Pacific Dunlop Limited & Anor v Swinbank
[2001] VSCA 74
•29 May 2001
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 2025 of 1997
| PACIFIC DUNLOP LIMITED and ZURICH AUSTRALIAN INSURANCE LIMITED | |
| Appellants | |
| v. | |
| CHRISTOPHER MARK SWINBANK | Respondent |
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JUDGES: | TADGELL, CHARLES and CHERNOV, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 16 October 2000 | |
DATE OF JUDGMENT: | 29 May 2001 | |
MEDIUM NEUTRAL CITATION: | [2001] VSCA 74 | |
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Insurance – Product liability insurance – Excess insurance – Indemnity for legal liability in respect of personal injury caused by an “Occurrence” – Whether policy definition of “Occurrence” produced extension of cover beyond “Period of Insurance”.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant Pacific Dunlop Limited | Mr J.E. Middleton, Q.C. and | Freehills |
| For the Appellant | Mr D.M.B. Derham, Q.C. and Mr M.D. Wyles | Phillips Fox |
| For the Respondent | Mr G.A.A. Nettle, Q.C. and Mr K.G. Hawden | Lander & Rogers |
TADGELL, J.A.:
Pacific Dunlop Ltd., a Victorian company, and Zurich Australian Insurance Ltd., each in a separate appeal that was heard together with the other, complain of what was in effect a refusal by Mandie, J. on 16 December 1998 to make a declaratory order as sought by Pacific Dunlop against the respondent, Christopher Mark Swinbank. Pacific Dunlop had sued the respondent in his own right as a member, and as representing the other members, of a Lloyd’s syndicate for a declaration that, upon the true construction of two Lloyd’s policies issued to it by the syndicate, it was entitled to indemnity, by way of product liability insurance, in respect of legal liability for certain claims for damages for personal injury (which I shall simply call “the personal injury claims”) made against some of its subsidiary companies.
Each of the Lloyd’s policies – referred to in the statement of claim as “the first Lloyd’s policy” (dated 1 June 1995) and “the second Lloyd’s policy” (dated 2 June 1995) – is for excess liability insurance. The relevant primary insurance cover was provided by Zurich Australian by a “Master Insurance Policy for Legal Liability” issued to Pacific Dunlop and dated 14 June 1993, referred to in each of the Lloyd's policies as “the Primary Policy”. The period of insurance is expressed in the Primary Policy to be from 4.00 p.m. Australian Eastern Standard Time on 30 September 1992 to 4.00 p.m. Australian Eastern Standard Time on 30 September 1993 “or any subsequent period for which the insured shall agree to pay and the Insurer shall agree to accept a renewal premium”; and the Lloyd’s policies provide for that same period of insurance, with provision for an extension to the same effect. Each of the Lloyd's policies further provides –
(a)(by condition 1) that it is subject to the same conditions and terms as the Primary Policy except with regard to, inter alia, the premium and limits of liability;
(b)(by condition 4) that in the event of exhaustion of any aggregate underlying limit the policy should apply in place of the Primary Policy.
It was common ground at the trial of Pacific Dunlop’s proceeding against the respondent, as it has been in this Court, that Pacific Dunlop’s case, so far as it concerns the interpretation of the Lloyd's policies, depends entirely on the terms of the Primary Policy. So it was that, at the trial, Zurich Australian was granted leave to intervene on condition that it undertook to be bound by the interpretation placed by the Court on the Primary Policy.
Pacific Dunlop alleged in its proceeding against the respondent that each of the personal injury claims in respect of which it asserted an entitlement to indemnity under the Lloyd's policies was caused by an “Occurrence”, as defined in the Primary Policy, for the consequences of which indemnity was available. Shorn of irrelevancy, the ultimate question for decision in the case is whether the indemnity provided by the Primary Policy, and consequently by the two Lloyd's policies, is limited to that against liability in respect of personal injury caused by an Occurrence happening during the period of insurance. The respondent’s essential submission was and is that the indemnity is so limited, whereas that for each of the appellants was and is that the terms of the Primary Policy, and in particular the definition of “Occurrence” that it contains, extend the indemnity to cover legal liability for Occurrences happening beyond the period of insurance. The learned trial judge accepted the respondent’s submission and ordered and declared that ―
“On the proper construction of the Primary Policy, it does not respond in relation to occurrences which happen after the expiry of the Period of Insurance…”.
