Packer v Cigna Insurance Asia Pacific Limited - [2000] WADC 3

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: PACKER -v- CIGNA INSURANCE ASIA PACIFIC LIMITED [2000] WADC 3

CORAM: COMMISSIONER STAVRIANOU

HEARD: 30 NOVEMBER AND 23 DECEMBER 1999

DELIVERED : 14 JANUARY 2000

FILE NO/S: CIV 3281 of 1998

BETWEEN: PHILIP JEFFREY PACKER
Plaintiff
AND
CIGNA INSURANCE ASIA PACIFIC LIMITED
Defendant

Catchwords:

Insurance - Risk insurance policy against total and permanent disablement - Construction of contract - Whether claim statute barred - Date insured's cause of action accrued - Whether cause of action accrued upon happening of event - Whether cause of action accrued on denial of claim.

Legislation:

Limitation Act 1935

Result:

Judgment for plaintiff on preliminary issue

Representation:

Counsel:

Plaintiff: Mr G R Hancy
Defendant: Mr M H Zilko

Solicitors:

Plaintiff: Ilbery Barblett
Defendant: Jackson McDonald

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

Council of the City of Penrith v Government Insurance Office of New South Wales (1991) 6 ANZ Insurance Cases 61-070
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Firma C-Trade S.A. v Newcastle Protection and Indemnity Association; Socony Mobil Oil Co Inc and Others v West of England Ship Owners Mutual Insurance Association (London) Ltd (No 2) [1991] 2 AC 1
Judamia v State of Western Australia, unreported; FCt SCt of WA; Library No 960114; 1 March 1996

Case(s) also cited:

Australian Casualty Co Pty Ltd v Federico (1986) 160 CLR 513
Beverley v Tindal Life Insurance Co Ltd, unreported; FCt SCt of WA; [1999] WASCA 198
Callaghan v Dominion Insurance [1997] 2 Lloyds Rep 541
Carter v Boehm (1766) 3 Burr 1905
Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd (1984) AC 226
Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZIC 61-175
Chandris v Argo Insurance Co Ltd (1963) 2 Lloyds Rep 65
Council of the City of Penrith v Government Insurance Office of New South Wales (1991) 6 ANZIC 61-070
Darlington Futures v Delco (1986) 161 CLR 500
Hunter v Stronghold Insurance (Aust) Pty Ltd, unreported; SCt of Victoria; BC9100734; 18 January 1991
Kelly v Norwich Union Fire Insurance Society Ltd (1989) 2 All ER 888
Khoury v GIO (1984) 58 ALJR 502
Legal and General Insurance Limited v Eather (1986) 6 NSWLR 390
London and Midland Bank v Mitchell (1899) 2 ChD 161
Luna Park (NSW) Ltd v Tramways Advertising Ltd (1938) 61 CLR 286
Lyn v Bamber (1930) 2 KB 72
Re Haycocks Policy (1876) 1 ChD 611
Tillotson v ANZ Life Assurance Co Ltd (1997) 9 ANZIC 61-378
Transthene v Royal Insurance (UK) Ltd [1996] LRLR 33
Vanguard Insurance Co Ltd v Darley Trading Pty Ltd (1981) 1 ANZIC 60-439
Wilson v Harvey Trinder (NSW) Pty Ltd (1973) 2 NSWLR 870

COMMISSIONER STAVRIANOU:

Introduction

On 27 August 1998 the plaintiff commenced proceedings seeking to recover damages for the defendant’s breach of contract in failing to make payment of $93,000 pursuant to a policy of personal accident insurance. The defendant relied upon the Limitation Act 1935 and on 25 October 1999 an order was made that one of the pleaded limitation defences be tried as a preliminary issue. The only evidence adduced upon the trial of the preliminary issue was the written policy of insurance and its conditions, which was supplemented by certain admissions.

