Robert Lewis Caine v Lumley General Insurance Limited - [2006] NSWSC 337

No judgment structure available for this case.

Reported Decision:
(2006) 14 ANZ Insurance Cases 61-698

New South Wales

Supreme Court

CITATION: Robert Lewis Caine & Anor v Lumley General Insurance Limited [2006] NSWSC 337

HEARING DATE(S): 24/04/06, 26/04/06

JUDGMENT DATE :
2 May 2006

JURISDICTION: Equity Division
Commercial Division

JUDGMENT OF: Einstein J

DECISION: Short minutes of order to be brought.

CATCHWORDS: Insurance - Proper Construction of policy

LEGISLATION CITED: Insurance Contracts Act 1984 (Cth)
Local Government (Caravan Parks, Camping Grounds and Movable Dwellings) Regulation 1995
Motor Vehicle Standards Act 1989 (Cth)

CASES CITED: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191
Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99
Australian Casualty Co Limited v Federico (1986) 160 CLR 513
City Centre Cold Store Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739
Cody v J H Nelson Pty Ltd (1947) 74 CLR 629
HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601
International Fina Services AG v Katrina Shipping Ltd (The “Fina Samco”) [1995] 2 Lloyd’s Rep 344
Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896
Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66
Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60
McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579
Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cas 61-366
State Government Insurance Commission v Sinfein Pty Limited (1996) 15 WAR 434
Telstra Corporation Ltd v Australasian Performing Right Association Ltd (1997) 191 CLR 140
Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57

PARTIES: Robert Lewis Caine (First Plaintiff)
Pauline Joy Byfield (Second Plaintiff)
Lumley General Insurance Limited (Defendant)

FILE NUMBER(S): SC 50033/04

COUNSEL: Mr RW Seton SC, Mr RJ Brender (Plaintiffs)
Mr JC Kelly SC (Defendant)

SOLICITORS: Barry F Cosier & Associates (Plaintiffs)
Piper Alderman Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Tuesday 2 May 2006

50033/04 - Robert Lewis Caine & Anor v Lumley General Insurance Limited

JUDGMENT

The proceedings

1 The proceedings concern the extent of cover provided by an insurance policy.

2 The plaintiffs own the real estate and business known as “Royal Pacific Tourist Retreat” at 109 Chinderah Road, Chinderah.

3 The property includes a two-storey house in which the plaintiffs live, 6 campsites and 34 permanent caravan sites with vans thereon, of which there were 26 caravans and annexes that were “park-owned”.

4 Of the twenty-six park-owned caravans, twenty-one of those caravans had attached to them solid material annexes. The other five were of vinyl fully lined walls. The caravans had solid “tropical roofs” above them. [It is convenient to refer to the property as "the caravan park" or "the park"]

5 The business also included an amenities block and 2 units on the ground floor of the house.

Susceptibility to flood

6 The park is flood prone and work to the annexes or roofs requires the approval of the Tweed Shire Council, which has adopted a policy that requires, inter alia, a Development Application to be lodged, an engineer’s certificate to be provided, and in the case of annexes, that the floor height be raised to a level designed to avoid flooding.

The policy

7 The caravan park was insured under Commercial Business Policy No. 000092 issued on behalf of the defendant, No. 0000902, commencing on 19 October 2001 (“the policy”)

The storm

8 On January 16, 2002, the park was struck by a severe storm, including hail and torrential rain, that caused damage to the house located on the park premises as well as to the caravans, annexes and roofs. Damage was sustained to 25 of the caravans and tropical roofs and 24 of the annexes.

Degree of consensus

9 The parties have reached a certain degree of consensus:

i. the plaintiffs have been paid $100,000 for hail damage to the caravans; $35,000 in respect of business interruption; and $700 in respect of damage to the residence;

The plaintiffs’ former claim

10 The proceedings were listed to be heard in July 2005. At that time the plaintiffs claimed $716,617 in respect of the damage to the caravans, in two parts, namely:

(a) The extra costs of reinstating the caravans necessarily incurred in compliance with the requirements of the local municipal council relating to the required increased height of the annexes above the ground and the new requirements for electricity connections: Amount claimed $624,617.00 (and)

The plaintiff's present claim

11 Following pleading amendments the plaintiffs claim that :

12 The plaintiffs also claim that it was unreasonable for the defendant not to make any of the above payments at the very latest by January 2003. Interest pursuant to Section 57 of the Insurance Contracts Act is claimed on whatever sum is allowed by the Court at 11% per annum from 16 January 2003 to the date of judgment.

The present issues

13 The present issues appear at least to include:

(a) Whether the structures in question (including annexes and tropical roofs) are parts of “caravans” within the meaning of the policy, or are parts of items of aluminium foam sandwich construction.

(b) Whether the proximate cause of the loss or damage to the structures in question, or a proximate cause, was hail.

(c) Whether the limits of indemnity under the policy, including the $100,000 stipulated in clause E 15 of the policy, apply to any Extra Cost of Reinstatement under clause D5.

(c) 1 What limits, if any, apply in relation to additional costs under clause C and/or annexes and tropical roofs, if they are not caravans

i. whether any liability to indemnify in relation to loss and damage to caravans as a result of the events of 16 January 2002 was released and discharged by operation of the Release dated 2 October 2002.

ii. Has the insurer waived [or become subject to an estoppel or have the parties so conducted themselves as to abandon an entitlement to rely on the release]

iii. Alternatively, whether there is a limit of indemnity in relation to damage to caravans by reason of any cause of $192,000.

(e) Alternatively, if no to (a), whether the structures in question are “Other Structures” within the meaning of the policy and are subject to a limit of indemnity of $15,000.

