McMurray v AIG Insurance Australia Ltd - [2018] WASC 144

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   MCMURRAY -v- AIG INSURANCE AUSTRALIA LTD [2018] WASC 144
CORAM:   CHANEY J
HEARD:   20 FEBRUARY 2018
DELIVERED          :   10 MAY 2018
FILE NO/S:   CIV 2962 of 2016
BETWEEN:   FREDERICK WILLIAM MCMURRAY and JENNIFER GRACE MCMURRAY
Plaintiffs
AND
AIG INSURANCE AUSTRALIA LTD
First Defendant
RUSSELL BRESLAND
BRESLAND CONSULTANTS PTY LTD
Second Defendants
TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD
Third Defendant
MOSMAN BAY CONSTRUCTION PTY LTD
First Third Party
TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD
Second Third Party
HANS BO KRISTIAN HOLGERSSON trading as HOLGERSSONS COMPLETE HOME SERVICE
First Fourth Party

Catchwords:

Insurance - Proper construction of insurance contract - Schedule showing insured as including all principals, contractors and sub-contractors - Whether sub-contractor entitled to indemnity

Legislation:

Insurance Contracts Act 1984 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Preliminary question answered

Category: B

Representation:

Counsel:

Plaintiffs	:	Mr G R Hancy
First Defendant	:	No appearance
Second Defendants	:	No appearance
Third Defendant	:	Ms J A Thornton
First Third Party	:	No appearance
Second Third Party	:	Ms J A Thornton
First Fourth Party	:	Mr J A Thomson SC

Solicitors:

Plaintiffs	:	Solomon Brothers
First Defendant	:	Wotton + Kearney Lawyers (Perth)
Second Defendants	:	Sparke Helmore Lawyers
Third Defendant	:	Clyde & Co (Perth Office)
First Third Party	:	Clyde & Co (Perth Office)
Second Third Party	:	Clyde & Co (Perth Office)
First Fourth Party	:	SRB Legal

Case(s) referred to in decision(s):

AWB Ltd v Cole (No 2) (2006) 233 ALR 453
CGU Insurance Ltd v Porthouse [2008] HCA 30; (2008) 235 CLR 103
City of Swan v Lehman Bros Australia Ltd [2009] FCA 784; (2009) 73 ACSR 86
Co‑operative Bulk Handling Ltd v Jennings Industries Ltd (1996) 17 WAR 257
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Landsdale Pty Ltd v Moore [2009] WASCA 176
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2002) 203 CLR 579
Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107
Woodside Petroleum Development Pty Ltd v H & R ‑ E & W Pty Ltd (1999) 20 WAR 380

CHANEY J:

These proceedings arise following a fire that occurred overnight between 15 and 16 January 2016 at a house owned by the plaintiffs in Wellington Street, Mosman Park. At the time of the fire, the home was undergoing extensive renovations which were being carried out by the first third party (Mosman Bay).
The principal proceedings were brought by the plaintiffs against three defendants. The first defendant (AIG) is the insurer of the house. It denies liability under the relevant policy on the basis of a contract works exclusion.
The second defendants (Bresland parties) are insurance brokers who arranged the insurance with AIG. The plaintiffs allege that if, as AIG contends, the contract works…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] WASC 144
Decision Date: 10 MAY 2018

CaseChat Overview and Summary

In the matter of McMurray v AIG Insurance Australia Ltd, the dispute arose from a claim for indemnity under an insurance policy issued by Tokio Marine & Nichido Fire Insurance Co (Australia) Pty Ltd (Tokio) to Mosman Bay Construction Pty Ltd (MBC). The question for the court was whether the policy provided coverage to sub-contractors of MBC, specifically whether they were included within the term 'Insured' as described in the Schedule of the policy. The Federal Court of Australia was tasked with interpreting the terms of the insurance contract to determine the scope of coverage.

The primary legal issue before the Court was the interpretation of the policy wording to ascertain the extent of the coverage for the sub-contractors of MBC. This involved examining the definitions of 'You' and 'Insured', and whether the inclusion of 'all Principals, Contractors and Sub-Contractors' in the Schedule meant that these parties were covered by the policy. The Court had to consider whether the term 'named' in the definition of 'Insured' required a specific naming by proper noun or if it could be interpreted more broadly.

