MARLAINE MAY AGNES CLAYTON v MUTUAL COMMUNITY GENERAL INSURANCE PTY LTD No. SCGRG 94/1259 Judgment No. 5080 Number of Pages - 5 Insurance - Fire Insurance (1995) 8 ANZ Insurance Cases 61-263 (1995) 64 SASR 353

[1995] SASC 5080

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(1), DUGGAN(2) AND NYLAND(3) JJ

CWDS
Insurance - fire insurance - Exclusion of damage caused by deliberate or intentional act - suicide by igniting petrol fumes in car in carport - damage to insured premises not designed - exclusion applies only where damage intentional or deliberate - fire spreading to insured premises - damage to premises not caused by deliberate or intentional act - exclusion of damage arising out of unlawful act - damage to jointly owned car unlawful act - joint owner not "wholly entitled" to property - damage to insured premises arising out of unlawful act - exclusion applies. Criminal Law Consolidation Act ss85(1) and 86. Beresford v Royal Insurance Co Ltd (1938) AC 586; Fire and All Risks Insurance Co Ltd v Powell (1966) VR 513; Hanover Insurance Group v Cameron (1973) 298 A.2d 715; Aetna Casualty and Surety Company v Freyer (1980) 411 NE 2d 1157 and MacGillvray and Parkington on Insurance Law 8th Edition pp455-456, considered.

HRNG ADELAIDE, 10 April 1995 #DATE 8:6:1995 #ADD 4:9:1995

Counsel for appellant:     Mr S H Milazzo

Solicitors for appellant:    Dixon Gallasch Pty Ltd

Counsel for respondent:     Mr S P Mathwin

Solicitors for respondent: Kelly and Co

ORDER
Appeal dismissed.

JUDGE1 KING CJ The appellant sued the respondent in the District Court for the sum of $45,000 the agreed amount of loss suffered by him in consequence of damage by fire to a house insured by the respondent. The action was dismissed and this is an appeal against that dismissal.

2. The house was owned by the appellant and her estranged husband as joint tenants. On 26 March, 1992 the husband committed suicide by deliberately igniting petrol fumes in a motor car, also jointly owned by the appellant and her husband, in the carport which formed part of the insured premises. The fire destroyed the car and damaged the carport. It spread to the house itself causing extensive damage.

3. The deceased left a copy of his will and a suicide note in the house. He removed his son's sailboard from the carport area into the house. It is obvious that he did not intend to cause damage to the house and the learned trial judge so found.

4. The respondent relied upon two General Exclusions in the Policy. One provides that the Policy does not cover "loss or damage caused by the deliberate or intentional acts committed by you". The other excludes cover for "loss, damage or liability arising from any unlawful act or omission by you or by any other person insured by the Policy or from the enforcement of any act, ordinance or law".

5. The learned trial judge held that the igniting of the fumes resulting in fire was a deliberate and intentional act and that it caused the loss which is the subject of the claim. He dismissed the action on that ground.

6. The principle which is reflected in the exclusion of deliberate or intentional acts in this Policy, is stated in Beresford v Royal Insurance Co Ltd (1938) AC 586 at 595 as follows:
    "On ordinary principles of insurance law an assured cannot by
    his own deliberate act cause the event upon which the
    insurance money is payable ... This is not the result of
    public policy but the correct construction of the contract."

7. This principle was elaborated in Fire and All Risks Insurance Co Ltd v Powell (1966) VR 513 at 518-19 by O'Bryan and Pape JJ as follows:
"In Beresford v. Royal Insurance Co. Ltd., (1938) AC 586,
at p 595;(1938) 2 All ER 602, Lord Atkin said: '... on
    ordinary principles of insurance law the assured cannot by
    his own deliberate act cause the event upon which the
    insurance money is made payable, the insurers have not agreed
    to pay on that happening ... . That is not the result of
    public policy but of the correct construction of the
    contract'.