Hence these appeals. In my opinion his Honour’s conclusion was correct, and the appeals should accordingly be dismissed, but the justification for it cannot be so succinctly expressed as the conclusion itself.
The personal injury claims
These claims derive from the production in the United States of America by a subsidiary of Pacific Dunlop’s, formerly called TPLC Inc., of implantable medical devices, namely coronary pacemaker leads. From about October 1988 until about October 1994 TPLC manufactured three models of the devices (designated 329-701, 330-801 and 033-812) known as Accufix atrial “J” pacing leads. These were distributed by the manufacturer in North America and by various other subsidiaries of Pacific Dunlop’s elsewhere around the world. In essence, the leads were designed to convey electronic signals from an implanted pacemaker to the patient’s heart. About 40,500 of the leads were implanted in cardiac patients, over 25,000 of them in the United States. All of the models in question incorporated a J-shaped stiffener alloy wire that was attached, by means only of a weld, to the proximal (pacemaker) end of the lead, extending towards the pacemaker for 88mm, between an outer polyurethane insulation sleeve and a conductor coil. The function of the coil was to transmit electronic signals from a pulse generator to the distal end of the lead which, in turn, was attached by means of the J-wire to the atrial wall of the heart.
In October and November 1994 TPLC announced the voluntary recall of all unimplanted leads of the relevant models following information that the J-wires had a potential to fracture and protrude through the polyurethane sleeve, and thus to migrate within the heart and cause death or injury to the patient. There were, indeed, reports that, in the United States, one J-wire had fractured during an explantation, apparently in 1989, and that another had been found to have fractured as a result of fatigue, before being explanted, but neither of these cases produced a personal injury claim.
The personal injury claims that have been made seek compensation for injury – physical and psychological – caused by an actual fracture, requiring explantation, or by explantation on account of apprehension of susceptibility to fracture, of implanted J-wires. Pacific Dunlop has sought indemnity in respect of liability for claims of each of those kinds.
On 20 November 1992 (during the period of insurance provided by the Primary Policy) Mrs Anne Smithers suffered a circulatory collapse and pericardial tamponade following a fracture and protrusion of a J-wire from the outer polyurethane sleeve and perforation of the right atrium. A week later the lead was removed by surgery in Victoria. Mrs Smithers sued in Victoria for damages for personal injury so suffered. Pacific Dunlop referred her claim to Zurich Australian and subsequently sought indemnity under the Primary Policy against any liability in respect of her claim and like claims. In essence, so far as is now relevant, Zurich Australian in 1995 accepted liability in respect of the claim and assumed the conduct of the defence or compromise of it and like claims. The claim by Mrs Smithers was compromised.
The terms of the policies
By the Primary Policy, in terms of what is called the “Operative Clause” the insurer agreed ―
“In consideration of the Insured having paid or agreed to pay the premium (and subject to the terms conditions exclusions and Limits of Liability incorporated herein)…to indemnify the Insured [relevantly, Pacific Dunlop and subsidiaries] for all amounts which the Insured shall become legally liable to pay by way of compensation or damages in connexion with [its business, as defined] by reason of liability imposed on the Insured by law or assumed under contract or agreement as more fully described in each Section.”
There are four such sections: A – General Indemnity; B – Product Liability; C –Employers Liability and D – Products Recall Expense. Pacific Dunlop’s claim relied on section B.
Each section of the Primary Policy contains an indemnity clause stating that “The insured is indemnified by this Section in accordance with the Operative Clause…” either against legal liability or for expense which it proceeds to particularise, thus:
Section A provides for indemnity up to a prescribed limit and subject to specified exclusions ―
“…against such sums as the Insured shall become legally liable to pay arising out of Personal Injury, Property Damage or Advertising Injury caused by an Occurrence happening:
(a) during the Period of Insurance, or
(b) after the Retroactive Date [ 30 June 1977 and in effect until 30 June 1990] in respect of which a claim is first made against the Insured during the Period of Insurance, and which Occurrence was not known to the Insured’s officer responsible for insurance prior to the inception date of this Policy…”
Section B specifies indemnity, up to a prescribed limit[1] and subject to specified exclusions ―
[1] The limit of cover provided by section B (so far as it is now relevant to state it, and subject to provisions for re-insurance) was “$A3,500,000 any one Occurrence and in the aggregate for all Occurrences”. That is to be compared with the limit of cover provided by section A (General Liability) of “$A3,500,000 any one Occurrence”.
