QBE Insurance (Australia) Limited v Cape York Airlines Pty Ltd

In the case of QBE Insurance (Australia) Limited v Cape York Airlines Pty Ltd, the dispute centred around an insurance policy for an aircraft held by Cape York Airlines with QBE Insurance. After the aircraft was ditched, Cape York Airlines made a claim for $1.8 million, the insured value, as they did not believe a repair would restore the aircraft to its pre-ditching condition. QBE Insurance, in response, sought to limit their liability by obtaining a repair quote and requesting Cape York Airlines to sign an authority to repair. They argued this constituted a valid election under the policy to repair rather than pay the insured value.

The primary legal issue before the court was whether QBE Insurance's request for Cape York Airlines to sign an authority to repair amounted to a valid election under the policy. The court had to determine if this request, by seeking to limit their liability to the repair cost, constituted an election to repair as opposed to paying the insured value. Another issue was whether the primary judge correctly dismissed Cape York Airlines' claim for interest on the $1.8 million from April 2004 and whether they were entitled to damages for loss of use of the aircraft in addition to the $1.8 million awarded.

The court found that QBE Insurance's request for Cape York Airlines to sign an authority to repair did not constitute a valid election under the policy. It held that an election to repair must be unequivocal and unconditional, and QBE Insurance's actions were not sufficiently clear to constitute such an election. Regarding the interest claim, the court found that the primary judge erred in dismissing the claim. Cape York Airlines would have used the $1.8 million to purchase another aircraft, which would have operated at a profit, and thus they were entitled to interest. The court also found that Cape York Airlines were entitled to damages for the loss of use of the aircraft in addition to the $1.8 million awarded.

The orders of the court were that QBE Insurance's appeal was allowed, the judgment for Cape York Airlines was set aside, and there was substituted judgment for Cape York Airlines for $1,807,367.88 together with interest at the rate of ten per cent per annum for six years and four months. QBE Insurance was also ordered to pay 95 per cent of Cape York Airlines' costs of the appeal.