also concluded that the parties must have intended that these goods were to be covered from the time when the insurance was effected, even though they had not at that point been transferred to the insured residence. It was, however, common ground before me that the subjective intentions of the parties are not relevant to my task, which requires the interpretation of documents. No evidence was called before the magistrate as to intention, and the issue of the parties' intentions (irrelevant, in any event, as it is now conceded), was not explored before the magistrate. Insofar as error is disclosed by that finding of the magistrate, the appeal was not brought with respect to that matter, and nothing now turns on the finding.
Although three questions of law were identified in the terms of the order made by a Master with respect to the appeal, they may be reduced to a single question, namely, whether the learned magistrate was wrong, as a matter of law, in concluding that goods which had never been located at "the situation" - which was identified in the Policy to be 294 Camp Road Broadmeadows - were goods which constituted "contents" to which the indemnity under the Policy applied.
The contentions advanced for the Insurer/appellant
Mr Fleming, counsel for the Insurer, submitted that the learned magistrate was in error in her interpretation of the Policy. The claim by the Insured Couple should have been rejected on any of the following alternative grounds:
(i) As a matter of common or dictionary usage, to be "contents", at all, the goods had, at some time, to be contained within the buildings or on the land at the situation, being 294 Camp Road, Broadmeadows;
(ii) The coverage was for goods (i.e. contents) at the situation or goods/contents away from the situation. These goods were not at the situation. If they were, then, to be goods "away" from the situation, that necessarily required that they had first been at the situation, at some time;
(iii) Although either of propositions (i) or (ii), above, would be sufficient to defeat the claim by the Insured Couple, were it necessary to consider the exceptions under the Policy (where it stipulated that contents away from the situation were not to be covered), exception (b) would apply, as these were goods/contents which were away from the situation for longer than 90 days.
the contentions advanced for the Insured Couple/respondents
Mr Mattin, counsel for the Insured Couple, submitted that the learned magistrate was correct in her decision (although not necessarily correct in all of the reasons upon which she based her decision). He submitted that:
(i) The meaning of "contents" was to be found not in dictionaries, but in the terms of the Policy. The definition of "contents" in the Policy did not specify that goods had first to be contained in buildings at, or upon the boundaries of, the situation;
(ii) Nowhere in the Policy was it specified that goods had to be first delivered to the premises at the situation before they could later be regarded as being goods "away from" the situation. There was an ambiguity in the definition of "situation" which should be interpreted in favour of the Insured Couple, so that goods could be covered even though they had never been at the situation;
(iii) The Policy specifically insured goods away from the situation, as these goods were. The words "away from" merely meant "not at". As to those specified circumstances where goods away from the situation were expressly denied coverage, none of those exceptions applied here. In particular, exception (b) did not apply, as the 90 days had to be counted from the date when the insurance came into effect, and these goods were destroyed only four days after coverage commenced, so were only "away from" the situation for four days.
I turn, then, to examine the competing contentions as to those issues.
What constitutes "contents"?
The Policy specifies, at page 9, under the heading "Buildings and Contents" - what was and was not insured. The scope of coverage was stated in the following terms: "Your buildings and contents are insured while at your situation. Cover for your contents while away from your situation is not provided unless we say so". (I have omitted the bold type face which appears on certain words which are defined in the Policy, but have highlighted, instead, words which are relevant to my discussion).
As his first argument, Mr Fleming submitted that the coverage is for "contents", a word which necessarily connotes a relationship with a thing in the sense of being contained by something, which in this case would be the insured buildings (or possibly the land) at 294 Camp Road, Broadmeadows. The relevant definition of "contents" in Macquarie Dictionary[1] is: "that which is contained".
[1]Macquarie Dictionary, 3rd Ed. at 471.
Mr Fleming referred me to definitions contained in Stroud’s Judicial Dictionary, and "Words and Phrases Judicially Defined", but only for the purpose of demonstrating that there was no definition inconsistent with the contention he advanced as to the meaning to be attributed to the word "contents". Likewise, he referred me to the provisions of Division 3 of the Insurance Contracts Regulations issued pursuant to the Insurance Contracts Act 1984. As to the case law, only one case to which I was referred (Jacobs v Spencer[2]) provided assistance, and that only in the most limited way.
[2] ` (1941) 41 SR(NSW) 102.