The Pleadings

The relevant paragraphs of the re‑amended statement of claim are as follows:
Paragraph 5:
The policy provided, subject to its terms and conditions, that if during the period of insurance, or any subsequent period in which the defendant agreed to accept a renewal premium, any of the events shall happen to an insured person, the defendant will pay compensation to the policy holder.
Paragraph 7:
Under the policy the matters referred to in para 5 above were relevantly defined as follows:
(a)The events shall mean bodily injury as defined, caused solely by violent accidental external means and independently of any other cause in … permanent total disablement (other than total loss of sight of one or both eyes or loss of limb).
(b)Bodily injury shall mean injury which is caused by an accident and which shall solely and independently of any other cause result in the Insured Person's death or disablement within 12 calendar months from the date of the accident on which injury was caused.
(c)Permanent total disablement shall mean disablement by bodily injury caused other than by loss of limb or eye, which has lasted for at least 12 months and entirely prevents the insured person from engaging in any occupation for which he is fitted by reason of education, training or experience for the remainder of his life.
(d)Insured person(s) shall mean six seamen/crewmen.
(e)Compensation shall be $93,500.
Paragraph 8:
On 20 March 1986 the plaintiff was working as a seaman and crewman on the vessel "Withnell Bay" in his employment with the vessel's owners Mermaid Sound Port and Marine Services Pty Ltd ("Mermaid"), a wholly owned subsidiary company of Woodside, as a result of which and by reason of the matters set out in paras 5, 6 & 7 herein, he was an insured person as defined by the policy.
Paragraph 9:
On 20 March 1986 when the plaintiff was working as a seamen and crewman on the Withnell Bay as referred to in paragraph 8 above, he fell down a ladder and was injured ("the accident").
Paragraph 11:
By reason of his injuries and disabilities from the accident the plaintiff has suffered bodily injury and permanent total disablement as defined in the policy.
The limitation issue to be tried is raised in paras 8(a), (b), (c) and (e) of the re-amended defence as follows:
"8.Further or alternatively, if the plaintiff suffered permanent total disablement (as defined in the policy), which is denied, then the defendant says that:
(a)the plaintiff's entitlement to the payment of benefits pursuant to the policy, and therefore the plaintiff's cause of action, was complete as at the date upon which the plaintiff suffered permanent total disablement (as defined in the policy);
(b)before the plaintiff could have been entitled to the payment of any benefits pursuant to the policy, the permanent total disablement (as defined in the policy) must have been suffered within 12 months of the alleged accident;
(c)at the latest, any cause of action that the plaintiff had against the defendant must have therefore arisen by 20 March 1987;
(d)further or alternatively to subparas (a) to (c) herein, if, which is denied, the plaintiff's cause of action only arose once the defendant formed the view and/or advised the plaintiff that benefits were not payable under the policy, the defendant advised the plaintiff's agent by letter dated 15 July 1988 that it did not consider that the plaintiff had suffered permanent total disablement (as defined in the policy);
(e)by reason of the matters pleaded in subparas (a) to (c) inclusive and/or (d) herein, the limitation period for the plaintiff's cause of action had expired prior to the issuing of these proceedings by the plaintiff, and the plaintiff's claim is therefore statute-barred."
Upon the resumed hearing counsel for the defendant moved to amend para 8(c) of the re-amended defence to add the words "or alternatively the 20 March 1988". I reserved on the application to amend and will deal with it later in these reasons.

Factual background

Regrettably, no statement of agreed facts was prepared for the trial of the preliminary issue. There were a number of facts accepted by the parties for the purpose of the trial of the preliminary issue and which I now state as:
1.On 17 October 1983 the defendant issued to Woodside Offshore Petroleum Pty Ltd a Personal Accident Policy No 395C 0 05817.
2.Mermaid Sound Port & Marine Services Pty Ltd is a wholly owned subsidiary of Woodside and the plaintiff was an insured person.
3.The policy was renewed from time to time and was in force in the period from 31 December 1985 until 31 December 1986.
4On 20 March 1986 the plaintiff was injured in the course of his employment with Mermaid Sound Port & Marine Services Pty Ltd.
On 30 April 1993 and 12 September 1994 the defendant denied liability for the plaintiff's claim under the policy.

The policy

The policy is a printed form and provides:
"NOW THIS POLICY WITNESSETH that in consideration of the payment of the Premium and subject to the terms conditions exceptions and memoranda contained herein endorsed hereon or attached hereto, if during the Period of Insurance set out above, or any subsequent period for which the insured shall pay and the Company shall agree to accept a renewal premium, any of the Events shall happen to the Insured Person the Company will pay the Compensation to the Policyholder, or in the case of his death to his Executors or Administrators."
There are two schedules to the policy described as a schedule of accident compensation and a schedule of sickness compensation. The schedule of accident compensation is as follows:

THE EVENTS THE COMPENSATION

A.	Bodily injury as defined, caused solely by violent accidental external means and independently of any other cause in
1. Loss of life	1. $80,000
2. Total and irrecoverable loss of sight of both eyes	2. $80,000
3. Total and irrecoverable loss of sight of one eye	3. $80,000
4. Loss of two limbs	4. $80,000
5. Loss of one limb	5. $80,000
6. Total and irrecoverable loss of sight of one eye and loss of one limb	6. $80,000
7. Permanent total disablement (other than total loss of sight of one or both eyes or loss of limb)	7. $70,000
8. (i) Total disablement from engaging in or attending to profession, business or usual occupation	8. (i) During such disablement $800 per week or weekly whichever is the less. (ii) During such disablement $200 per week or 25% of Weekly Wage whichever is the less.
9. Medical expenses ‑ Excess of any medical or hospital funds

A proviso to the policy enables an insured to elect to receive weekly payments of compensation in lieu of the sums specified in A2 to A7 inclusive.
In the policy there are the following definitions:
"1.'BODILY INJURY' shall mean injury which is caused by an accident and which shall solely and independently of any other cause result in the Insured Person's death or disablement within twelve calendar months from the date of the accident on which injury was caused.
2.'DISMEMBERMENT' shall mean:
(a)Loss of one or more limbs by actual physical severance at or above the ankle or wrist or,
(b)Loss of one or more eyes being the total and irrecoverable loss of sight.
3.'PERMANENT TOTAL DISABLEMENT' shall mean:
disablement by bodily injury caused other than by loss of limb or eye, which has lasted for at least 12 months and entirely prevents the Insured Person from engaging in any occupation for which he is fitted by reason of education training or experience for the remainder of his life.
4.'TEMPORARY TOTAL DISABLEMENT' shall mean temporary disablement by bodily injury which entirely prevents the Insured Person from engaging in his usual occupation.
5.'BENEFIT PERIOD' shall mean the total period (but no necessarily consecutive period) for which Temporary Total Disablement is payable in respect of any one accident to any one accident to any insured person.
6.'DEFERMENT PERIOD' shall mean a period at the beginning of a period of temporary total disablement during which compensation provided by Benefit 4 shall not be payable.
7.'WAGES' shall mean weekly award wage or salary.
8.'MEDICAL EXPENSES' shall mean expenses necessarily incurred and arising from treatment (up to a maximum specified under Events A9 following bodily injury to an insured person."