The agreed facts

14 The parties agreed the following facts:

i. As at the date of commencement of the period of insurance, namely 19 October 2001 ("Commencement Date"), the plaintiffs owned 26 caravans on-site at 109 Chinderah Road, Chinderah,

ii. Each of the caravans referred to in paragraph 1 had an annex adjoining it to one side and also a structure built over it known as a 'tropical roof'.

iii. As at the Commencement Date the cost of replacing each tropical roofs was $4,534.75.

iv. As at the Commencement Date the cost of replacing each of the timber-frame / vinyl annexes to its existing specification was $17,382.50.

v. As at the Commencement Date the cost of replacing each of the other types of annexes to its existing specification was $20,449.93.

vi. As at the Commencement Date, there were 26 tropical roofs.

vii. As at the Commencement Date, there were 5 timber-frame / vinyl annexes.

viii. As at the Commencement Date, there were 21other annexes.

ix. On 16 January 2002, 25 tropical roofs were damaged by hail.

x. On 16 January 2002, 5 timber-framed / vinyl annexes were damaged by storm including hail and torrential rain.

xi. On 16 January 2002, 21 of the other annexes were damaged by storm including hail and torrential rain.

xii. Damage was caused to the caravans by storm including hail and torrential rain resulting in the need to repair or replace them at the cost per caravan as set out in the first column of amounts in the attached schedule marked "A"

xiii. Damage was caused to the tropical roofs by hail, resulting in the need to repair or replace them at the cost per tropical roof as set out in the second column of amounts in the attached schedule marked "A"

xiv. Damage was caused to the annexes at each of the caravan sites by storm including hail and torrential rain resulting in the need to repair or replace them at the cost per annexe as set out in the third column of amounts in the schedule "A".

xv. Included in the costs set out in the second and third columns of amounts in schedule "A" are the cost of an engineer's certificate of compliance and the council's D.A. fee for each tropical roof and each annexe.

xvi. The extra cost of reinstatement of each annexe necessarily to be incurred by the plaintiffs to comply with the requirements of any statute or regulation or of any municipal or statutory authority would include the amounts set out in the fourth column of amounts in schedule "A" in respect of each site number set out therein.

xvii. The figure of $2,240 as set out in the fourth column of amounts in schedule "A" does not include the cost of engineer's certificates of compliance or Development Application fees and is additional to the amounts set out in the 3rd column of amounts.

xviii. The cost of obtaining an engineer's certificate of compliance in respect of each rebuilt or repaired tropical roof or annexe is $287.

xix. The cost of lodging a Development Application with the local council in respect of the rebuilding or repair of each tropical roof or annexe is $101.75.

xx. It will be necessary for the plaintiffs to obtain an engineer's certificate of compliance in respect of 25 of the tropical roofs.

xxi. It will be necessary for the plaintiffs to obtain an engineer's certificate of compliance in respect of 24 of the annexes.

xxii. It will be necessary for the plaintiffs to lodge a Development Application in respect of 25 tropical roofs.

xxiii. It will be necessary for the plaintiffs to lodge a Development Application in respect of 24 annexes.

xxiv. The defendant paid the plaintiffs $700 on 14 July 2005 in satisfaction of the remainder of their claim on the policy relating to the residential premises.

xxv. The defendant paid to the plaintiffs $100,000 on 7 February 2003 in respect of damage to caravans.

xxvi. The defendant paid $35,000 to the plaintiffs on 7 February 2003 in respect of business interruption.

[Note: During the hearing an agreed replacement was substituted for the original form of Annexure A]

The defendant's contentions

15 Fundamentally, the defendant contends that:

(1) annexes and tropical roofs are parts of “caravans”, within the meaning of the policy;

(2) the proximate cause of the damage to the caravans, or a proximate cause, was “hail”; and

16 That being so,

(1) clause E5 is said to apply;

(2) the $100,000 limit is said to apply; and

17 In the alternative, the defendant contends that if annexes and tropical roofs are not parts of caravans within the meaning of the policy, they are “Other Structures” within the meaning of the schedule to the Policy, where “Other Structures” have a limit and declared value of $15,000. Fundamentally, that is said to mean [even if the plaintiffs are correct in the way they now seek to put their case] that they were under-insured in relation to “Other Structures” and the averaging provisions contained in clause G2 of the policy apply.

18 In the event that the court considers that the annexes and tropical roofs are parts of caravans, but the proximate cause of damage was not hail, it would be necessary to consider whether any liability in respect of caravans was released and discharged by operation of the release; if not, whether there was a limit of indemnity of $192,000 in relation to caravans, whatever the cause of the loss or damage to the caravans; and, if not, how the averaging provisions apply.

19 In the event that the court found that the annexes and tropical roofs are not parts of caravans, it is common ground that a number of the annexes were of aluminium foam sandwich construction: hence the defendant contends that:

(1) those annexes and tropical roofs were damaged by hail and attract the $100,000 limit in clause E5;

(2) the remaining annexes and tropical roofs are subject to a limit of $15,000; and

Paginated version of the policy

20 As a matter of convenience the policy has been paginated for the hearing: a copy of the pagination is marked “MFI Conv”.

21 Before turning to treat with the more elaborate exposition of the respective submissions, it is convenient to turn to the relevant principles of construction and then to the policy.

The relevant principles of construction

22 As a matter of principle, the policy is to be construed in accordance with the principles which apply to the interpretation of contractual documents: Australian Casualty Co Limited v Federico [1986] HCA 32; (1986) 160 CLR 513; Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66.

23 Accordingly, the Court endeavours to discover the intention of the parties from the words of the policy and its interpretation requires attention to “the language used by the parties, the commercial circumstances which the document addressed and the objects which it was intended to secure”: Lasermax at [35] per McColl JA (with whom Tobias JA agreed), citing Australian Broadcasting Commission vAustralasian Performing Right Association [1973] HCA 36; (1973) 129 CLR 99 at 109 per Gibbs J and McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 at [22] per Gleeson CJ.

Dictionaries

24 Dictionaries are not a substitute for judicial determination and construction: of the interpretation and construction of a document: Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60 at 78. They tend to distract from the exercise of discerning the intention of the parties from an examination of the context in which the words under consideration appear: Lasermax per McColl JA at [104].