Mr Fleming submitted that it was significant that the word "contents" was used in the Policy, rather than words such as "goods" or "chattels". Thus, he submitted, it was intended that the word "contents" should be given its dictionary meaning, and it was intended that the Insured Couples' chattels must have been items contained in a building (or, at least, within the boundaries of "the situation"), the appropriate building being that which was insured and identified as being at the "situation" at Camp Road, Broadmeadows. Mr Mattin submitted, in response, that if it was necessary for goods to be contained within a building at the situation (or within the boundaries of the situation) in order that they could be described as "contents" then that was inconsistent with the fact that the Policy provides coverage for goods which were away from 294 Camp Road, Broadmeadows. It could not have been necessary, therefore, that goods be confined within the walls of the building (or within the boundaries) of 294 Camp Road for them to be deemed "contents".
In Jacobs v Spencer the Court of Appeal in New South Wales was interpreting a policy which provided primary coverage for "the whole contents of the private dwelling house" and secondary coverage when "the property" was located at a private residence, hotel, inn, lodging house, etc, at which the insured party was temporarily residing. The terms of the secondary coverage were very similar to the terms used in the Policy with which I am concerned, whereby, at page 26, it is stated that the Policy "only applies when the contents are in a residential building, boarding house, motel, hotel, club, nursing home or hospital where you are staying, or for sporting equipment stored within a clubroom".
The issue in Jacobs v Spencer was whether goods left in a car parked in a hotel car park, were covered by the Policy. The Court held that they were not covered, because the Policy applied only to goods within four walls of a building. Jordan CJ held that secondary cover extended to things which - "once the contents of the dwelling house or of its outbuildings"- are thereafter damaged or lost while located at one or other of a number of other specified places.
The case is not of particular assistance, because the terms of the Policy in that case specified that what were insured were "contents of dwelling situated at (an identified address)". Elsewhere, the Policy referred to "the whole contents of the private dwelling house. . .herein described". Thus, the Policy in that case left little room for doubt that contents were items contained in a particular building. The issue with which I am concerned, as to the status of goods which had never been placed within the designated situation, did not arise. What can be seen, however, is that the judges in Jacobs v Spencer assumed that goods remained "contents" when they were subsequently moved away, temporarily, from the place at which they had been housed, and which had been identified as the location for primary coverage. Similarly, under the present policy (see page 25) coverage extends to "contents while they are in the open air at your situation". The cover for contents away from the situation, however, required that those "contents" be in a residential building, boarding house, etc. A similar requirement was identified in Jacobs v Spencer. These goods can be contents although not within four walls of the residence whilst at the situation, and also when within four walls of another building whilst away from the situation. An element of "containment" may be thought to apply however, so that once in the building or on the land at the situation the goods become, and thereafter retain the description of, "contents".
Although I later conclude that the Policy in this case does demonstrate an intention that only goods which had first been housed in the dwelling at "the situation" would be covered, I do not accept that this conclusion can be derived merely by reference to dictionary definitions, as Mr Fleming contended. In Jacobs v Spencer[3] Jordan CJ observed (as to the arguments then advanced by counsel concerning the construction of words in a policy) that "the policy is its own dictionary" and that, in my opinion, is the case here, also. The conclusion I reach, however, as to the meaning of the word, when used in the Policy, is not inconsistent with the dictionary definitions advanced by Mr Fleming.
[3](1941) 41 SR (NSW) 102, at 106
If reference is not made to the dictionary but merely to the Policy then what are "contents" is defined. There are, altogether, some twenty-four paragraphs identifying items in specific or generic terms as being defined as "contents". In the first paragraph, "contents" are defined as "household goods, which are not used for earning income". That first definition makes no reference to "situation", nor to containment. The second definition, at page 23, identifies "goods while they are at your situation and that you use for earning your income", and the third definition refers to office and surgery equipment "while it is at your situation", which equipment is used for earning income. If the first definition stood alone, goods which were not at the situation could be "contents", unless words were added to the first definition so as to read "household goods at your situation . . .". It might, initially, be thought significant, that not only do those words not appear in the first definition, they do appear in the second and third definitions. That could be said to demonstrate that the word "contents" as defined, does not, in itself, import containment at the situation. I do not, however, consider that that is the explanation for the omission of reference to "situation" in the first definition of "contents".
I recognise that there may be nothing absurd in the notion that goods which have been at a particular household location, and which were the property of householders who had not yet moved into a new household, might nonetheless be regarded, by the householders, at all times, as having been "contents" of both their new and old households. The mere fact that items were described as "household goods" would not necessarily imply that the items must first have been in a particular household, nor indeed, in any particular building constituting the household of the owners of the goods.
