Kenwright v Insurance Australia Limited
[2013] NSWDC 255
•20 September 2013
District Court
New South Wales
Medium Neutral Citation: Kenwright v Insurance Australia Limited [2013] NSWDC 255 Hearing dates: 11, 12, 13, 14 and 15/2/2013 Decision date: 20 September 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Note that the principal amount, exclusive of interest payable by the defendant to the plaintiff, is the sum of $125,135.
(2) Grant liberty to the parties to forward to my associate by 9am on 30 September 2013 either an agreed statement of interest and costs or a short submission (maximum two pages) as to the appropriate rate of interest and costs.
(3) Grant liberty to seek a further hearing on costs in the event that either party is of the view that a written submission is not sufficient.
Catchwords: INSURANCE - home and contents - indemnity denied - home destroyed by fire - allegation of fraud - damages for breach of contract Cases Cited: Briginshaw v Briginshaw (1938) 60 CLR 336
British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86
Castellain v Preston (1883) 11 QBD 380; [1881-85] All ER 493
Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668
Raso v NRMA Insurance t/as NRMA Home Insurance (New South Wales Court of Appeal, Mahoney, Priestley and Handley JJA, 14 December 1992, unreported)
Reynolds v Phoenix Assurance Co Ltd [1978] 2 Lloyd's Rep 440
Roumeh Food Stores (NSW) Pty Ltd v New India Insurance Co Ltd [1972] 1 NSWLR 227
Spina v Mutual Acceptance (Insurance) Ltd (1984) 3 ANZ Ins Cas 60-554Texts Cited: David St L Kelly & Michael Ball, Kelly & Ball Principles of Insurance Law, LexisNexis Category: Principal judgment Parties: Dawn Juliet Kenwright (plaintiff)
Insurance Australia Limited trading as NRMA Insurance ACN 000 016 722 (defendant)Representation: Mr T Boyd (plaintiff)
Mr G Carolan (defendant)
Herbert Weller (plaintiff)
William Roberts Lawyers (defendant)
File Number(s): 2011/377445 Publication restriction: No
Judgment
INTRODUCTION
The plaintiff, Dawn Kenwright, as homeowner had a policy of insurance with the defendant, Insurance Australia Limited trading as NRMA Insurance Limited ("NRMA"). The house was destroyed by fire on 5 April 2010. NRMA refused to pay asserting that Ms Kenwright caused the fire.
BACKGROUND
Ms Kenwright purchased the house in a rural location called Stanbridge near Leeton in western New South Wales in October 2012. She bought the property from her cousin for a price of $50,000 and thereupon commenced residing there. She paid $30,000 at the time of purchase. Her intention was to renovate the house and sell it for a profit after about two years.
Ms Kenwright gave evidence of the improvements she made to the property, repainting it, sanding and preparing the floors, varnishing some of the floors, buying bathroom and kitchen cabinetry and fixtures, and partially completing the bathroom. She also gave evidence of buying furniture for the house. Her two daughters gave evidence corroborating her account and they, at least, were not challenged on this issue. The real estate agent and notes of a neighbour's conversation with NRMA also supported the account of the renovations. There is no evidence to the contrary. I find at the time of the fire the house was partially renovated in the manner asserted by Ms Kenwright.
Ms Kenwright's account of what occurred on the day of the fire was as follows:
"On 5 April 2010 I was living by myself. My daughter had left the premises about 2 months previously. On the day of the fire I remember rising early that day. After breakfast I sorted some things to take to St Vincent's De Paul in Leeton. I recall loading the items in my car and I drove to Leeton. I arrived back home from Leeton around 9:00am. I recall I then washed and detailed my car. I then had a look at the latest CCTV footage. From this footage I observed that my 2 dogs had been let out of the dwelling at some stage and only 1 dog was let back in. My Jack Russel had been locked out. I recall I then showered, folded some clothes and watched TV for a period. At about 5pm I decided to go to the cemetery in Leeton to visit my mother's grave to deliver to her grave an angel I had purchased previously in Sydney and some artificial flowers (wild daisies). I drove to the cemetery with my 2 dogs. I also had with me three empty 15L water bottles which I intended to fill on my way home from the cemetery at Whitton. I recall being at the cemetery for about 1 hour when the gatekeeper asked me to leave as he was locking the gates.