25 Accordingly, McColl JA referred with approval to Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 at 912 where Lord Hoffman said, “The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its word. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean”: Lasermax at [107].

The relevant provisions of the policy

26 In proceeding to outline the relevant provisions it is convenient from time to time to interpolate the respective submissions of either or both of the parties.

Insuring Clause (Clause B)

27 The Policy comprises what might be called general terms and conditions plus twelve separate sections. Section 1 relates to Property damage. The general terms and conditions and Section 1, are the only relevant portions of the policy for the purposes of these proceedings.

28 Prior to the "General Definitions", the general terms and conditions commence:

subject to the terms and conditions of the Policy

29 The insuring clause is to be found in Section 1 in Clause B headed “Extent of Cover” provides, relevantly:

(a) at the Situation at the time that the Damage occurs…

["Situation" is defined to mean "the address (es) shown in the schedule]

(2) The Limit(s) and sub- Limits referred to in the schedule;

30 “Damage” is defined in the policy under Clause A ‘Definitions’ as “physical loss, damage or destruction”.

31 “Property Insured” is defined as:

32 In Section 1 of the schedule to the Policy [page 3] under the heading “Material Damage” various items are listed, with figures under a column headed “Declared Assets”.

33 The plaintiff contends that:

i. the definition of “Property Insured ” is wide enough to include, but is not limited to, the items listed in the schedule as Declared Assets.

ii. there is nothing in the policy to indicate that Property Insured is limited to the Declared Assets;

iii. if the policy was intended, in relation to Material Damage, to be limited to the Declared Assets, the definition of Property Insured could have made reference to the items specified in the schedule;

iv. it does not.

v. the policy insures “ Property Insured ” and not “ Declared Assets ” or “ the items in the schedule ”;

vi. the purpose of the Declared Assets being listed with a value, it is submitted, is to enable the calculation of a Limit of Liability;

vii. that figure (the Limit of Liability) also becomes relevant if the averaging clause is to apply, in the event of underinsurance;

34 Clause B3 [page 16] provides:

35 The Basis of Settlement Clause D [page 18] provides:

Reinstatement Value

(emphasis added).

36 “Reinstatement Value” is defined in Clause D1 [page 18] as:

37 The plaintiff contends that the following matters follow:

i. where items falling within the definition of Property Insured are damaged, indemnity is provided under the policy by reference to the costs necessary to replace, repair or rebuild the item to a condition substantially the same as but not better or more extensive than its condition when new.

ii. The parties have agreed as to what the appropriate costs are for the caravans, annexes and tropical roofs.

iii. pursuant to Clause B Extent of Cover, the insurer is liable to indemnify the plaintiffs in respect of damage to the caravans, the annexes and the tropical roofs.

iv. The extent of indemnity is calculated by reference to the cost of repair or replacement, which has been agreed between the parties.

“

provide the additional cover

referred to in Clause C up to the value of the Limit(s) and Sub-Limit(s) of Liability referred to in the schedule”

.

38 Clause E entitled "Property Excluded" provides inter alia as follows:

"Section 1 of this Policy does not cover Damage to the following property in the circumstances set out:
…

(b) Property in the open air unless such property comprises all forms part of a permanent structure designed to function without the protection of the walls or roof where caused by wind, rain water or hail;

(i) Special Excess-$1500 per textile or fabric annex or sail material shelter and $5,000 in the aggregate being the maximum excess payable by the Park where damage is caused by storm, tempest, wind, rain water or hail;

…

[It is presently common ground that no such statutory requirement obtains in the present case]

15 Caravans and all aluminium foam sandwich construction where caused by hail. Unless the hail penetrates the entire thickness of the material damage, causing water to enter. Limit of Liability $100,000 any one year;

What limits if any apply in relation to Caravans and, Tropical Roofs, and Annexes?

The plaintiff's submissions

39 The plaintiff submitted as follows:

What Limits, if any, Apply in Relation to Caravans?

i. It is submitted there is no limit referable to caravans alone. The answer to this question is to be determined by reference to the schedule. The schedule provides “Caravans Indemnity … $192,000”. It is important to note however that the $192,000 appears under the heading, “Declared Assets”. Each item in the schedule relating to Material Damage has a “ Declared Assets” amount and they are totalled so as to provide a “Limit of Liability” of $655,300. Elsewhere throughout the schedule “Sub Limits ” are specified, as are other “Limits of Liability” . It is submitted that the “Declared Assets” amounts for each item specified under Material Damage do not constitute limits or sub-limits. If they had been intended by the insurer to constitute limits or sub-limits, the insurer would have and should have so specified, as it did elsewhere throughout the schedule.

ii. The significance, if any, of the Declared Assets figures being noted at $192,000 is as a means of calculating the Limit of Liability for the whole of Material D.

iii. It is therefore submitted that the only limit of liability of any relevance in these proceedings is the $655,300 for the entirety of the claim for Material Damage. In contrast it may be noted that the additional cover under clause C is not subject to this limit of liability (this is dealt with further below). Similarly a claim under clause 5 of D basis of Settlement for the extra cost of reinstatement so as to comply with new statutory or municipal requirements is also not subject to this limit of liability (also dealt with further below).

iv. The defendant argues that there is a limit of $100,000 in relation to caravans on the basis that damage has been sustained to the caravans as a result of hail penetrating the entire thickness of the material damaged allowing water to enter (see Clause E(15)). It is agreed between the parties that the defendant has paid $100,000 to the plaintiff in respect of damage to caravans.

v. The plaintiffs submit however that the damage to the caravans was caused by a storm which included hail and torrential rain. The onus of establishing that the exclusion clause applies rests with the defendant insurer. It is submitted that the defendant has failed to discharge that onus of proof.