“…against such sums as the Insured shall become legally liable to pay in respect of Personal Injury or Property Damage caused by an Occurrence happening:
(a) during the Period of Insurance, or
(b) after the Retroactive Date [30 June 1977, in effect until 30 June 1990] in respect of which a claim is first made against the Insured during the Period of Insurance, and which Occurrence was not known to the Insured’s officer responsible for insurance prior to the inception date of this Policy
arising out of or in connexion with any Products [as defined].”
The indemnity specified in Section C ― Employers Liability ― need not be considered, for it has no evident bearing on the present issues, being dependent on the terms of the appellant’s primary employers’ liability policies.
Section D specifies indemnity up to a prescribed limit and subject to specified exclusions “…for Products Recall Expense caused by an Occurrence in respect of which a claim is first made against the Insurer during the Period of Insurance…”
It was common ground that the J-wires were “products” as defined by the Primary Policy and so fell within section B. The following further definitions, applying to all sections of the Primary Policy, are relevant ― [2]
[2]I set out the definitions of “Personal Injury”, “Property Damage”, “Advertising Injury” and “Product(s)” not because they are themselves of immediate importance but for such light as they shed on the centrally important definition of “Occurrence”.
“1. PERSONAL INJURY
The Term ‘Personal Injury’ shall mean: -
(a)bodily injury, death, sickness, disease, disability, shock, fright, mental anguish and mental injury;
(b)false arrest, false imprisonment, wrongful eviction, wrongful detention, discrimination, malicious prosecution and humiliation;
(c)libel, slander, defamation of character or invasion of right of privacy; and
(d)assault and battery not committed by or at the direction of the Insured unless committed for the purpose of preventing or eliminating danger to persons or property.
2.PROPERTY DAMAGE
The term ‘Property Damage’ shall mean:-
(a)physical loss, destruction of or damage to tangible property, including the loss of use thereof at any time resulting therefrom;
(b)loss of use of tangible property which has not been physically injured, damaged or destroyed, provided that such loss of use is caused by or arises out of an Occurrence;
(c)nuisance trespass or interference with any right of way or right to light air or water, easement or quasi easement.
3.ADVERTISING INJURY
The term ‘Advertising Injury’ shall mean libel, slander, defamation, infringement of copyright, title or slogan, piracy, unfair competition, idea misappropriation or invasion of right of privacy, arising out of the Insured’s advertising activities.
4. PRODUCT(S)
The term ‘Product(s)’ whenever used herein shall be deemed to include:
(a)any tangible property (after it has ceased to be in custody or control of the Insured) which has been designed, formulated, specified, manufactured, processed, sold, supplied, constructed, erected, installed, repaired, altered, treated, serviced, renovated, tested, hired out, cleaned, worked upon, stored, handled, financed, despatched, delivered, distributed, transported or disposed of by or on behalf of the Insured.
(b)any advice, consultancy, design, plan, specification, formula, labelling, instructions for use, or similar only insofar as incorporated in or provided in connection with 4.(a) above.
5.OCCURRENCE
The term ‘Occurrence’ shall mean an event including continued or repeated exposure to substantially the same conditions which results in such Personal Injury, Property Damage or Advertising Injury neither expected nor intended by the Insured.
With regard to Advertising Injury all injury arising out of the same injurious material regardless of the frequency of repetition or the number or kind of medial used shall be deemed to be one Occurrence.
An Occurrence or series of Occurrences arising directly from a common cause or condition shall be deemed to be one Occurrence regardless of the number of persons or organisations who sustain Personal Injury Property Damage or Advertising Injury. All such Occurrences shall be deemed to have occurred on the day of the first of such Occurrences.”
In his reasons for judgment the learned judge referred to the last paragraph of the definition of “Occurrence” as “the aggregation clause” and to the last sentence of that paragraph as “the date deeming provision”, and I shall follow suit.