After leaving the cemetery I went into Leeton where I purchased fish and chips for dinner from Golden Chickens. I then drove to Narrandera and arrived there around 7:30pm. I went to Narrandera to see Josh Winell to ask him if he could help me to move my furniture into storage. I spoke to him and his mother Joan Winell. I was with them until about 8:30pm when I left Narrandera. I recall that when I first left Narrandera I returned to see Joan again to ask her if she could look after the DVD's that I had in the car. She took them and I then resumed my travel back to Leeton. By that time it was too late to stop at Whitton to get water so I drove straight home.
I arrived home shortly after 9pm. I found the dwelling in darkness. This concerned me because I recall I had left the floodlights on. I went to the back door and turned the lights on from there. The lights however did not come on and at that time I recall hearing a big bang which I thought had come from the roof. I also noticed a smell of rubber in the house. I think I then dead locked the back door and got in the car and drove off to my cousin's place, Malcolm Arrow, who was only 2-3 kilometres away. When I arrived at Malcolm's place I found he was very much under the influence of alcohol but in any event he agreed for me to stay in his house. I stayed in his lounge on a mattress with my 2 dogs inside the house with me. I remember making a coffee and lying down. I recall hearing some sirens but I tried to doze off. My next memory is of my mobile ringing around midnight. It was a call from the police to say that my house had been damaged. I immediately drove to my premises and found the extent of damage."
LIABILITY
Apart from one omission and a challenge to her evidence of timing to which I shall return, this account was consistent with what Ms Kenwright told the NRMA on the day after the fire, and what she told the NRMA investigator in a record of interview some two weeks later. It is supported by evidence of an unchallenged phone call that evening to Ms Kenwright by her daughter and a call by Ms Kenwright to her daughter. The fire was reported to the fire brigade at 10.12pm that evening, a matter also consistent with Ms Kenwright's account.
The NRMA challenged Ms Kenwright's account. It relies on the following matters: that Ms Kenwright's evidence was unreliable, that she was on a disability pension with no savings of any magnitude, that she would be financially benefited from the insurance, that she mistakenly thought she was being harassed, that she wanted to live in Queensland, that there was no possibility of an electrical fault causing the fire and that the only reasonable explanation for the fire was that Ms Kenwright started it. I will deal with each of these matters in turn.
(a) UNRELIABLE EVIDENCE
There were two principle bases for the challenge to Ms Kenwright's account, that her timing of the events was inaccurate and that in her initial account she made no mention of a "bang" at the time she returned to the house after 9pm.
As to her timing, she deposed to having returned to the house "shortly after 9pm". In her initial phone call to NRMA the day after the fire and on the next day she identified the time as "9, 9.30 or something", and "about 9, 9.30", and "around 9, 9.30". In her record of interview conducted by the NRMA investigator about two weeks later in answer to a question, "When did you get back to the house", Ms Kenwright said, "It would have been around about 9-ish". In cross-examination Ms Kenwright said that she arrived at her cousin's place at about 9.06pm, which she saw on a clock.
As to the reference to a "bang", it is true that this was not mentioned in her initial account to the NRMA but was mentioned two weeks later.
In assessing these aspects of Ms Kenwright's evidence I should note that her answers were not always responsive or coherent and that she could not be described as articulate. There was evidence before me of a medical referral from her doctor that appeared to be for a psychiatric consultation. Her referral stated:
"Dawn does not suffer from Schizophrenia or any diagnosed psychiatric condition. However, various people accuse her of having some delusional disorder. She relates the story of how she has been systematically harassed by various family members since she moved into her own house. She relates attempts to burn, sabotage her property including vandalism and poison on her fruit. She denies direct attempts on her life. The Police is [sic] not coming out at all any more as they could never found [sic] evidence of foul play. Her brother has schizophrenia."
The referral also noted the current medication she was taking in December 2009 and mentioned a past condition of "Depression".
In my opinion, the two criticisms by NRMA of her evidence were not of great significance. Whether Ms Kenwright arrived at the house at 9.00 or 9.30 was of no particular significance in assessing whether she lit the fire. Her reliability in properly timing the evening's events is an unhelpful guide to her honesty. A person's knowledge or memory of the times of daily events, without some specific incident at a certain time against which the event can be measured, is prone to be unreliable. Evidence of matters that happened before Ms Kenwright was aware of the fire would not at that time have seemed so significant.