The Court found that the term 'named' in the definition of 'Insured' should not be narrowly construed to mean named by proper noun. Instead, the Court held that a reasonable businessperson would understand the Schedule to extend coverage to all principals, contractors, and sub-contractors, regardless of whether they were specifically named. The Court rejected Tokio's argument that the Schedule must be read subject to the policy terms, emphasizing that the definition of 'You' and 'Insured' was dependent on the Schedule's provisions. The presence of the word 'all' before 'Principals, Contractors and Sub-Contractors' further supported the broader interpretation. The introductory words of the policy, which referred to 'the Company and You' as identified in the Policy and the Schedule, also supported this interpretation as all contractors and sub-contractors were indeed referred to in the Schedule.

The Court's decision was that the policy provided coverage to all principals, contractors, and sub-contractors of MBC, as described in the Schedule. This interpretation was consistent with the plain meaning of the terms used and the commercial purpose of the insurance contract. The Court held that the specific extension of coverage to all such parties did not render any part of the policy terms redundant or unnecessary, as some provisions, such as certain exclusions, plainly had no application to the insured project.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The terms of a commercial contract are to be determined by what a reasonable business person would have understood those terms to mean. That requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.[9][9] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]. The primary issue for resolution concerns the relationship between the definition of 'You' and the description of the insured in the Policy Schedule. The expressions 'You' and 'Insured' are both defined in item 26 of the definitions, and therefore bear the same meaning and are interchangeable. That meaning is a 'person(s) or legal entity named in the Schedule'. The Schedule uses the expression 'Insured' which it identifies as Mosman Bay Construction Pty Ltd and all principals, contractors and sub‑contractors. Tokio contends that 'named' necessarily means named by proper noun. I reject that contention. The difficulty with Tokio's construction is that it fails to give meaning to the inclusion of the words 'and all Principals, Contractors and Sub‑Contractors' where they appear in the Schedule. Condition 3.2 of section 2 (set out above at [27]) contemplates that there is more than one 'Insured' and contemplates coverage for each insured as though separate policies had been issued to them. Tokio argues that those words should be, in effect, read as 'Principals, Contractors and Sub‑Contractors to the extent that they may be covered by this policy'.[10] It contends that in order to determine what cover principals, contractors or sub‑contractors may have under the Tokio Policy, it is necessary to look to the policy wording, and that the Schedule must be read subject to the policy terms. It is clear, however, that the definition of 'You' and 'Insured' depends for its content on the provisions of the Schedule. Furthermore, the proposition that the reference to principals, contractors or sub‑contractors should be qualified in the way suggested by Tokio ignores the presence of the word 'all' where it appears before principals, contractors and sub‑contractors in the Schedule.[10] ts 47. In my view, it is artificial to construe the word 'named' in the definition of 'You' and 'Insured' as meaning named by proper noun. There can be no doubt, because the words are clear, that a reasonable business person reading the Policy Schedule description of the Insured would understand the policy to extend to all principals, contractors and sub‑contractors regardless of whether their particular name was specified. That construction is also supported by the introductory words of the Tokio Policy which read 'the Company and You are identified and referred to in the Policy and the Schedule' (emphasis added). All contractors and sub‑contractors are referred to in the Schedule. It is true that the inclusion of all principals, contractors and sub‑contractors as 'You' appears to render par c) of the definition of 'Named Insured' unnecessary. That is not a reason to qualify the description of the insured in the Schedule or to give that description anything other than its plain meaning. There are numerous provisions in the boiler plate provisions of the Tokio Policy that plainly have no application to the project to which the insurance relates. For example, it is difficult to see any relevant application to the project of some of the categories of persons referred in par d) of the definition of Named Insured such as committees or members of Your canteen, sports, or social or welfare organisations. Some of the exclusions applicable to section 1 of the Tokio Policy such as loss or damage to any vessel or thing intended to float on water (exclusion 10), or loss and damage resulting from the normal action of the sea (exclusion 22), are examples. Similarly, in relation to section 2, exclusions in relation to Aircraft, Hovercraft and Watercraft (exclusion 4) and Aircraft Products (exclusion 5) can have no sensible application to the project the subject of the insurance. That the specific extension of coverage to all principals, contractors and sub‑contractors might render certain provisions of the policy terms unnecessary or redundant is not a reason to limit that express and specific description of the Insured. The Schedule is a document drawn specifically to deal with the particular insurance contract.