“Caravans…..where caused by wind, rainwater, storm or tempest, where there is a statutory requirement for the Manufacturer to cyclone rate the structure or for any special cyclone rating anchorage, unless such requirement is adhered to.”

“storm, tempest, wind, rainwater or

hail

.”

vii. Therefore clause E15 requires damage by hail alone , it is submitted, before the clause might apply. Had the insurer in clause E15 wished to exclude damage to caravans when caused by a combination of hail and other factors, it could easily have clearly so specified.

viii. Accordingly, it is submitted that, having regard to Mr Caine’s evidence in his affidavit sworn 8 October 2004 and the Agreed Facts, the plaintiffs have proved that damage was sustained to the caravans by “wind, rainwater, storm or tempest” and that accordingly they are entitled to be indemnified. The parties have agreed that the cost of reinstatement of the caravans was in fact $195,000. The defendant having already paid $100,000, the plaintiffs are entitled, in respect of damage to caravans for the purpose of these proceedings to an additional $95,000.

Are There Any Limits or Sub-Limits in Respect of Tropical Roofs?

ix. The answer to this question is also to be answered by reference to the schedule. The schedule makes no reference to tropical roofs. It is contended by the plaintiffs that a tropical roof forms part of the Property Insured. Tropical roofs therefore fall within the Material Damage portion of the policy in Section 1 and are subject only to the limit of liability (for the entirety of a Material Damage claim) of $655,300.

x. A tropical roof cannot be considered a caravan. The two items are entirely different. A tropical roof is a fixed structure requiring a DA and engineering certificate. A caravan is a living quarters on wheels capable of being transported from place to place (see Mr Caine’s affidavit sworn 8 October 2004 paragraph 13 for a description of a tropical roof). It is therefore submitted that, in respect of tropical roofs, the plaintiffs are entitled to be indemnified (subject to the entirety of the Material Damage claim exceeding $655,300) to the agreed sum of $85,031.25.

“Other Structures,

“Declared Asset”

· As previously submitted, a Declared Asset amount (here $15,000) cannot be considered a limit or sub-limit.

· In any event, “Other Structures” is not defined in the policy and the only guidance as to what the expression means is to be found by the examples provided of “power heads/poles and office contents”. In the circumstances, the ejusdem generis cannon of construction would apply (see Telstra Corporation Ltd v Australasian Performing Right Association Ltd (1997) 191 CLR 140, Cody v J H Nelson Pty Ltd (1947) 74 CLR 629 at 639.3) and a fixed structure such as a tropical roof does not fall within any class of items containing power heads/poles and office contents. (A power head/pole is an external power point provided for power cords leading from caravans to power points).

· Accordingly tropical roofs are subject to no policy limits other than the overall limit of liability for a Material Damage claim of $655,300.

What Limits or Sub-Limits, if any, apply to Annexes?

xii. Again, this question is answered by having reference to the schedule. There is no reference in the schedule to annexes. Caravans and annexes ought not be treated as one and the same thing. Indeed, the policy itself distinguishes between caravans and annexes. In this regard, reference should be had to Clause E11(c) which talks about “caravan and cabin annexes, and shelters built of sail material or perimeter fencing…”

xiii. In any event, the common usage of the word “caravan” does not connote in any way an annex. The annexes are fixed, rigid structures. A caravan is placed aside the annex and is (as per common usage) a form of residence on wheels capable of being towed as trailer.

xiv. See also the Australian Design Rules for Motor Vehicles and Trailers, which has been prescribed by the Motor Vehicle Standards Act 1989 and Regulations as the relevant National Standards that must be complied with in relation to the construction of caravans and trailers. Clause 7.1 of the Design Rules define a caravan as “an enclosed trailer which is intended for use as a mobile home or living quarters when parked”.

“caravan”

“A vehicle in which people may live, whether temporarily or permanently, usually having two wheels and designed to be drawn by a motor car.”

xvi. Confirmation of this distinction can be found for example, in the Local Government (Caravan Parks, Camping Grounds and Movable Dwellings) Regulation 1995 where, in Regulation 94 a clear distinction is drawn between tents, caravans and associated structures and annexes. See also Regulation 96, which provides that “a caravan (including any associated rigid annex)” that is installed in a caravan park must be maintained in a safe and healthy condition. See also Division 2 of Part 5, which specifically deals with annexes and their structural soundness whereas Division 1 of Part 5 deals with caravans. The Regulation quite clearly treats caravans and annexes as two distinct and different items.

xvii. The fact that annexes commonly adjoin caravans does not make them caravans just as a car, which commonly accompanies a caravan, is not a caravan.

xviii. The plaintiff repeats the submissions made in paragraph 31 above as to why annexes do not constitute an “Other Structure” as referred to in the schedule, or if they do why there is no applicable limit or sub-limit.

Do the “Declared Assets” amounts for each item specified under Material Damage constitute limits or sub-limits

40 Whether the figures of $192,000 and $15,000 in the schedule operate as ‘limits’ as well as ‘declared values’ depends upon the proper construction of the policy as a whole, including the schedule.

41 In my view, the Declared Asset amounts for the items specified in the schedule do constitute limits/sub limits. This is clear from the use in Section 1 clause B, of the phrase "up to the value of the Limits (s) and Sub-limit (s) of liability referred to in the schedule": cf line 4 of B; B 2. By these references this clause delineates the "Extent of Cover".

42 Turning to the schedule, it is apparent that the figure of $655,300 is the total of a number of other figures, including the $192,000 in respect of Caravans Indemnity and the $15,000 in respect of “Other Structures” and it is said to be “Limit of Indemnity”.

43 I accept as of substance the submission by the insurer, that the description of the total of figure of $655,3000 as the “Limit of Indemnity” indicates an intention that each of the constituent parts of that total are themselves limits. Clearly, the schedule could have been better expressed. Instead of “Limit of Indemnity” it could have said “Total of Limits of Indemnity”. However, that is not the test. The intention of the instrument is plainly to the same effect.