In my view, neither her account of times nor the absence to the reference to a "bang" in her initial account are weighty matters in deciding whether I should accept Ms Kenwright's account that she did not cause the fire.
Ms Kenwright was prepared to concede matters against her interest. She conceded the presence of petrol in the fireplace and the presence of other accelerants. She also conceded that several items she had purchased had not been installed and that she intended to move to Queensland. She wanted to live near her daughters and was troubled by both the harassment and that the police did not believe her complaints of harassment. She also conceded that she had returned to the house, went inside, smelled rubber, perhaps burning rubber, locked up the house and travelled to her cousin's home nearby. All these matters seem to me potentially to be against her interest but she candidly accepted them all. I accept that Ms Kenwright's evidence was given honestly.
(b) THE DISABILITY PENSION AND HER LACK OF FUNDS
It was not in dispute that Ms Kenwright was struggling financially. How long this had continued was not clear, at least some months and perhaps, as the NRMA submitted, for more than a year. This circumstance may have made it more difficult for her to finish the renovation and move to Queensland to live with her daughters as, at least by early 2010, she had intended to do. But it is a circumstance with which she had coped for a lengthy period without apparent problem. Her impecuniosity was a factor to be considered but by itself it is of little weight.
(c) THE FINANCIAL BENEFITS OF INSURANCE
NRMA submitted that the motive for the alleged arson was the financial benefits Ms Kenwright would derive from insurance. But NRMA also submits, conversely, that there is no financial benefit because the insurance policy is an indemnity policy. Thus, the NRMA relies upon Ms Kenwright being mistaken about the true effect of the policy and acting on that mistake. No questions were asked of Ms Kenwright concerning her understanding of the policy on the night of the fire.
It appeared to be common ground that the building sum insured of $180,000 was significantly greater than the value of the house - perhaps $75,000 - at the time of the fire. Ms Kenwright gave evidence that the real estate agent told her that the premises would be worth 160,000 to $180,000 once the renovations were completed, and also says that the insurer recommended the sum of $180,000 to be safe. The real estate agent did not recall giving that information when he visited the premises. No challenge was made to Ms Kenwright's evidence of the insurer's recommendation.
I do not think that the difference in the value of the house and the sum insured is significant. Prudence generally dictates that the level of insurance cover should be sufficient to pay for the rebuilding of the house rather than the market value of the house. If Ms Kenwright was entitled to have the house rebuilt, the ordinary consequence for insured homeowners that have lost their house to fire, it may be careless of her to obtain insurance limited to the difference between the value of the house and land and the land value alone.
Ms Kenwright, through her counsel, submits that under the building component of the policy Ms Kenwright is entitled to the cost of rebuilding the house, or the sum insured, whichever is the lesser. NRMA submits that Ms Kenwright is only entitled to the diminution in value as a result of the fire. That is a matter to which I shall return but for present purposes it is only relevant in assessing whether a financial benefit rendered it more likely that Ms Kenwright lit the fire.
In the absence of any cross-examination of Ms Kenwright as to her understanding of her insurance entitlements, I think the asserted benefit is of limited assistance in assessing motive. The sum insured based on the cost of rebuilding a house might often exceed the value of the house. As I have indicated, without something more this fact is of limited probative force in determining whether the house was destroyed by arson on the part of the insured.
The issue is even more problematic when the policy would not provide or is asserted (by NRMA) not to provide any monetary benefit, so that the financial motive asserted depends upon a mistake by Ms Kenwright. In these circumstances, I do not accept the motive has been established. I note that Ms Kenwright took out insurance immediately after purchasing the house and secured insurance from the NRMA on the expiry of that initial policy some six months before the fire. This history of Ms Kenwright obtaining insurance does not provide support to an allegation of arson.
(d) MS KENWRIGHT THOUGHT SHE WAS BEING HARASSED
It was not in dispute that Ms Kenwright believed an unknown stalker was harassing her. However, I am reluctant to make any finding about whether the stalker was real or imagined. The relevant person was never identified and there was no objective proof of a stalker. It appears that the police did not accept Ms Kenwright's complaints of harassment and I have referred to evidence that Ms Kenwright had been accused of being delusional in respect to that harassment.
But both Ms Kenwright's daughters gave evidence supporting Ms Kenwright's accounts.
