Ferrcom Pty Limited v Commercial Union Assurance Co of Australia Limited

Ferrcom Pty Limited appealed to the High Court of Australia against a decision concerning its claim under an insurance policy issued by Commercial Union Assurance Co of Australia Limited. The dispute arose from damage sustained by an unregistered mobile crane, which the insured had subsequently registered as a motor vehicle. This registration constituted a material non-disclosure after the contract of insurance was entered into, and the core of the appeal concerned the application of section 54(1) of the *Insurance Contracts Act 1984* (Cth) to reduce the insured's claim.

The High Court was required to determine the correct approach for courts to take when reducing an insured's claim under an insurance policy pursuant to section 54(1) of the *Insurance Contracts Act 1984* (Cth). Specifically, the court had to consider how to distinguish between acts of the insured that would, but for the section, disentitle them from claiming, and those acts that could reasonably be regarded as contributing to the loss. The court also had to consider the interplay between subsections (1), (2), (3), and (4) of section 54 in determining an insurer's entitlement to refuse a claim.

The court explained that section 54 establishes a regime where an insurer's right to avoid a claim due to an insured's act is modified. If the act could not reasonably be regarded as contributing to the loss, section 54(1) applies, and the insurer cannot refuse the claim. However, if the act could reasonably be regarded as capable of causing or contributing to the loss, section 54(2) to (4) come into play. Under these provisions, the insurer is generally entitled to refuse the claim, unless the insured can prove that no part of the loss was caused by the act, or if the act did not contribute to the loss. The court noted that the specific circumstances of the crane's registration and subsequent use were central to applying these principles.