However, whilst the householders might have such an understanding of what were "household goods", I consider that, in the context of the Policy, the fact that the first definition of "contents" made no reference to "the situation" is explicable by the fact that (apart from the second and third definitions) all of the other definition paragraphs specify items which one would associate with a residential situation (the "situation" comprising both buildings and outbuildings and land). In other words, the use of the term "household goods" is referable to a residential premises. The fact that some of the items were transportable (eg. "money and negotiable documents"), merely means that they, too, are capable of being "household goods". The fact that the words "household goods at your situation" are not used, in my view, does not manifest an intention that goods never brought into the household at the situation were intended to be covered. The goods which were being covered were intended to be the contents of a particular household situation, in my opinion, and the household with which the Policy is concerned is that located at "the situation". The specific reference to "the situation" in the case of income producing goods is explicable as being a limitation imposed so as not to cover such items when they really are the contents of a business premises, which might be assumed to have its own insurance cover for contents.
Mr Fleming submitted that it was significant that the Policy referred to "your contents", not "your chattels", and that it spoke of "your contents while they are away from your situation", not "your goods wherever they may be located". I agree that there is significance in the use of the word "contents". The twenty-four paragraphs identify "goods", "items, "appliances", "effects" "accessories" and so forth. All, however, fall under the broader definition of "contents". This demonstrates, in my view, that "contents" is being used as something more specific in meaning than "goods" or "chattels". It is a reference, in my opinion, related to the contents of the buildings or the area of land, which is identified in the Policy as being the "situation".
The same conclusion is strengthened when one considers another paragraph in the Policy, at page 25. Under the heading "Cover for Contents in the open air at your situation" the following appears: "We will insure your contents while they are in the open air at your situation. Your contents are in the open air when they are not in a building that is fully enclosed". That suggests that contents will ordinarily be enclosed by a building but need not be if they are located at "your situation". Cover for theft does not apply "while your contents are away from your situation" and cover for storm damage, etc. only applies while the contents are contained within a building.
Thus, whilst I do not accept that it is by virtue of any common or dictionary usage of the word "contents" that the items which were destroyed by the fire in this case are incapable of constituting "contents", an examination of the usage of the words as defined by the Policy would nonetheless suggest the same conclusion, namely, that for primary coverage goods will be required to be within a building, unless they are in the open air at the situation at which that building is located. Given that coverage is provided for contents "at your situation", it was intended that primary coverage be for contents of the buildings at the situation (or else goods left in the open air at the situation). If these goods had never been at the situation, therefore, they could not be "contents" under the Policy. I turn then to other contentions advanced on behalf of the Insurer.
Can goods be "away" from a place, without first being at that place?
Mr Fleming submitted that when the scope of the coverage - as set out at page 9 of the Policy - is considered, it is apparent that if goods are to be insured as "contents", then the goods in question must either be "at your situation" (which was not the case here) or else, having been once "at your situation", are now "away from your situation". Mr Fleming submitted that the concept of goods being "away from" a place necessarily requires that they first have been at that place. The goods here were never at the situation, and, thus can not be goods away from the situation, he submitted. They can not be covered by the Policy.
In my view, the concept of "away from" might be quite consistent, in some contexts, with merely meaning "not at". The words used were not "removed from". Thus, unless there is something else in the terms of the Policy, or in the context in which the words "away from your situation" appear, then, in my view, the terms of the Policy could permit coverage of these goods, although they had not been located at the situation at any time prior to their destruction.
As I shall discuss, however, in the context of this Policy, "away from" does presume and require that the goods were once at the situation.
Were these goods covered by the Policy?
Mr Fleming advanced alternative arguments for his contention that the expression "away from" was not intended in this Policy to merely mean "not at".
In the first place, Mr Fleming submitted, it would be a commercial nonsense, because an insurer would not intend to be bound to cover items which were located at a place other than the identified situation/residence, because they would be likely to be covered by insurance that related to that other place. He submitted that were the interpretation advanced by the Insured Couple to be adopted, then a person who owned four properties would only need contents coverage for one of them, as the goods at the three other places would be contents "away from" the first.