Bianca Dark gave an account of hearing rocks thrown onto the roof and loud footsteps around the outside of the house at night, as well as other matters. She was not challenged on this evidence although she conceded that she had not seen any intruder on her mother's land since November 2008. Ms Jana Hone, Ms Kenwright's other daughter, claimed to have seen a person on the DVD footage shining a torch and she also was not challenged on this evidence.
I have doubts about the stalker. Had Ms Dark and Ms Hone been challenged on their evidence then, in the absence of persuasive evidence from them, I may have been inclined to reject Ms Kenwright's account of being harassed by a stalker as a true account. When the evidence has not been fairly challenged I do not think I should reject the corroborated account.
However, the existence of a stalker is of limited assistance. As I have noted it is not disputed that Ms Kenwright genuinely believed she was being harassed as her long history of reporting such complaints demonstrates. I am not persuaded that Ms Kenwright's belief (mistaken or otherwise) about a stalker of itself makes it more likely that she would burn her house down with all her contents inside. However, it may be relevant in combination with other matters.
(e) Ms Kenwright wanted to live in Queensland, at least by the time of the fire
This is not disputed. This is another matter that could only be of significance in combination with other matters.
(f) THERE WAS NO POSSIBILITY OF AN ELECTRONIC FAULT CAUSING THE FIRE
As I have mentioned, the main power switch was found after the fire to have been turned off before the fire burnt the house down. No damaged fuses were found. These matters persuade me that it is unlikely that an internal electrical fault caused the fire.
(g) The only reasonable explanation for the fire is that Ms Kenwright started it
A number of matters were raised in Ms Kenwright's favour. First, in her oral evidence she impressed as an honest if not always reliable witness. When it was put to her that she had lit the fire she answered with some feeling, "I would not have done that to my stuff". The emotions that she manifested on that occasion and others in her evidence were persuasive that she felt a great sense of loss at the destruction of all her possessions acquired over her lifetime. This was also apparent from the transcript of her phone call to the insurer on the day after the fire. It is a matter that supports her claim, in my opinion.
Ms Kenwright was not challenged on a number of crucial matters in cross-examination. As stated, she denied lighting the fire and she denied spreading any hydrocarbon accelerant. She gave evidence that she left the lights on and she was not asked about turning off the power to the home. But if she did not turn off the power then I must infer that someone else, potentially an intruder, did. She was also not asked about being at the home at about 10pm when the fire started. It was not suggested to her that she returned to the house once leaving it or that she did not arrive at her cousin's house at around 9.10pm or at least before 9.30pm.
Nor was there any evidence suggesting that use was made of petrol or mineral turpentine although there were cans of these substances available at the house. These were more obvious fire accelerants (at least to Ms Kenwright who knew of them) than the paint thinner or enamel paint, which NRMA suggested was used to accelerate the flames. To my mind the use of these less obvious accelerants seems more consistent with an intruder, being unaware of the existence of the petrol, starting the fire rather than Ms Kenwright.
Further, in the early evening before the fire Ms Kenwright had arranged and made payment for the storage of her possessions. The fire was started before those possessions were removed from the house.
No satisfactory explanation was submitted as to why Ms Kenwright would spend significant money and labour renovating the home, fill the home with her possessions and furniture and then cause the fire. As a result of the fire Ms Kenwright was effectively left with nothing. No clothes or household items. She was required to request NRMA for emergency assistance of $1,000 so that she had money for food. She still owed some money on the house although there was no suggestion that she was being pressed for it at the time of the fire.
Moreover, Ms Kenwright did not impress as someone capable of any sophisticated scheme of arson, and the NRMA did not press a submission to this effect. Rather, it was suggested that the fire was a last minute act of desperation by Ms Kenwright. The motivation to burn down one's house with all the contents inside, on a whim, presumably because Ms Kenwright was disturbed by what she perceived to be unknown persons harassing her, is an allegation lacking in credulity. It is irrational, and while there is some evidence that perhaps some of Ms Kenwright's actions in dealing with the perceived harassment may be termed irrational, none of them bore any resemblance to the serious criminal conduct of arson.
Further, if the fire was a last minute, irrational act by Ms Kenwright, then securing an insurance policy with the sum insured of $180,000 and any other features consistent with a plan to defraud the insurer fall away as matters relevant to motive.
As I mentioned earlier, Ms Kenwright lost all of her personal possessions in the fire. This included antique items and other household, family and personal items precious to Ms Kenwright including family videos and photographs and other family mementos.
Whilst the insurer disputed the value of these items there was no real challenge to the existence of the items alleged to have been possessed by Ms Kenwright.