This means that an insured cannot recover if the event on
    which the insurance money is made payable is deliberately
    caused or brought about by his own act. The emphasis is upon
    the proposition that to afford a defence to the insurer on
    this ground it must be shown that the loss in respect of
    which indemnity is claimed was deliberately contrived and
    intended, as was the case in Beresford v. Royal Insurance Co.
    Ltd., supra, and Haseldine v. Hosken, supra. The distinction
    is between an intentional act which produces intentional loss
    or damage, and an intentional act in the course of doing
    which unintended loss or damage occurs. The true rule is
    that where the actual loss for which indemnity is sought is
    deliberately contrived by the insured's wilful and deliberate
    act, he cannot recover under the policy, but that his
    negligence does not bring him within that concept."

8. No authority has been brought to our attention governing the interpretation of a clause in identical terms with the clause under consideration. Two American cases were cited. In Hanover Insurance Group v Cameron (1973) 298 A 2d 715, the clause excluded "bodily injury or property damage caused intentionally by or at the direction of the Insured ...". The Supreme Court of New Jersey (Stamler JSC) held that the word "intentionally" denoted that the actor desires to cause consequences of his act or believes that consequences are substantially certain to result from it. In Aetna Casualty and Surety Company v Freyer (1980) 411 NE 2d 1157, a clause in a legal liability indemnity policy excluded liability for injury "which is either expected or intended from the standpoint of the insured". The Appellate Court of Illinois held that the insurer was not obliged to defend or indemnify in respect of a claim for assault and battery. In doing so, however, it said, citing a passage from Appleman Insurance Law and Practice and Hanover Insurance Group v Cameron, supra:
    "The word 'intent' for purposes of exclusionary clauses in
    insurance policies denotes that the actor desires to cause
    the consequence of his act or believes that the consequences
    are substantially certain to result from it."

9. The words in the instant Policy differ from those under consideration in the American cases. What is excluded is not intentional damage but damage caused by a deliberate or intentional act. Nevertheless the American cases cited illustrate the basic considerations and purposes of insurance law in the light of which the actual words of the insurance contract must be construed.

10. MacGillvray and Parkington on Insurance Law 8th Edition pp455 and 456 express the consideration and purpose underlying such clauses as follows:
    "... it is a rule of insurance law that an assured cannot
    normally recover the policy moneys when he has intentionally
    brought about the event upon which the policy specifies the
    moneys to be payable ... . There is a presumption in the
    case of every insurance contract that the assured cannot by
    his own intentional act bring about the event upon which the
    insurance money is payable and then recover under the policy.
    This is not the result of any rule of public policy but of a
    prima facie rule of construction of the contract, by which it
    is presumed that the insurers have not agreed to pay on that
    happening."

11. The underlying purpose is identified by the Court in Aetna case supra at 1159 as follows:
    "In addition, insurance companies, in order to make this
    limitation of coverage absolutely clear and unescapable,
    include an exclusion for 'intentional' injuries' caused by
    the insured. The intentional injury exclusion is necessary
    to the insurer to enable it to set rates and supply coverage
    only if losses are uncertain from the standpoint of any
    single policy holder. If a single insured is allowed through
    intentional acts to consciously control risks covered by the
    policy, the central concept of insurance is violated."

12. The learned judge construed the "act" in the phrase "deliberate and intentional acts" as applying to the igniting of the petrol fumes disengaged from its consequences. The only question for him was whether the igniting of the fumes caused the damage to the insured premises. Such a narrow construction would have consequences which, in my opinion, would frustrate to a substantial degree the effectiveness of the legitimate cover which the parties should be taken to have intended. Damage caused by the escape of a hearth fire deliberately lit in the course of ordinary domestic use would not be covered. Neither would damage from a fire accidentally resulting from a deliberately lit candle or damage to the premises as a result of a deliberately driven car accidentally colliding with a building. The parties should not be taken to have intended that unintended consequences of ordinary and proper use of the insured premises or ordinary and proper activities carried out on them would be excluded from the cover provided by the Policy.