44 The insurer is also correct in its submission that another indicator to the same end is that the item in relation to caravans is expressed as “Caravan Indemnity”. The presence of the word “indemnity” points to a limit of indemnity, for if was not intended that the $192,000 be a limit, it would seem to make no sense to speak of an indemnity at all.

45 In short the proper construction of the policy is to read it as providing for "Additional Cover" but only up to the limits and limits referred to in the schedule.

Finding as to what was the meaning of ‘caravans’

46 The question whether the word “Caravans” in clause E15 includes or excludes annexes and tropical roofs turns on the proper construction of the policy.

47 In my view the submissions of the defendant are of substance in relation to whether the structures in question [including annexes and tropical roofs] are parts of caravans within the meaning of the policy, [or parts of items of aluminium foam sandwich construction]. Those submissions are adopted in what follows.

48 The policy does not define the term “caravans” but there are powerful contextual indicators that support a construction that the word “caravans” is not used in the sense of a mobile home, or a trailer-home which is towed behind a car. It is used in the sense of a permanent or semi-permanent structure, which incorporates a stationary van, an annex and tropical roof, together with various other appurtenances, such as frames, walls, doors, steps and slabs. Those contextual indicators include the reference to “structure” in clause 14 and the exclusion of cover for damage to “Vehicles or trailers registered or licensed to travel on a public road” in E4.

49 The “annexes” and “tropical roofs” are not separate structures.

50 The plaintiffs’ reliance upon the dictionary definition of the word “caravan” in the Macquarie Dictionary [MFI #P3] is misconceived but does serve to point up the error in their approach to the construction of the policy and interpretation of the word “Caravans” in the context of clause E15.

51 The dictionary definition on which the plaintiffs rely relevantly states the meaning of the word “caravan” as:

“1. a vehicle in which people may live, whether temporarily or permanently, usu. Having two wheels and designed to be drawn by a motor car.

a vehicle

52 In the context of the policy, “Caravans” is not referring to a “vehicle”. It is referring to a structure. The 26 “caravans” at the Royal Pacific Tourist Retreat, owned by the plaintiffs, are “permanently installed for use by (the plaintiffs’) patrons”; each caravan has “an annexe leading off from it and has a concrete slab floor”; and each “caravan” is “connected to services such as electricity”: Affidavit of Mr Caine, 1 October 2003, para 3 (underlining added). That is consistent with the “caravans” owned by the plaintiffs being in the nature, not of a vehicle, such as a mobile home or a trailer home which is towed behind a car, but part of a permanent or semi-permanent structure which incorporates a stationary van as part of a residential unit for use by patrons of the caravan park.

53 Clause E14 refers to “Caravans, Manufactured Homes, Relocatable Homes, Park Homes, and Cabins” and excludes liability for damage caused by wind, rainwater, storm and tempest, where there is a statutory requirement for the manufacturer to cyclone rate “the structure”. That points squarely to “caravans” as a structure, as distinct from a mobile van, trailer or vehicle.

54 Consistently with an intention that “caravans” is used in the sense of a permanent or semi-permanent structure rather than a mobile home, E4 excludes liability for damage to “Vehicles or trailers registered or licensed to travel on a public road”.

55 Once it is appreciated that the word “caravans” is used in the sense of a permanent or semi-permanent structure, it follows that all of the parts of and appurtenances to such a structure, including annexes and tropical roofs, should be regarded as part of that structure and within the concept of “caravans”. They do not constitute other structures.

56 The photographs in evidence show that the caravans in question are established as permanent or semi-permanent structures. They show that the stationary vans are elevated on Besser blocks and that the annexes and tropical roofs are not separate structures; they are parts of the permanent or semi-permanent structures which constitute the residential units, along with other appurtenances, such as frames, walls, doors, steps and slabs. They are more like houses than trailers or vehicles. They are not let to be used on public roads. They are stationary and built into the site; in some cases with the wheels removed and gardens growing underneath.

57 As the insurers submitted, the evidence included the following matters:

i. The stationary vans are elevated;

ii. “They nearly all sit on Besser blocks”

: Mr Caine, T38.31;

iii. “Some have wheels on them; some have wheels removed”

: T338.34;

iv. the tropical roofs are “bolted” to the van: T38.50;

v. the annexes are attached to the vans by a roofing screw: T39.40;

vi. it is a common feature of the caravan park that patrons grow little gardens around the vans: T39.28.

58 In the ordinary use of language, a reference to a whole includes a reference to all of its constituent parts. For example, a reference to the “residence” at the plaintiffs’ caravan park would include the kitchen, the lounge-room and all the other parts of the residence without the need to mention specific parts. If the residence had a car-port or a garage attached to the body of the house, it would go without saying that the garage, being part of the residence, was embraced by that term. In the same way, as a matter of ordinary language, it goes without saying that anything attached to the vans, including the tropical roofs and annexes, forms part of the caravans and – at least so long as they have not been dismantled – are embraced by that term.

59 Just as it would be a misuse of language to say that the wall of a caravan is not part of a caravan but “other property” for the purpose of taking it out of a sub-limit, it is a misuse of language to describe annexes and tropical roofs as anything other than a part of the relevant whole. The parts of a whole require to be consistently treated as such.

60 The defendant sought to have the e-mail at PX 1 admitted into evidence as a pre-contractual document passing between the parties. Mr Caine in this communication, referred to "there being 25 park owned vans all in good condition [and of a certain dimension] with steel and annex’s average value $8,000 each..”. The document [had it been shown that it had passed between the parties], may have assisted the construction exercise. However there was no real evidence that the document had passed between the parties and as appears below the admissibility of the e-mail is limited by s.136 order.