Ms Kenwright's daughters gave evidence corroborating some of the items and of their mother's genuine shock as a result of the fire. Neither daughter was challenged on their evidence. I accept their evidence to be honestly given and generally reliable. It differed from Ms Kenwright's in some respects. Ms Hone referred to two phone calls which Ms Kenwright did not refer to in her evidence and Ms Hone's accounts of when the phone calls occurred, at least one of them, seems to be inaccurate by an hour or so. Whether the fact that the fire occurred on the day after the first Sunday in April - traditionally the day when daylight saving ends in New South Wales (Ms Kenwright's daughter being in Queensland) provides any explanation for this difference was not explored in the evidence. I do not regard the evidence of the time of the telephone calls in the evening, in the absence of any telephone records that must have been available to both parties but were not tendered, as of real significance.
Taking all these matters into account, I am persuaded that it is at least as likely that a third person started the fire. No item of evidence points strongly to Ms Kenwright being the cause. I am not persuaded on the balance of probabilities and in accordance with the principles in Briginshaw v Briginshaw (1938) 60 CLR 336, that Ms Kenwright deliberately caused the fire. And it follows that the NRMA is obliged under the insurance policy to pay for the loss in accordance with the policy.
DAMAGES
There are three components of Ms Kenwright's claim for damages: loss of the house, loss of contents and the costs of rental accommodation.
(a) HOUSE
Ms Kenwright claims that she is entitled to the sum insured of $180,000 for the loss of the house. There was some evidence that the cost to rebuild the house exceeded $300,000.
The policy provides:
"What we pay for - Buildings Insurance
If we agree to cover your claim under Buildings Insurance, then we will:
► pay the cost to repair or rebuild the part of your home that was damaged - we pay the lower of the cost to repair or rebuild your home
...
The most we pay
The most we pay is the buildings sum insured...
How we settle your buildings claim
We will choose to settle your claim for loss or damage to your home or 'other cover' in one of the following ways:
1. Arrange for repairs, builders or suppliers to repair or rebuild your home.
If you agree, we can arrange for our preferred repairers, suppliers or builders to repair or rebuild your home.
2. Pay you the reasonable cost to repair or rebuild your home.
We can choose to:
► pay you
► pay your nominated repairer, supplier or builder, or
► provide you with store credits from one of our nominated suppliers
For example, we may pay directly when:
► you decide not to repair or rebuild your home, or
► you don't start repairing or rebuilding your home within 6 months from when the damage takes place, or within any longer period we agreed to in writing.
3. Pay you the buildings sum insured
We may do this when we consider your home to be a total loss or when we choose to do so.
If we pay you the buildings sum insured, then your policy ends and you don't get a refund of your premium.
We will continue your liability cover (as described on pages 34 to 36) for up to 6 months from when the listed event took place. However, liability cover will end during this period if:
► construction starts at your site, or
►you sell the land, or
► you take out a new buildings insurance policy for your site.
4. Paying for 'other cover'
If we agree to pay you for other cover, we will choose the method of settlement.
We provide examples of how we calculate claims under Buildings Insurance - see pages 56 to 58."
The primary debate on this issue concerned whether the policy was an agreed value policy with an agreed value of $180,000.
INDEMNITY POLICIES
(a) Legal Principles
In Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668, Megaw LJ stated at pp 673 and 674:
"The insured may recover his actual loss, subject, of course, to any provision in the policy as to the maximum amount recoverable. The insured may not recover more than his actual loss."
"What the insurers have agreed to do is to indemnify the insured in respect of loss or damage caused by fire. The 'full value' is the cost of replacement. That defines the maximum amount recoverable under the policy. The amount recoverable cannot exceed the cost of replacement. But it does not say that that maximum is recoverable if it exceeds the actual loss. There is nothing in the wording of the policy, including the declaration which is incorporated therein, which expressly or by any legitimate inference provides that the loss which is to be indemnified is agreed to be, or is to be deemed to be, the cost of reinstatement, 'the full value', even though the cost of reinstatement is greater than the actual loss. The plaintiff is entitled to recover his real loss, not exceeding the cost of replacement."
Megaw LJ quoted Brett LJ in Castellain v Preston (1883) 11 QBD 380 at 386; [1881-85] All ER 493 at 495:
"the fundamental principle of insurance, and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the assured from obtaining a full indemnity, or which will give to the assured more than a full indemnity, that proposition must certainly be wrong."