I do not find that argument persuasive, for reasons which become apparent if one has regard to the terms of the Policy. In the example given - of four separate residences, with only one contents policy being held, with respect to the first residence - the Policy of the first residence would not cover the chattels in all the other residences, either because those goods were permanently away from the first situation (exception (d)) or were away for more than 90 days (exception (b)) or else, arguably, did not meet the description of "household goods" because they were never the goods of this household, but of one or other of the three other households. In any event, as Mr Mattin submitted, where there is no evidence relating to the commercial factors which might bear upon the terms of the Policy, it may be unwise to make presumptions as to commercial considerations. It might be equally open to conclude, for example, that the commercial reality was that a policy taken out on home contents, which had not yet been moved into the new home, would cover those items immediately, even if identification of them might be difficult before they had been first placed in the insured residence.
I do not, therefore, gain much assistance by resort to considerations of "commercial reality", which issues were not explored before the magistrate, in any event. More relevantly, it seems to me that the Policy, by its terms, does demonstrate that it is the intention that only goods which had been at the situation would subsequently qualify for coverage as being goods which were "away from" that situation.
As is stated at page 9, coverage is not provided for goods away from the situation unless the Policy so specifies. The fundamental contention made on behalf of the Insured Couple is that the Policy specifies, at page 26, that: "Your contents are insured while they are away from your situation, but still in Australia". The goods here, met that description, counsel submitted (so long as they were not in one of the four exceptions). It should not be concluded that the Policy used "away from" to mean "formerly at, but now not at", Mr Mattin submitted.
Mr Mattin, counsel for the Insured Couple, submitted that nothing in the Policy required that the goods must first have been at the situation. The definition of "situation" confirms, he submitted, that coverage applies where goods may be located at a place other than "at" the situation. The word, "situation", is defined as "the place where the buildings and/or contents are located", (my emphasis).
Mr Mattin contended that the Policy creates an ambiguity. Whilst primary coverage would apply to both buildings and contents "while at your situation" (see, page 9 of the Policy) it is not essential that both contents and buildings be "at" the situation for primary coverage to apply. By the use of "and/or", Mr Mattin submitted, the definition of "situation" leaves open that in the case of "contents" the definition of "situation" can read "the place where the contents are located". Put another way, the definition of “situation” would therefore only require that one or other of either the buildings or the contents be located at the situation stipulated in the Policy. Thus, so Mr Mattin submitted, the definition of "situation", when read with the statement that, "Your contents are insured while they are away from your situation, but still in Australia," is consistent with the conclusion that coverage of goods can arise even though they have not first been at the situation. He submitted that the failure of the Policy to specifically state that contents had to have been first at the situation, before they could be considered eligible for cover, is the fault of drafting, for which the appellants must pay the price of the contra proferentem rule.
Mr Mattin conceded that had the definition of "situation" read "the place where the buildings and contents are located" the contention of ambiguity could not be maintained as to the definition of "situation". In that case, primary cover would require that the contents first be at the situation, just as it required that the insured buildings be located at the situation. Mr Mattin acknowledged that if the definition was in those terms, or was to be read that way, then it would be difficult to argue that secondary coverage for goods "away from the situation" did not require that the goods had first been at the situation.
Counsel for the appellant/insurer, Mr Fleming, acknowledged that where there is an ambiguity in the terms of a contract of insurance the contract is construed against the drafter of the Policy: Darlington Futures Ltd v Delco Australia Pty Ltd[4]. He submitted that words should usually be interpreted in their ordinary and natural meaning, as understood by the ordinary reasonable person: Huddleston v RACV Insurance [5]. He submitted that the contra proferentum rule is only to be applied in a situation where there is ambiguity. The rule does not apply where a fair and reasonable construction is open so that the provision is unambiguous.[6] None of those propositions of law were in dispute. Mr Fleming submitted that this was a case where there could be no ambiguity as to the meaning of the terms of the Policy.
[4](1986) 161 CLR 500 at 510.
[5][1975] VR 683 at 687.
[6]Sutton, Insurance Law in Australia, 3rd Ed, (1999) at 756; M. Clarke, "The Law of Insurance Contracts", 3rd Ed, 1997, at 363-5, 369-74.
In my opinion, the ambiguity identified by counsel for the Insured Couple is not an ambiguity, at all. The definition of "situation" at page 8 of the Policy ("the place where the buildings and/or contents are located") must be read with the statement as to coverage on page 9, which specifies that the Policy coverage which an insured can take out may be limited to being over "only. . . buildings" or as being over "only . . . contents". Thus, insurance cover can be taken out for "buildings and contents" or else for "buildings or contents". The definition of "situation", by the use of both the conjunctive and disjunctive words - "and/or" - is merely providing for those options. In my opinion, therefore, unless there be some other indication in the terms of the Policy to support it, the interpretation of the definition for which counsel for the Insured Couple contends must be seen to be an entirely artificial one. There is no ambiguity.