It seems unnecessary to set out in detail any of the terms of the two Lloyd's policies. It is sufficient to say that each of them relevantly undertook to indemnify the insured against products liability claims “as contained in the Primary Policy” up to a proportion being, in the case of the first Lloyd's policy, a line of 18% of a defined limit of liability of “$8,000,000 any one Occurrence, and in the aggregate for all Occurrences in excess of the Insured’s Underlying Policies”; and, in the case of the
second Lloyd’s policy, a line of 15% of a limit of liability similarly defined but of $10,000,000.
The proceeding below
Pacific Dunlop sought indemnity under the Primary Policy in respect of personal injury claims which included claims for injury suffered both during the period of insurance to 30 September 1993 (as in the case of Mrs Smithers) and after that period had expired. Zurich Australian had accepted liability on the footing that, on the basis of information supplied, “the first incident involving any injury to a patient” of which the insured was aware occurred in October 1992; and that accordingly –
“… the ‘Occurrence’ for the policy purposes is deemed to have occurred on that date and the claim will thus attach to the 1992-1993 year … Further, there will be deemed to [be] one occurrence as all who suffer personal injury do so from one common cause. Policy liability is therefore limited to the 1992/93 year only irrespective of when the individual patient notifies his claim.”
Acceptance of liability by Zurich Australian in those terms was evidently attributable to an interpretation favourable to the insured of the aggregation clause and the date deeming provision.
The level of cover under the Primary Policy being on the point of exhaustion, Pacific Dunlop sought acceptance of liability under the Lloyd’s policies, to the extent necessary, in respect of the personal injury claims that had been made against its subsidiaries. In February 1997 the issuing Lloyd’s syndicate declined to accept liability, being unwilling to concur in the interpretation of the aggregation clause and the date deeming provision that had been applied by Zurich Australian. The syndicate contended in particular that the personal injury claims save, apparently, for that of Mrs Smithers (and presumably others in the same category) did not form a “series of occurrences” in terms of the aggregation clause. So it was that in proceeding 2025 of 1997, commenced by writ filed on 2 April 1997, Pacific Dunlop sought the declaration that, as I noted at the outset, Mandie, J. eventually refused. In its own separate proceeding Zurich Australian sued the Lloyd’s syndicate for damages and declaratory relief in respect of the reinsurance of its liability under the Primary Policy. We are not here concerned with the fate of the latter proceeding but Zurich Australian, having at the trial generally supported the conclusions for which Pacific Dunlop contended, takes the same stance now as to the proper interpretation of the Lloyd’s policies.
In order to facilitate the determination of their competing contentions as to the effect of the Primary Policy the parties agreed before trial –
(a)to identify four categories of “Occurrence” into which all relevant personal injury claims should be taken to fall; and
(b)to make mutual admissions of relevant facts concerning sample claimants, which should be taken to be the only facts relevant to illustrate each category of Occurrence.
Counsel for the respondent announced at a directions hearing before the trial that the earliest event which his client would contend constituted an “Occurrence” was the implantation of a lead in a patient, and that he would not contend that the “Occurrence” was the design, manufacture or distribution of the J-wire. Furthermore, the parties expressed agreement before trial that “the nature of and factual basis for the legal liability of the plaintiff to the personal injury claimants is not relevant to determination of the issues for trial…” At trial there was admitted into evidence by consent a report (referred to as “the Manning Report”) which the judge described as containing “uncontradicted expert opinion evidence” and which, as his Honour determined, established on the balance of probabilities that –
“(a) The mode of fracture of the J-wire is fatigue;
(b)the cause of fracture is unrelated to variations in the material or material processing but is related to the stress level of the wire, and that stresses sufficient to cause fatigue failure are caused by ‘patient-specific implant geometry and lead displacement’.”
The four categories of personal injury agreed on were those suffered –
(a)during the period of insurance as the result of the fracture of a J-wire (as in the case of Mrs Smithers);
(b)after the expiry of the period of insurance as a result of the fracture of a J-wire;
(c)after the expiry of the period of insurance as a result of the removal by surgery of an unfractured J-wire;
(d)after expiry of the period of insurance as a result of fear of fracture of a J-wire.