Kelly & Ball Principles of Insurance Law reads:
"There are two main methods for determining the amount of the insured's loss. The first is by reference to the cost of replacing or repairing the insured property after making allowance for wear and tear. The other is by comparing the market value of the insured's interest in the insured property immediately before the loss with its market value immediately after the loss."
The learned authors accept the words of Macrossan J in Spina v Mutual Acceptance (Insurance) Ltd (1984) 3 ANZ Ins Cas 60-554 at 78 and 345, the words of Forbes J in Reynolds v Phoenix Assurance Co Ltd [1978] 2 Lloyd's Rep 440 and the decision of Roumeh Food Stores (NSW) Pty Ltd v New India Insurance Co Ltd [1972] 1 NSWLR 227 at 237, and conclude that generally the insured loss is measured by the cost of repair or replacement.
The authors continue:
"The principle that the insured's loss is measured by reference to the cost of replacing the insured property has three main exceptions. The first is where the insured property has no particular value to the insured other than the price for which it can be sold. An obvious example is where the property is bought as an investment. In that case, the appropriate measure is normally market value.
Second, the insured is not entitled to recover the cost of reinstatement where he or she does not intend to reinstate the insured property or where reinstatement is impossible. For example, in Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668; [1979] 1 WLR 512, the insured property was on the market at the time it was destroyed by fire. The court held that, in that case, the insurer was only entitled to the market value of the property. Similarly, in Kypris v MLC Fire & General Insurance Co Pty Ltd (1981) 1 ANZ Ins Cas 60-451, changes to planning laws prevented reinstatement. In that case, the court assessed the insured's loss by reference to market value. Likewise, in VACC Insurance Co Ltd v Lekkas (1999) 10 ANZ Ins Cas 61-436, a block of shops which was under threat of compulsory acquisition was badly damaged by fire. The Victorian Supreme Court only permitted the insured to recover the block's market value (taking into account the threat of compulsory acquisition) less the amount payable as compensation on the acquisition.
The third exception to the principle that the insured's loss is measured by reference to replacement value is where the insured's desire to replace or reinstate the insured property is unreasonable. The insurer bears a heavy onus to establish that the insured's desire to reinstate is unreasonable."
Kelly & Ball also state:
"In order to avoid the difficulties associated with assessing the market value of property, some policies contain a term under which the insurer and insured agree on the value of the property. If the insured suffers a total loss, he or she is entitled to recover the agreed value. If the insured suffers a partial loss, he or she is entitled to recover that part of the agreed value which represents the proportionate amount of the loss. An agreed value policy is still an indemnity policy. As Kitto, Taylor and Owen JJ explained in British Traders Insurance Co Ltd v Monson (1964) 111 CLR 86, [1964] ALR 845:
The case of a valued policy is special, but it throws no doubt upon the general principle [of indemnity]. In such a case the application of the principle is affected by the agreement of the parties on value in the same way as any obligation to indemnify may be affected by an agreed pre estimate of the value of property The agreement in the case of a valued policy is as to the value of the subject matter, not the amount of the loss, and its effect upon the assessment of the amount payable to the insured is not for the processes to be directed to anything other than the indemnification of the insured, but only that the assessment of his loss must proceed on a basis of the agreed valuation of the property at CLR 93. [Brackets added by authors]
An agreement on value is not decisive if it was induced by fraud. Whether a contract is an agreed value contract or not depends on its construction. In the absence of clear words, however, a contract is a simple indemnity contract and not a valued one. Valued policies are not to be confused with policies in which the insured simply declares the value of the insured property at the time of taking out the insurance."
In the present case, Ms Kenwright did not seek to remain living in the home. She had decided to move to Queensland and was in the process of finalising that move. This is not a case where if the fire had not occurred, Ms Kenwright would continue to reside in the property. The property was of no value to her other than what she could obtain by a sale. This approach to her loss is also consistent with her long-held intention to renovate and sell her property.
The case is similar to Raso v NRMA Insurance t/as NRMA Home Insurance (New South Wales Court of Appeal, Mahoney, Priestley and Handley JJA, 14 December 1992, unreported) involving a policy drafted in similar terms. That policy provided (at 17) that:
"1. COVER FOR THE HOME We will cover you if any of the events which are listed below destroys or damages the home. This means that we may choose to: - pay you the sum insured, or - pay you the cost of repairing or - replacing the home, or - repair or replace the home."