In construing a limitation clause it must be interpreted according to its natural and ordinary meaning, read in the light of the contract as a whole, 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 the case of ambiguity: Darlington Futures Ltd v Delco Australia Pty Ltd[7]. The examination of the Policy for ambiguity must be properly conducted, and the contra proferentem rule not be misapplied. As the learned author, Dr Sutton, observed in "Insurance Law in Australia"[8] (omitting case citations):
"The precise limitations on the application of the principle must, however, be borne in mind. It can be used only if an obscurity or ambiguity exists in the wording of the particular provision relied on, for it is fundamental that the maxim has no application where, on a fair and reasonable construction, the provision is unambiguous. As has been said, the rule exists only for the purpose of removing a doubt, not for the purpose of creating a doubt or magnifying an ambiguity, when the circumstances of the case raise no real difficulty. Hence, the court should not be astute to find an ambiguity in order to work all presumptions against an insurer. Any ambiguity in the Policy may be resolved by reading it as a whole, and in examining the commercial purpose of the contract not only may the exclusion clauses be of assistance, but also practical considerations concerning the operations of the assured. If it is clear that a provision has only one meaning on a fair and reasonable construction, the clause prevails, but if it is open to two constructions it is for the court to construe that condition contra proferentem, that is, in the sense in which a prudent and reasonable assured would understand the words used. In this connection it has been held that where the operative part of a policy is unambiguous it will prevail over a recital therein which contains an ambiguity".
[7][1986] 161 CLR 500, at 510.
[8]“Insurance Law in Australia”, Sutton, 3rd Ed, at 756-757.
Whilst it is easy to sympathise with the Insured Couple in their misfortune, the interpretation for which their counsel contended as to the Policy, and, in particular as to the definition of “situation”, would constitute an artificial construction of the plain meaning of the words of the Policy, and would amount to the identification of ambiguity where none truly exists.
The definition of "situation" for which Mr Mattin contended would produce an odd result in the event that a "contents-only" policy was taken out. In the case of a "contents-only" policy the definition of "situation" would either be otiose or else would read: "The place where the contents are located. We will show this place on all schedules we give you". Thus, if the goods were located at a place (or places) other than the place at which it was intended that they be permanently housed by the insured party then the schedule would need to specify the place or places where the goods were located, and would need to change the stipulation of that location or those locations, as being “the situation,” once the goods were moved into the permanent address. Given the real possibility that the goods might initially be located at a place or places which already had existing “contents” cover it would be surprising if the Policy did not address that possibility, in some way. In the present case, the situation identified was 294 Camp Road, Broadmeadows, a place at which the goods were not located when they were destroyed. It is impossible to resist the conclusion that the Insurer was intending to identify as "the situation" the place at which the goods were to be permanently located, namely 294 Camp Road, that being the place at which the goods were to be insured “while at your situation”. That location provided the buildings in which the goods were to be housed, and upon being housed therein they would meet the description of “contents”, and subsequently might retain coverage while being “contents while away from your situation”.
In my opinion, a fair reading of the Policy, in its totality, demonstrates clearly that it was the intention, and assumption, that "contents" would be those items located in the buildings (which may or may not themselves be also insured) in which the Insured Couple were to reside at 294 Camp Road, Broadmeadows. A reading of the Policy at page 9, in the section concerning "Buildings and Contents", makes that very clear, in my opinion. It is also the clear assumption and intention manifest in the Policy, at page 26, in the section titled "Cover for contents away from your situation".
The exceptions (listed by me as paragraphs (a) to (d) and the balance of that section, at pages 26-27), all proceed from the assumption that the contents had first been at the identified situation. Mr Mattin submitted that that merely demonstrates that the draftsperson had not contemplated, and therefore failed to address, the circumstance where at the time when coverage under the Policy commenced goods had yet to be moved to the "situation". Thus, he submitted, although the question was not in contemplation, the Policy provided coverage, because it did not expressly exclude goods which were yet to be located at the situation. In my view, however, the alternative observation is more appropriate: the Policy does not include coverage for goods which had not first been at the situation. To say that the Policy does not address the circumstance where goods have not yet been delivered to the “situation” at which they would be housed, amounts to a recognition that the Policy was not intended to provide coverage for goods which had not yet been located at the situation. If there was such coverage under the Policy then it would have been an unintended outcome of the drafting.