Accrual of the Cause of Action

Section 38(1)(c)(v) of the Limitation Act 1935 provides that an action founded on any simple contract, including any contract implied in law shall be commenced within six years from the date that the cause of action accrues.
The competing alternatives for the date when the cause of action accrued are:
(a)according to the defendant ‑ 20 March, 1987 or 20 March 1988 being the latest date when the relevant insured event occurred ‑ namely permanent total disablement;
(b)according to the plaintiff –
(1)April or May 1993 when the defendant advised the plaintiff by letter that "On the evidence available we are unable to entertain a claim for permanent disablement …” or
(2)On or about 12 September, 1994 when the defendant's solicitors advised the plaintiff's solicitors by letter of that date that "your client's claim has prescribed (sic) and for this reason will not be entertained by our client."
A cause of action is the fact or combination of facts which give rise to a right to sue: Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234 at 245: Judamia v State of Western Australia, unreported; FCt SCt of WA; Library No 960114; 1 March 1996, per Malcolm CJ at 35.
The basic rule of contract law is that a breach of contract is actionable without proof of damage. As the gist of an action on a simple contract is that there has been a breach, it is essential to determine when the breach occurred in order to be able to identify the date on which time begins to run against a plaintiff. I was taken by the parties to a number of cases dealing with different types of policies including policies of life, marine and household insurance. Many of the decisions are usefully collected and discussed in Council of the City of Penrith v Government Insurance Office of New South Wales (1991) 6 ANZ Insurance Cases 61-070. In that case in describing a claim under a contract of indemnity insurance Giles J said at 77,215:
“Unliquidated or not, the damages are damages for breach of contract, and there will be no breach until the insurer has been required to pay or do some other act in performance of its promise and has failed or refused to do so …”
General statements or decisions on other policy wordings are of limited assistance when the question turns upon the interpretation of the contract in the particular circumstances of the case. The answer will lie in interpreting the terms of the contract, since it will be necessary to identify the obligations, which have been undertaken. The question is what has been promised and when did the defendant fail to fulfil that promise with the result that the plaintiff's cause of action has accrued.
The obligation to make payment under the policy in this case is different to that imposed under a policy of indemnity insurance. The remarks of Lord Goff in Firma C-Trade S.A. v Newcastle Protection and Indemnity Association; Socony Mobil Oil Co Inc and Others v West of England Ship Owners Mutual Insurance Association (London) Ltd (No 2) [1991] 2 AC 1 at 35 distinguish the position in relation to policies of indemnity insurance:
"I accept that, at common law, a contract of indemnity gives rise to an action for unliquidated damages, arising from the failure of the indemnifier to prevent the indemnified person from suffering damage, for example by having to pay a third party. I also accept that, at common law, the cause of action does not (unless the contract provides otherwise) arise until the indemnified person can show actual loss. This is, as I understand it, because a promise of indemnity is simply a promise to hold the indemnified harmless against a specified loss or expense. On this basis, no debt can arise before the loss is suffered or the expense incurred; however, once the loss is suffered or the expense incurred, the indemnifier is in breach of contract for having failed to hold the indemnified person harmless against the relevant loss or expense. There is no condition of prior payment; but the remedies available at law were not efficacious to give full effect to the contract indemnity. It is for this reason that equity felt that it could, and should, intervene. If there had been a clear implied condition of prior payment, operable in the relevant circumstances equity would not have intervened to enforce the contract in a manner inconsistent with that term …”
The policy under consideration is not a policy of indemnity insurance. Whether and when a liability arises on the underwriter to make a payment under it depends upon the proper interpretation of the contract in the circumstances of the case.
In this case what the defendant promised was to pay specified compensation in relation to particular events (as defined). In this case the event is bodily injury which results in permanent total disablement. There is no agreement between the parties as to the date upon which permanent total disablement occurred.
In determining when an event occurred it is first necessary to consider the definition of bodily injury. The policy provides that bodily injury is injury resulting in a person’s death or disablement and may occur within 12 calendar months from the date of the accident on which injury was caused. In other words an insured person could suffer bodily injury (as defined) if at any time within the period of twelve months following the date of accident disablement occurred. In the context of the facts this means that provided disablement occurred by the 20 March 1987 bodily injury (as defined) could have been suffered.
The next question is when does permanent total disablement occur. The definition of the term in the policy requires disablement by bodily injury and for disablement to have lasted for at least twelve months. Thus, if an accident occurring on 20 March 1986 produces bodily injury (as defined) which lasts at least twelve months (the injury not being the loss of a limb or eye) the earliest date on which a claim might be made on account of permanent total disablement would be 20 March 1987. However the defendant does not then without more come under a liability to make a payment for the non-performance of which the defendant is thenceforward in breach of contract. The plaintiff must first make a claim and the claim must be refused, or possibly not dealt with within a reasonable time. The policy permits an insured to elect whether to receive weekly payments or a lump sum. Further, in the event of death the obligation is to make payment to the executors or administrators of the insured. Clearly, payment in that circumstance could only be made after the event. The nature and purpose of the contract was one to provide compensation in the event of accident or sickness resulting in disablement. The event may not occur within the policy period as appears from the definition of bodily injury. Until notice of claim is given the insurer may not know of the happening of an event. All of these matters support the conclusion that the occurrence of an event may give rise to an entitlement to payment under the policy but does not ipso facto place the insurer in breach of its obligation under the policy. I consider it improbable that the intention of the parties was that the defendant would immediately be in breach upon the occurrence of an event (as defined).
Upon the trial of a preliminary issue the parties must take especial care to ensure that all aspects of the matters necessary for the determination of the issue are agreed or established by the evidence. The question or issue must of course appear clearly from the pleadings. In this case the issue to be determined was in my view clearly identified namely whether the cause of action must have arisen by the 20 March 1987. The plaintiff proceeded to trial on the narrow issue identified and I am not prepared to allow the defendant to raise issues other than as arise from the pleadings as were before the Court at the time the order was made for the trial of the preliminary issue. In this regard I accept the plaintiff’s submission that the only issues to be determined are those specifically pleaded in paras 8 (a), (b), (c) and (e). Paragraph 8(b) of the re-amended defence asserts that permanent total disablement must be suffered within twelve months of the alleged accident. In my view the cause of action need not, as a matter of law, have arisen by the 20 March 1987, and there is nothing in the evidence before the Court to show, as a matter of law, that it did so. Accordingly, the limitation defence raised by paras 8(a), (b), (c) and (e) fails.

The defendant’s application for leave to further amend the re-amended defence was made in the course of closing addresses. The application was opposed by counsel for the plaintiff. The plaintiff has pleaded that it made a claim pursuant to the policy in August 1988 and that the defendant denied it. The view, which I have formed of the policy, is that the cause of action did not accrue immediately upon the happening of an event. The proposed amendment seeks to maintain the assertion that the cause of action accrued on the happening of an event. Given my view as to when the cause of action accrued the application to amend is refused.
I will hear counsel as to the appropriate orders.