The Court of Appeal held (at 17):
"The language of the policy ('we may choose to') confers an option on the underwriter to either pay the sum insured or to reinstate or pay the cost of reinstatement. The underwriter did not exercise the option. However it is clear from The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92-93 and the cases there cited that 'where there are two or more ways in which a defendant might perform the contract, the court in assessing damages adopts the mode of performance which is most beneficial to the defendants.'"
The Court of Appeal accepted the submission that although the policy did not in terms provide an option of paying the insured the loss of market value nevertheless this was its "necessary legal effect when the option to pay the sum insured is read subject to the overriding effect of the indemnity principle."
The Court concluded (at 19):
"because an insurance contract is a contract of indemnity, the amount recoverable under the policy could not exceed the sum necessary to indemnify the [Insured] against the loss actually sustained by them in consequence of the fire. An assured is not entitled to recover the amount specified in the policy unless it represents his actual loss. The amount specified fixes only the maximum liability of the insurer under the policy...
It follows that, despite the language of its policy, the respondent was not bound to pay the sum insured. It could have elected to indemnify the insured for the loss of market value."
This principle must equally apply to Ms Kenwright and the policy in this case. As stated in British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86 at 94:
"[N]o approach can be valid which fails to accept as its first step that a policy showing, as the policy here shows unmistakably, that it is intended as a policy of fire insurance must be construed as a contract for indemnification only."
It may be that Ms Kenwright would have done further renovations and sold at a higher price than the current value, but there is little evidence of this. Ms Kenwright had decided to move and put her furniture into storage. She had no funds for further renovations and there was no persuasive evidence that further renovations would have produced a greater increase in value than the cost of doing that. Neither Ms Kenwright nor the insurer proposed to rebuild the house.
For these reasons, Ms Kenwright is not entitled to anything other than the lost value of the house.
I am not persuaded that the policy is an agreed value policy. It does not say that it is. The mere evidence of the total sum insured is not regarded as sufficient to establish an agreed value policy. Rather, the total sum insured is the maximum sum that the insurer is liable for under the policy. It appears to me that Ms Kenwright is only entitled to receive the diminution in the market value of the home resulting from the fire.
Accordingly, I find that Ms Kenwright's claim for the loss of building entitles her to be indemnified for the decreased market value of the property occasioned by the fire. The parties agree that if the renovations alleged were carried out the value of the property was $75,000 before the fire and $15,000 afterwards. I have accepted that the renovations were carried out. It follows that the loss of market value is $60,000.
(b) THE CONTENTS
The contents were insured for the sum of $100,000 on the certificate of insurance. Again, this sum represents the maximum sum an insurer would pay in accordance with the contract.
Although the indemnity principle applies also to the contents component of the policy there is no evidence in this case that suggests that Ms Kenwright did not intend the contents for personal use. There was no evidence that she intended to sell her possessions. Rather, she had arranged for storage of them, presumably to use them at some future time when she had organised her accommodation in Queensland.
The policy provided that "If we replace an item that is part of your contents, we will replace it with a new one. This is known as 'new for old'".
Accordingly, Ms Kenwright is entitled to have her destroyed contents replaced with equivalent new items up to the maximum value of $100,000 being the amount of the contents sum insured.
In the present case, there is no evidence of the new price of equivalent items. Ms Kenwright orally gave evidence of the price she paid for some items. Although Ms Kenwright included in her affidavit a comprehensive list of items, her oral evidence of prices was not so extensive. This oral evidence was not entirely satisfactory. Sometimes the figures placed on an item appeared to represent Ms Kenwright's estimate of the value rather than the price paid. Further, her evidence did not deal with all the items claimed to have been lost. There was no reason given why Ms Kenwright could not have dealt with all the items and I do not think it is appropriate that I draw inferences in her favour about items when she declined to provide the evidence.
The oral evidence of prices given by Ms Kenwright was not challenged in cross-examination. I have concluded that this unchallenged oral evidence that Ms Kenwright has given about prices, while not entirely satisfactory, totals a sum which I have regarded as an appropriate measure of Ms Kenwright's loss on the evidence before me.