The absurd result which would flow, if goods which had not been located at the situation might nonetheless be covered, is clearly apparent when considering what would be the effect of the exclusion clause (b). I will turn to that issue next.
Do the exceptions apply?
In the light of my conclusion that the Policy did not cover goods which had never been located at the situation it is not necessary that I examine the question whether any of the exceptions would have applied so as to prevent these goods being described as "contents away from your situation". For completeness, however, I will consider the four exceptions, as in doing so it becomes even more apparent that the Policy was not intended to apply to goods which had not previously been located at the situation.
Mr Fleming submitted that the four exceptions all conveyed the assumption that "away from" could only mean "having first been at the situation, but were later away from it". He referred to exception (b), in particular, to illustrate that point, but submitted that even if he was wrong as to that contention then, by virtue of that paragraph, the Insured Couple would fall within the exception anyway, and would be denied coverage.
Exception (b) provides that goods away from the situation were not covered if they had been "away from your situation for more than a continuous period of 90 days". Mr Mattin, having contended that the Policy provided coverage for goods which had not been located at the situation at any time, because it covered them as contents "away from the situation", was compelled to submit that this exception would not apply because the Policy had only been in existence for four days when the fire occurred. Thus, the goods had only been “away from” the situation for four days. If that was a correct analysis of the situation, then that would lead to the odd result that had there been no fire until after 90 days from the commencement of the Policy, and had the goods not been moved to the situation, then they would have been covered for 90 days from commencement of the Policy (whilst they were not at the situation), but would then cease to be covered at 90 days, although their location, away from the situation, had not changed.
Mr Fleming submitted that had the four exceptions had any application (and he submitted, and I agree, that they were irrelevant save to the extent that they throw light on the primary coverage which the Policy provided) the better view would have been that in applying paragraph (b), the goods had been "away from the situation" for 5 years!
Exception (a) excludes coverage for "contents … on the way from . . .commercial storage", to the situation. That suggests that "contents" on the way to the situation from non-commercial storage would be covered as goods "away from the situation". In my opinion, however, this does not mean that goods which had never been at the situation, might therefore also be intended to be covered. That is so because the use of the word "contents" in paragraph (a) is deliberate, in my opinion, and is used in the manner I have earlier discussed. Thus, paragraph (a) applies to goods which, having once been on the premises at the situation (that is, goods which are "contents"), and having been removed, are being returned to the situation. Had those goods been away for 90 days, or more, they would be excluded under (b).
Mr Fleming submitted that exception (c) pointed to the fact that his contention on behalf of the Insurer must be correct, because it would be odd if the Policy specifically excluded coverage for goods which were in transit during a permanent removal away from the situation at Broadmeadows and yet provided coverage for goods which had never been brought to the situation. The exception (c), once again, emphasises that the Policy is predicated on the fact that the contents will either be at the situation or will only be away from the situation temporarily. There is no assumption that goods might be covered although they have never had any physical connection with the “situation”.
Exception (c) must mean contents "in transit during a permanent removal" from the situation, not "to" the situation. That may or may not be an unintended limitation, but the Policy can not be interpreted so as to extend coverage to goods which had not yet arrived at the situation and so could not be either described as "contents" or as being "contents away from" the situation.
Exception (d) applies only to goods "removed … away from" the situation. That can only support the interpretation of the Policy advanced by the Insurer. It reflects the assumption that goods at the situation are covered, but if they leave the situation, then they will not be covered if their removal is permanent. It also suggests that the "situation” provides a means of identification of those goods which are covered, whereas if the alternative interpretation of the Policy were to be adopted, the Insurer would have little prospect of determining, even generally, what goods would be covered under the Policy.
In my view, the interpretation which I have given to the terms of this Policy most likely reflects the reality that the assumption manifested in the Policy was that parties moving from one residence to another would have contents insurance at the former location as well as taking out such cover for the new location. No intention is manifested by the Policy to provide coverage for goods before they reached the new location.
I conclude that on the fair reading of the terms of the Policy, the ambiguity contended for by counsel on behalf of the Insured Couple does not exist. Under the terms of the Policy the goods which were destroyed are not subject to coverage under the Policy. In my view, the appeal should be allowed, and the decision of the learned magistrate should be set aside and, in lieu thereof, judgement should be entered for the Insurer.
I will hear the parties as to costs of this appeal and of the hearing in the Magistrate’s Court.
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