61 However the defendant by another route seeks to submit that the Court can infer from the schedule that the insured and the insurer did not contemplate anything other than that the "Caravans Indemnity" was to cover caravans, annexes and tropical roofs. This is said to be apparent from a mere careful survey of the schedule, it appearing from the respective items that the residence is a home with substantial value; that the next materially valuable item is the "caravans indemnity" [giving a declared asset value of $192,000] and that there are precious little following items of particular value. The defendant’s proposition is that the plaintiffs’ claim to give the various ‘add ons’ to the caravans, a separate value entitling the plaintiffs to the additional amount of $477,000 by way of indemnity, is so starkly out of contrast with the listing of material items as to make it quite plain that the item "caravans indemnity" could only have been intended to be read as a description of the caravans with their annexes and tropical roofs. The submission is that had the intent been to insure the annexes and tropical roofs as items separate from the caravans it would have required a large additional figure for those items to be included in the schedule.

62 In my view this is a submission of real substance. Each document to be construed of course has instant specific circumstances which are always required to be focused upon. There is however no reason why the Court is not in a position to rely in relation to a document which has to be construed:

i. not only on the words appearing in a particular part of the document [here a schedule],

What was the proximate cause of loss and damage to the caravans?

The plaintiffs' submissions

63 As earlier indicated the plaintiff contends that clause E15 required damage by hail alone before it could apply. The proposition is that if the insurer had in that clause wished to exclude damage to caravans when caused by a combination of hail and other factors, it could easily have clearly so specified.

64 It is convenient to focus on Clause E: Property Excluded.

65 The central template put by the plaintiff involves its entitlement to indemnity through a number of alternate routes:

i. The insuring clause read together with the definition of "Property Insured, in the context in which it is put that there is nothing in the schedule which limits the items to the declared Asset amounts.

[In the event that clause 11 (c) would be held to have covered annexes the Special Excess provision would require a deduction from the payment otherwise owing by the insurer. The plaintiff concedes that 5 annexes are made of vinyl so that they would fall into the category of fabric and that a special access of $1500 per annex would come off. The concession is that vinyl is a fabric].

66 It does not seem to me that E Property Excluded clause 11 is presently engaged for the following reasons:

i. it is not the case that the caravans [here regarding them as including the annexes and tropical roofs] fall within the meaning of the term "property comprising or forming part of a permanent structure designed to function without the protection of the walls or roof" [cf 11 (b)];

67 It would only be a situation in which caravan annexes were shown to be part of a permanent structure designed to function without the protection of walls or roof, that clause 11 (c) might apply in which case the Special Excess may be engaged.

68 Clause E11(c) does not say that the open-air exclusion in 11(b) shall not apply to “caravans or cabins”. That is, the words “caravan and cabin annexes” are pointing to a part of a whole, namely, an annex as part of a caravan or a cabin and the clause then makes special provision referable to that part, namely, the open air exclusion shall not apply if the relevant part of the whole, ie the annex, is less than 10 years old, where damage is caused by storm, tempest, wind, rainwater or hail, subject to a special excess. If the policy had intended that exception to the open air exclusion to the whole, it would have used the words “caravans and cabins”, as it has done in clause E15 in the case of caravans.

69 The commercial context in which the policy was intended to operate supports the defendant’s construction. The policy was intended to provide insurance for the plaintiffs’ caravan park. That means it was intended to provide insurance cover for what the plaintiffs had in their caravan park, namely, caravans. As it happens, those caravans did not take the form of vehicles. It was a caravan park; not a mobile home or car rental business. The caravans took the form of permanent or semi-permanent installations, bolted together with other items, including tropical roofs and annexes. They are the items of property the policy intended to insure: that is, “caravans”, as is, where is, with all things attached.

70 Indeed, it would make nonsense of the plain intention of the policy to provide cover for caravans limited to $100,000 for damage by hail, as per the exception to E15, if all one had to do to avoid the limit was to notionally dismantle the relevant structure and break it down into parts. If that were permissible, one could just as easily ignore the doors, windows and other constituent in order to work the figures down, and claim for those items under some other heading unaffected by that limit.

71 In the passage from the Investors Compensation Scheme Case, referred to with approval by McColl JA in Lasermax at [107] Lord Hoffman went on to say:

72 In the present case, it may well have been preferable for the policy to define the word “Caravans” to mean any permanent or semi-permanent structures at the Situation used as a residential unit by patrons of the insured, including any stationary vans, annexes, tropical roofs and other appurtenances, but that does not mean that there is any ambiguity in the words of the policy. “Caravans” conveys the same meaning in the commercial context in which the policy was known by the parties and intended to operate, and any construction which left such items out of the concept of caravans in E15 would defeat the object of contract and flout commercial common sense: see Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 per Lord Diplock and International Fina Services AG v Katrina Shipping Ltd (The “Fina Samco”) [1995] 2 Lloyd’s Rep 344 at 350, each of which were referred to with approval by McColl JA in Lasermax at [100]. The annexes and tropical roofs are costly items and it is inherently unlikely that the parties intended to leave them out of the declared assets in the policy schedule, let alone leave the plaintiffs seriously under-insured in the manner earlier submitted.

73 The commercial setting of the policy was one in which the caravans at the plaintiffs’ caravan park took the form of permanent or semi-permanent structures which included stationary vans, annexes and tropical roofs as parts of the one residential unit.

74 As to the plaintiffs emphasis on the comparison between clauses 14 and 15 of the Property Excluded Section E the following observations may be made:

(a) Clause 14 can be put aside having no application where there is no cyclone rating circumstance;
(b) The burden of clause 15 is to provide that unless the hail penetrates the entire thickness of the material damaged causing water to enter, there is to be no cover. Hence the relevant content is that the circumstance where cover is provided involves hail penetration which breaches the physical integrity of the structure and causes water to enter.

75 As put by the insurer's counsel:

If [the hail] breaks windows and in comes the torrent, if it breaks windows and in comes the hailstones which then melt, if it dents to the point of pitting and rendering sieve-like parts of the structure, roof and walls, which are otherwise there for the purposes of preserving the interstices of the caravan so as to permit the water to enter through the breach, then that is the circumstance which is then insured against.