In the circumstances, I propose to allow an amount for the lost contents based on the evidence of prices paid, treating that as evidence of the current cost. I have not allowed any amount for items which, although listed by Ms Kenwright, were not the subject of clear oral evidence about price. I note that the figures in her affidavit placed against those items were not admitted as evidence of price or value in the absence of confirming oral evidence.
No claim was made for items not owned by Ms Kenwright. Accordingly, where the evidence indicated that Ms Kenwright did not own the item I have reduced the price on those items to reflect the proportion owned by Ms Kenwright. In the figures that I propose to declare I have marked with an asterisk those items where the price has been reduced to a figure based on Ms Kenwright's proportion of ownership.
In addition, the policy does not cover building materials so I have excluded those items.
There are some prices that are obviously approximations and others which seem to me to be excessive, but as I have said, I think the total of these amounts is a reasonable measure of her damage. Doing the best I can a summary of the items and prices Ms Kenwright gave evidence of, and which I accept, is as follows:
Item
($)
Antique China
3,000
Queen Mahogany Bedroom Suite
3,500
Queen mattress
1,500
Bedside tables
500*
Queen bedroom suite
2,500*
Residual bedroom 2 furniture
7,660*
Amour
2,500
Residual Hallway Furniture
1,595
Items in toilet other than building materials
860
Items on back verandah
16,567
Items in laundry
1,618
Items in lounge ("majority")
14,000
Total
55,800
In the circumstances I propose to allow $55,800 for contents.
(c) TEMPORARY ACCOMMODATION
The policy provided further cost of temporary accommodation in the following terms:
"Temporary accommodation for home owners
If a listed event damages your home and we agree you can't live in it and need to move out for the reasonable time it should take to repair or rebuild your home.
Covered under Buildings Insurance
► costs for temporary accommodation:
- that we agree are reasonable and appropriate for you, your family and your pets that you normally keep at your site
- for the reasonable time we agree it should take to repair or rebuild your home
► any additional living expenses that we agree are appropriate
► costs to remove and store your contents and them return them to your home.
We pay these costs for up to 12 months from when the listed event took place. We pay this on top of the buildings sum insured.
Conditions
► you must have lived in your home permanently before the listed event took place
► we must agree to pay the costs before you make any arrangements."
Ms Kenwright accepts that the NRMA paid for her temporary accommodation until mid-June 2010, which amounts to some ten weeks. As the cover is for a maximum of 52 weeks, she would then be entitled to a further 42 weeks.
Ms Kenwright gave evidence of her rental, which ranged from $150 to $245 per week. In the 42 weeks from mid-June her rental costs totalled $9,335.
NRMA asserted that Ms Kenwright was proposing to move to Queensland in any event and so was not entitled to accommodation costs. However, this fact is not listed as an exception under the policy. Ms Kenwright did live in her home permanently before the fire, which is one of the conditions. The other condition, namely, that NRMA must first agree to pay the accommodation costs, cannot be applicable where the insurer denies indemnity. I propose to allow the sum of $9,335.
Accordingly, I propose to allow damages for breach of the insurance contract in the total sum of $125,135, comprising: buildings $60,000, contents $55,800, and temporary accommodation $9,335.
To this must be added interest.
NRMA is obliged to pay for the loss once it has had a reasonable period to investigate the claim, so interest should not run until after that period. I have concluded that a reasonable period to investigate the claim is until 1 September 2010. Also, if temporary accommodation costs are recoverable for the period from June 2010 to April 2011, it seems appropriate that interest can run on the whole of the temporary accommodation costs from the midpoint of that period, namely November 2011. In the circumstances, I propose to allow interest at the prescribed rate from 1 September 2010 to 15 November 2010 on the sums for building and contents, namely $115,800, and from 15 November 2010 to today on the entire sum.
As the parties have not addressed me on interest and have raised a question concerning the appropriate rate, I think I should indicate that I propose to give judgment for $125,135 plus interest from the dates, and on the amounts, that I have specified.
I allow the parties until Monday at 9am on 30 September to make any submissions on interest or costs.
The orders of the Court are:
(1) Note that the principal amount, exclusive of interest payable by the defendant to the plaintiff, is the sum of $125,135.
(2) Grant liberty to the parties to forward to my associate by 9am on 30 September 2013 either an agreed statement of interest and costs or a short submission (maximum two pages) as to the appropriate rate of interest and costs.
(3) Grant liberty to seek a further hearing on costs in the event that either party is of the view that a written submission is not sufficient.
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Decision last updated: 20 January 2014
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