The stipulations in the Primary Policy that called chiefly for interpretation and application at the trial were the aggregation clause and the date deeming provision. These, in summary, were the issues of construction raised for consideration –
(a) the meaning of “Occurrence”, as defined;
(b)the meaning in the aggregation clause of “a common cause or condition”, from which an “Occurrence or series of Occurrences” must arise directly in order to be deemed one Occurrence (regardless of the number of persons who sustained personal injury);
(c)the meaning of “a series of Occurrences”;
(d)the interaction between the indemnity clause in Section B (and in particular the provision that indemnity was provided for legal liability “…in respect of Personal Injury…caused by an Occurrence happening …during the Period of Insurance”) and the date deeming provision.
The learned trial judge expressed his conclusions (some of them tentative) upon items (a), (b) and (c) but they are not matters on which I need dwell: counsel for the appellants did not take serious issue with the judge’s conclusions upon them and, to the extent to which counsel for the respondent did so, I can dispose of the case without reference to them.
Item (d), on the other hand, underlay a question that was crucial at the trial and remains so: whether, upon the proper construction of the Primary Policy, a series of Occurrences may include Occurrences happening after the expiry of the period of insurance – 30 September 1992 to 30 September 1993. The learned judge stated the matter thus –
“… the question arises whether the date deeming provision in the aggregation clause evinces an intention to deem all occurrences in a series to have occurred on the day upon which the first of the series happened even if the Occurrence happened after the expiry of the Period of Insurance.”
At trial Pacific Dunlop (supported by Zurich Australian) contended, and both of them contend in this Court, that that question should be answered in the affirmative, the respondent to the contrary.
It was contended primarily for Pacific Dunlop below that the evidence disclosed a “series of Occurrences arising from a common cause or condition” within the meaning of the aggregation clause, that the series of Occurrences was therefore deemed to be one occurrence (regardless of the number of persons who had sustained personal injury) and that the single occurrence was to be deemed to have happened on the day of the first Occurrence of the series. Zurich Australian advanced a separate argument in support of a similar contention. For the respondent, the primary opposing contention below was that save (prima facie) in the case of personal injury caused by an Occurrence that happened within the period of insurance, no indemnity was available under the Lloyd's policies. It was submitted that no part of the definition of “Occurrence” extended the cover provided by the Primary Policy beyond the Period of Insurance, that is to say, to any of the agreed sample categories of personal injury (b), (c) and (d) described in paragraph [17] above.
In this Court counsel for Pacific Dunlop appear to have reiterated with emphasis their arguments put at first instance. They submitted that, in accepting the respondent’s argument, the learned judge had erred in that he failed to afford the indemnity clause in Section B its full operation by reference to its incorporation of the aggregation clause and the date deeming provision; failed to allow the aggregation clause its full scope according to its natural and ordinary meaning; and failed to afford the date deeming provision any useful operation within the overall context of the product liability cover granted. Thus, so the argument ran, the operation of the indemnity clause which, as it was asserted, is made “expressly subject to” the definition of “Occurrence”, and made “subject to” the operation of the aggregation clause, is unduly circumscribed by the judge’s interpretation, as is the aggregation clause itself; the date deeming provision is rendered nugatory and the definition of “Occurrence” is in substance re-written. It was submitted that the scope of the indemnity afforded by the Primary Policy is controlled by the requirements of the aggregation clause itself: that an interaction between the indemnity clause, the definition of “Occurrence”, the aggregation clause and the date deeming clause is intended as part of a mechanism to unify a number of events so that, in defined circumstances, they are to be deemed to be one occurrence. Thus, so it was said, was cover afforded in respect of events not happening within the period of insurance but being part of a series that was unified by reason of its arising directly from a common cause or condition. It was conceded for Pacific Dunlop that liability to indemnify cannot arise unless (putting aside the retroactive period) an Occurrence happens during the period of insurance; but the argument was that, if an Occurrence does happen during the period of insurance, and that Occurrence is the first of a series of Occurrences arising directly from a common cause or condition, the aggregation clause operates, without any tension or inconsistency with the indemnity clause, to deem all such Occurrences to be one Occurrence, and to deem all such Occurrences to have occurred on the day of the first Occurrence. Counsel for Zurich Australian again advanced a separate argument, sometimes with different emphasis from that for Pacific Dunlop, but to the same general effect.