76 The proper construction of clause 15 is that it was to be the only clause applicable where it can be seen that damage to caravans was caused by hail as the proximate cause.

77 It should be remembered that the Agreed Facts include the following:

Tropical roofs

25 tropical roofs were damaged by hail [agreed facts (9), (13)] [In context I read this agreed facts as excluding any contention that any of these tropical roofs were damaged by anything otherwise than hail]

Annexes

five timber framed/vinyl annexes were damaged by storm including hail and torrential rain [ agreed facts (10)]

21 of the other annexes were damaged by storm, including hail and torrential rain [agreed facts (11)]

damage was caused to the annexes at each of the caravan sites by storm including hail and torrential rain [ agreed facts (14)]

Caravans

including hail

78 This raises another question. Mr Seton SC, leading counsel for the insured, seemed to me to be in some difficulty in terms of whether his submissions were [or were not] that it was necessary for the Court to regard itself as bound by the facts agreed to in terms of paragraphs xii and xiv: such that the proper construction of those paragraphs was that there was no issue being litigated in terms of the suggested agreed fact that “damage had been caused to the caravans and to the annexes by storm including both hail and torrential rain”. At one stage he put this submission [transcript 144.53-145.4; cf transcript 143.10]. However he proceeded on a number of occasions to indicate that the insured would be content if the Court was to embark on a determination based upon the evidence [transcript 143.45; 144.16-.24; 145.17-145 .33].

79 It does seem to me that the matter should be regarded as before the Court for the purpose of a determination on all of the materials before it, including the agreed facts and the evidence. It is fair to say that the agreed facts [paragraphs xii and xiv] are imprecise in failing to identify precisely how damage was caused in the ways suggested.

80 In any event the clear necessity to decide the proximate cause issue makes it necessary to look at the actual evidence adduced. It is also important to note that no objection [in terms of a claim that there was no relevance in the questions being asked], was taken to the cross examination on these issues.

Decision on proximate cause

81 In my view the defendant's contentions on proximate cause are of substance and I adopt them in what follows.

82 The proximate cause of loss and damage to the caravans was hail.

83 Notably the defendant conceded that hail was a proximate cause.

84 The words “damaged by hail” in E15 mean “damaged by reason of hail” or “caused by hail”, in the sense that hail was a proximate cause of the damage.

85 A proximate cause “is not the first, or the last or the sole cause of the loss; it is the effective or dominant or operative cause”: Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66 at [5] per Ipp JA referring with approval to the decision of the Full Court of the Supreme Court of Western Australia in State Government Insurance Commission v Sinfein Pty Limited (1996) 15 WAR 434.

86 Where a number of causes may be operating at the one time, each has to be examined to ascertain the active, efficient cause that sets the relevant train of events in motion: See, for example, City Centre Cold Store Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739.

87 It is clearly established, however, that where there are two causes, one covered and the other excluded, then the insurer is not liable: See Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Insurance Cas 61-366 and HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 at 610.

88 The causal sequence dictated by E15 contemplates that there may be other causes operating concurrently with hail, such as wind to drive the hail into the damaged material and torrential rain to enter that material at the point of penetration of the entire thickness of the material. In that way, the presence of those elements does not defeat the engagement of E15; it gives effect to the subsequent requirements of the clause, leading to the limit of $100,000 in any one year.

89 The sequence of events which is involved in invoking the $100,000 limit therefore involves (1) “Damage to … Caravans (etc) … by hail”; (2) … the hail (penetrating) the entire thickness of the material damaged; (3) causing water to enter.

90 The evidence makes it perfectly clear that each of those elements was satisfied.

91 In paragraph 6 of his affidavit sworn on 1 October 2003, Mr Caine says:

hail damage to our caravans and their annexes

The photographs in evidence prove the same point.

92 Mr Caine gave evidence that some of the hailstones were “as big as house bricks” (T44.12); he saw other hailstones of “all shapes and sizes” (T44.41); the rain and hail travelled almost horizontally because of the ferocity of the storm (Para 9, affidavit of 8 October 2004 &T44.35); and the hailstorm was of such ferocity that hailstones came through one window of the residence, travelled across the room and reached the opposite wall (T43.32). The intensity was such as to tear away some of the sheeting on the caravan walls (T42.5); the hail dented the walls of the caravans, leaving little pin-holes in those walls (T42.10); and the windows of the vans were smashed (T42.24). The vans were “all penetrated to some degree” (T42.); some four inches of rain fell in ten minutes (T44.45); and, in the result, “All the vans were left uninhabitable due to water ingress” (Para 15, affidavit of 8 October 2004).

93 It is true to say that damage was caused to the caravans by storm including hail and torrential rain, as per paragraph 12 of the Agreed Facts. That is precisely what happened. But it is not inconsistent with hail being the proximate cause of the damage. Proximate cause is a concept which requires an assessment of the qualities of reality, predominance and efficiency in circumstances in which a number of factors contribute to the happening of the damage in question: HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 at 608.

94 In the present case, damage was occasioned to the caravans in a manner in which a storm took place, including hail and torrential rain; the hail penetrated the materials from which the caravans were constructed; the entire thickness of the walls and windows of the caravans was penetrated by the hail when holes of various sizes and descriptions were made, and the physical integrity of the structure was thereby breached, allowing water, in the form of rain and the hail itself, to enter the caravans. In that way, the hail was the active, efficient cause of the damage. It set the relevant train of events in motion, in the common sense way in which proximate cause must be ascertained. As earlier submitted, the undisputed facts afford a paradigm example of the mechanism of loss contemplated by the policy.