13. I consider that the act contemplated by the phrase "deliberate and intentional act" is the act of causing the damage. There must be a deliberate or intentional causing of the damage to the insured premises.

14. Generally speaking, to say that a person deliberately or intentionally causes damage imports that that person desires to cause that damage. Intention in law, however, is not equated with desire. There is an intentional act of causing damage when a person who has no desire to cause the damage, deliberately does so because of a desire to achieve some collateral purpose. Neither is intention equated with recklessness. The act of causing damage is reckless in contra distinction to deliberate or intentional where the person realises the risk that damage will probably result but proceeds irrespective of that risk.

15. Although intention and recklessness are distinct states of mind and the latter is not within the policy exclusion, there is a point at which the risk of damage to the insured premises, as it exists and as it is realised by the insured to exist in consequence of the insured's actions is so high that the insured's state of mind, notwithstanding that the damage was not designed or planned by him, is indistinguishable from intention.

16. It is difficult to formulate a satisfactory test for the determining when unplanned and undesigned damage is to be regarded as intentional. In the American cases cited above the test adopted is that the insured believes that the damage is "substantially certain to result" from his actions and MacGillvray refers to embarking "upon a course of conduct in which there was a clear risk of the loss occurring." I do not think that the adoption of a precise formula would be useful. It must be a question for the tribunal of fact whether the risk, as realised by the insured, of the unplanned and undesigned damage was so high that his state of mind should be equated with intention because it amounted to imposing on the insurer a risk which it could not reasonably be thought to have intended to assume.

17. I do not think on the evidence that the deceased's action in igniting the petrol fumes in the car give rise to an inference that he realised that the carport would be damaged still less that the fire would enter the house through the air-conditioning. I do not think that his action can be regarded as the deliberate or intentional causing of damage to the insured premises. I do not think that the "deliberate and intentional act" exclusion applies to exclude the respondent's liability under the policy.

18. The learned judge rejected the respondent's argument that the damage arose out of an unlawful act, namely a breach of s85Criminal Law Consolidation Act. That section so far as material is as follows:
    "85.(1) Where a person -
    (a) intending to damage property of another, or being
    recklessly indifferent as to whether property of another is
    damaged; and
    (b) without lawful authority to do so, and knowing that no
    such lawful authority exists,
    damages, or attempts to damage, property of another by fire
    or explosives, the person shall be guilty of an offence."

19. Property is regarded as the "property of another" by virtue of s85 if the person who damages or attempts to damage the property is not "wholly entitled to the property both at law and in equity". His Honour was of opinion that "notwithstanding the fact that the deceased was not the sole owner of the house property and its contents and the motor vehicle and was joint owner thereof, he was nonetheless 'wholly entitled to the property at law and in equity' and was therefore an owner thereof". I do not think that that view is tenable. The appellant had an interest as joint tenant both at law and in equity in the house and the car. The deceased plainly was not wholly entitled to either the house or the car.

20. There can be no doubt that the deceased deliberately caused damage to the car. It was argued that there was no proof that the appellant did not authorize his action. It is true that that question was not asked of the appellant and that there was no explicit evidence on the point from her. Nevertheless, it is clear from the evidence that she was totally unaware of the deceased's intention to commit suicide and, of course, to damage the car in the process. There could be no question of her having authorized his action. It is plain that the deceased did not have lawful authority to damage the car. The conclusion that the damage to the car by igniting petrol fumes was a breach of s86 and therefore an unlawful act is inescapable.

21. The fire by means of which the deceased damaged the car spread to the carport and through the air-conditioning system into the house. The damage to the insured premises therefore arose directly out of the unlawful act of damaging the car.

22. In my opinion the respondent has brought itself within the unlawful act exclusion and for that reason the appeal must be dismissed.

JUDGE2 DUGGAN J I agree that this appeal should be dismissed for the reasons given by King CJ.

JUDGE3 NYLAND J I agree that this appeal should be dismissed for the reasons given by King CJ.