One may readily acknowledge that the Primary Policy is to be interpreted according to the ordinary and popular meaning of its words. The words are, however, to be construed and applied in their context; and, since the Primary Policy is a commercial document, its words are to be understood in accordance with sound business principles and good business sense, so that its provisions receive a fair and sensible application.[3] So much I take to be axiomatic.
[3] E.g. Hydarnes S.S. Company v. Indemnity Mutual Marine Insurance Company [1895] 1 Q.B. 500, at 504, per Lord Esher. M.R., and the other authorities referred to in MacGillivray on Insurance Law 9th ed., para. 11-7.
Bearing those principles in mind I am bound to say that I find the submissions for Pacific Dunlop and Zurich to ignore or to overlook the essential nature of the Primary Policy as one that is calculated to afford insurance cover to Pacific Dunlop by way of indemnity over a distinct, limited and finite portion of time, marked out at each end to the very minute, and designated as “the Period of Insurance”. What, according to the terms of Section B, is relevantly insured against by that Section is liability for the consequences of a particular event (called an “Occurrence”) happening within that particularly specified time frame, namely between the beginning and the end of the defined Period of Insurance. The following remarks of Hobhouse, L.J. on the same subject in Municipal Mutual Insurance Ltd. v. Sea Insurance Company Ltd. & Ors [4] are exactly in point and I respectfully adopt them –
“When the relevant cover is placed on a time basis, the stated period of time is fundamental and must be given effect to. It is for that period of risk that the premium payable is assessed. This is so whether the cover is defined...by reference to when the physical loss or damage occurred, or by reference to when a liability was incurred or a claim made. Contracts of insurance...are or can be sophisticated instruments containing a wide variety of provisions, but the definition of the period of cover is basic and clear. It provides a temporal limit to the cover and does not provide cover outside that period; the insurer is not then ‘on risk’.”
[4][1998] Lloyd'sRep.: Insurance & Reinsurance 421, at 435-6.
It is the indemnity clause contained in Section B that, in accordance with its terms, defines the scope of the indemnity afforded by that Section. The asseveration on behalf of Pacific Dunlop that the scope of the indemnity is “controlled” by the requirements of the aggregation clause cannot in my opinion be sustained. The argument of which it is part smacks of a sustained and elaborate attempt to cause the tail to wag the dog. The function of the definition of “Occurrence” so far as it applies to Section B is, to my mind, to define the kind of event that is to be treated as an Occurrence for the purpose of that Section. Neither the aggregation clause nor the date deeming provision, although each is in a sense part of the definition, is calculated either to supply a meaning to the expression “Occurrence” or to expand its ambit. Rather, those provisions (being ancillary to the definition proper) suppose that a series of Occurrences, as earlier defined, might arise from a common cause or condition and, in such a case, deem them (a) to be one Occurrence, regardless of the number of persons who sustain various kinds of injury or damage (one only of which is “Personal Injury”) and (b) to have occurred (as it would seem) on the day that the first of them happened. Curiously, the aggregation clause also appears on its face (by virtue of its opening words “An Occurrence or”) to seek to apply its deemed unification to a single Occurrence. I do not understand how sense is to be made of that unless what is meant is that an Occurrence by which more than one person is injured shall not on that account be treated as more than one Occurrence. That, however, would seem to be so in any case for, clearly enough, an Occurrence is not to be equated to an accident or an injury: cf., e.g. South Staffordshire Tramways Co. v. Sickness and Accident Assurance Association[5], and contrast Forney v. Dominion Insurance Co, Ltd.[6] However that may be, the point now to be made is that no part of paragraph 5 of the definitions under the heading “Occurrence” purports, nor in my opinion is it apt, to enlarge the period during which cover is afforded by the Primary Policy.
[5][1891] 1 Q.B.402, discussed and distinguished by Stephen, J. in The Distillers Company Bio-Chemicals (Australia) Pty Limited v. Ajax Insurance Company Ltd. (1974) 130 C.L.R. 1, at 18-19.
[6][1969] 1 W.L.R. 928, at 934.; and see Allen v. London Guarantee and Accident Co. Ltd. (1912) 28 T.L.R. 254.