95 It is not correct to say that two concurrent causes, properly so-called, were involved. In that regard, the reasoning of the Court of Appeal in Petersen & Shadomill Pty Ltd v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cases 61-366 is instructive. In that case, the evidence disclosed two concurrent causes properly so called: flood water from drains (which was covered by the policy) and flood water not from drains (which was excluded). Priestley JA, with whom Mason P & Powell JA agreed, dismissed the insured’s appeal from the decision of Rolfe J in favour of the insurer, on the basis that, general flooding intermingled with flooding from drains did not come within the exception to the flood exclusion, therefore the exclusion did not apply. Secondly, the court held that the general flooding was the dominant cause because the torrent of rain was such that the general flooding would have happened whether the drains had been there or not.

96 In the present case, it is true that high winds were driving the hail but that is not a concurrent cause of the damage by hail. The presence of high winds is a necessary condition, without which the damage by hail would not have occurred, but that is not the same as a concurrent cause. The caravans did not blow away. If damage had been done by the wind blowing the caravans off their supports and tumbling them over, the proximate cause of the damage would be the wind. If the caravans were at the same time pounded by hailstones and penetrated in the manner required by E15, each of which damaged the caravans, two concurrent causes may be said to operate, wind and hail, but that is not this case. If all that happened was wind and rain, the damage in question would not have occurred. In that way, Petersen is distinguishable on its facts; the exception in the exclusion is invoked; and the limit applies. Indeed, if the plaintiffs are correct in their contention that the storm itself, including high winds and the torrential rain, were concurrent causes, properly so-called, Petersen should have been decided in the opposite way because the flood waters in question in that case were all occasioned by torrential rain.

97 It is no answer to contend that the opening words of E15 are confined to hail, as distinct from “wind, rainwater or hail”. The clause does not purport to exclude cover for wind or rainwater. If the caravans had blown away and broken themselves up as they tumbled over, the loss would be covered. If rainwater alone had caused the loss, by for example, entering an open door, that too would be covered. But that is not what happened. The mechanism of the loss was damage by hail and the clause is therefore engaged.

98 In the present case, there is an abundance of evidence that the effective, or dominant or operative cause of damage to the caravans, including the annexes and tropical roofs, was hail.

99 It is no answer that the hail fell during a storm which also involved torrential rain and high winds. Hailstorms almost always involve rain and wind. The policy singles out hail and specifically excludes cover for that risk, except in the circumstance in which the hail penetrates the entire thickness of the damaged matter, whereupon the $100,000 limit applies.

100 I accept that the clear contemplation of the policy is to allow a limited form of cover where the severity of the impact by hail causes the physical integrity of the caravans and other insured property which has been constructed of foam sandwich materials to be breached. That is this case.

101 The insurer puts the alternative argument that if there were two concurrent causes, one of which is excluded and the other not, the defendant contends that Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd (1974) QB 57 is still good law in light of City Centre Cold Store Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739 and HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 at 610; the exclusion applies; and the consequence of the exclusion applying is that the limit in E15 is invoked. It is unnecessary for the Court to deal with this contention.

102 I reject the submission by the plaintiffs that upon the proper construction of the whole of the policy, the $100,000 limit provided for in Exclusion 15 does not act as a limit to the "Additional Cover" dealt with in C. In the particular circumstances the $100,000 limit provided for in that exclusion is to be regarded as representing a "specific sub limit contained in …[a] specified Section of the Policy" within the meaning of the third paragraph which follows the heading "The Agreement" [cf page 7 of the paginated policy]

Reserved Ruling

103 A ruling was reserved [transcript 73] on the application by the plaintiff to have the admissibility of pages 1, 6 and 7.1 of exhibit PX limited to the witnesses understanding only. That ruling is given. Pre-contractual documents must pass between the parties to permit their content, in the event of an ambiguity, to be taken into account on a construction exercise.

Averaging

104 This matter does not seem to arise for decision.

Short Minutes of Order

105 The parties are to bring in short minutes of order conforming to these reasons. Costs may be the subject of submissions.

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Citations

Robert Lewis Caine v Lumley General Insurance Limited [2006] NSWSC 337

Most Recent Citation

Caine v Lumley General Insurance Limited [2008] NSWCA 4

Cases Citing This Decision

2

Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109

Caine v Lumley General Insurance Limited [2008] NSWCA 4

Cases Cited

8

Statutory Material Cited

3

Australian Casualty Co Ltd v Federico [1986] HCA 32

Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66

Australian Casualty Co Ltd v Federico [1986] HCA 32

CITATION:	Robert Lewis Caine & Anor v Lumley General Insurance Limited [2006] NSWSC 337
HEARING DATE(S):	24/04/06, 26/04/06
JUDGMENT DATE :	2 May 2006
JURISDICTION:	Equity Division Commercial Division
JUDGMENT OF:	Einstein J
DECISION:	Short minutes of order to be brought.
CATCHWORDS:	Insurance - Proper Construction of policy
LEGISLATION CITED:	Insurance Contracts Act 1984 (Cth) Local Government (Caravan Parks, Camping Grounds and Movable Dwellings) Regulation 1995 Motor Vehicle Standards Act 1989 (Cth)
CASES CITED:	Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 Australian Casualty Co Limited v Federico (1986) 160 CLR 513 City Centre Cold Store Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739 Cody v J H Nelson Pty Ltd (1947) 74 CLR 629 HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 International Fina Services AG v Katrina Shipping Ltd (The “Fina Samco”) [1995] 2 Lloyd’s Rep 344 Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66 Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cas 61-366 State Government Insurance Commission v Sinfein Pty Limited (1996) 15 WAR 434 Telstra Corporation Ltd v Australasian Performing Right Association Ltd (1997) 191 CLR 140 Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57
PARTIES:	Robert Lewis Caine (First Plaintiff) Pauline Joy Byfield (Second Plaintiff) Lumley General Insurance Limited (Defendant)
FILE NUMBER(S):	SC 50033/04
COUNSEL:	Mr RW Seton SC, Mr RJ Brender (Plaintiffs) Mr JC Kelly SC (Defendant)
SOLICITORS:	Barry F Cosier & Associates (Plaintiffs) Piper Alderman Lawyers (Defendant)