The answering submission made for the respondent is, I think, correct in observing that “Occurrence” in the indemnity clause in Section B is governed, syntactically and logically, by the temporal limitations that the clause imports so that, when the definition of “Occurrence” is incorporated into it, the indemnity clause is to be read thus –
“The insured is indemnified by this section in accordance with the operative clause against such sums as the Insured shall become legally liable to pay in respect of personal injury … caused by –
[1]an event including continued or repeated exposure to substantially the same conditions which results in such Personal Injury neither expected nor intended by the Insured [;] or
[2][a] series of [such] event [s] … arising directly from a common cause or condition which shall be deemed to be one [such] event … regardless of the number of persons or organisations who sustain personal injury and which shall be deemed to have occurred on the day of the first of such event[s] –
happening:
(a)during the Period of Insurance, or
(b)after the retroactive date specified in item 10 of the Schedule, in respect of which a claim is first made during the Period of Insurance…
arising out of or in connection with any Products.”
That is to say, “Occurrences” the consequences of which qualify for indemnity are those happening during the Period of Insurance. This, as I think, is the natural meaning of the Primary Policy; and it is carried through into the Lloyd's policies.
The learned judge considered the purposes of the aggregation clause to be clear enough: to provide a benefit for the insured by limiting the potential application of the provisions providing for Deductibles[7] and a benefit to the insurer by its interaction with the Limits of Liability provisions. Of this counsel for the appellants made no substantial criticism; but they did offer serious criticism of an asserted inability of the judge’s reasons or conclusion, or of the respondent’s argument, to accommodate a useful operation for the date deeming clause within the context of the product liability cover overall. For the appellants it was objected that the judge’s interpretation renders the date deeming clause practically nugatory whereas by comparison, so it was argued, the appellants’ principal contention recognises the importance of the clause and gives it a definite role to play. The judge did recognize that the argument for the respondent did not suggest any particularly useful purpose to be served by an express stipulation that “All such Occurrences” are deemed to have occurred on the day of the first Occurrence. His Honour appears, however, not to have been troubled by that in reaching his conclusion. I agree that there is not much to be made of the point in the context of this case. In giving a meaning to the provisions of paragraph 5 of the definitions in the Primary Policy, under the heading “Occurrence”, one should remember that the paragraph applies to all sections of the policy. Hence, the references in paragraph 5 to “Personal Injury”, as that term is itself defined, extend far beyond physical and psychological injuries to human beings, with which the present case is alone concerned; and the injuries and damage to which paragraph 5 refers include Property Damage, as defined, and Advertising Injury, as defined. The reach, therefore, of paragraph 5 is obviously vast; and it is no surprise that all aspects of the paragraph do not necessarily fit in with, or apply to, each and every kind of species or sub-species of injury or damage to which it is literally capable of extending. Although there may not be a readily identifiable task for the date deeming provision (as the learned judge has construed it) in the case of discrete individual physical or psychological personal injury of the kind now under consideration, I should hesitate to say that such a construction renders the provision nugatory. Suppose, for example, a claim under the Primary Policy for indemnity in respect of liability for an intimately connected series of “Occurrences” of defamation (whether as “Personal Injury” or “Advertising Injury”) or of infringement of copyright (as a species of “Advertising Injury”). The time at which the events happened – whether injury was caused to one or to many – might very well affect assessment of the quantum of damage, and there would clearly enough be room for the operation of both the aggregation clause and the date deeming provision.
[7]Specified in the Schedule to apply, as to Section A (with one exception) and Section B, to the first $25,000 of any amount otherwise payable in respect of each and every Occurrence; and as to Section D to the first $250,000 of any amount otherwise payable in respect of each and every claim.
There were other arguments advanced on behalf of the respondent which sought to challenge (some by way of Notice of Contention) findings or assumptions of fact made by the learned judge on which the application of the aggregation clause and the deeming provision would have depended. Because I consider that the
principal submission for the respondent should be accepted, I have no need to investigate these further submissions and I shall not do so.
For these reasons I would dismiss the appeals.
CHARLES, J.A.:
I agree with Tadgell, J.A.
CHERNOV, J.A.:
I also agree with Tadgell, J.A.
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