Silbermann v CGU Insurance Ltd

Case [2003] NSWCA 203

Reported Decision:

 57 NSWLR 469
(2003) 12 ANZ Insurance Cases 61-571
(2003) 21 ACLC 1425

Court of Appeal


CITATION: Silbermann v. CGU Insurance Limited; Rich v. CGU Insurance Limited; Greaves v. CGU Insurance Limited [2003] NSWCA 203 revised - 31/07/2003
HEARING DATE(S): 23 May 2003
JUDGMENT DATE:
25 July 2003
JUDGMENT OF: Beazley JA at 1; Hodgson JA at 2; Tobias JA at 63
DECISION: 1. In each matter, leave to appeal granted. ; 2. In each matter, appeal dismissed with costs.
CATCHWORDS: INSURANCE - Liability insurance policy - Exclusion clause - Dishonesty and fraud - Requirement of judgment or final adjudication - Whether insurer can resist giving indemnity prior to judgment or final adjudication.
CASES CITED: Baldry v. Jackson [1976] 2 NSWLR 415
Darlington Futures Pty. Ltd. v. Delco Australia Pty. Ltd. (1986) 161 CLR 500
Distillers Bio-Chemicals (Aust) Pty. Ltd. v. Ajax Insurance Co. Ltd. 91974) 130 CLR 1
Fire & All Risk Insurance Co. Ltd. v. Powell (1966) VR 513
Hammer Waster Pty. Ltd. v. QBE Mercantile Mutual Ltd. [2002] NSWSC 1006
MGICA Ltd. v. United City Merchants (Australia) Ltd. (1986) 4 ANZ InsCas 60-729
Provincial Insurance Aust. Pty. Ltd. v. Consolidated Wood Products Pty. Ltd. (1991) 25 NSWLR 541
Sherry v. FAI Insurance Ltd. (In Liq) [2002] SASC 3

PARTIES :

 John David Rich - claimant
Mark Silbermann - claimant
John Huyshe Greaves - claimant
CGU Insurance Limited - opponent in each matter
FILE NUMBER(S): CA 40066/03; 40065/03; 40076/03
COUNSEL: Mr. D.L. Williams for Rich and Silbermann
Mr. A.J.L. Bannon SC for Greaves
Mr. C.G. Gee QC with Mr. A.W. Street SC and Mr. E. Romaniuk for CGU Insurance
SOLICITORS: Joanne Kelly, Darlinghurst for Rich and Silbermann
Watson Mangioni, Sydney for Greaves
Collins Biggers & Paisley, Sydney for CGU Insurance
LOWER COURTJURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S): SC50141/01; 50096/02; 50150/02
LOWER COURT
JUDICIAL OFFICER : 		McClellan J



                          CA 40065/03
                          CA 40066/03
                          CA 40076/03

                          BEAZLEY JA
                          HODGSON JA
                          TOBIAS JA

                          Friday 25 July 2003

SILBERMANN V. CGU INSURANCE LIMITED


RICH V. CGU INSURANCE LIMITED


GREAVES V. CGU INSURANCE LIMITED

Judgment

1 BEAZLEY JA: I agree with Tobias JA.

2 HODGSON JA: These are three applications for leave to appeal, raising identical questions. In each of three cases brought in the Commercial List of the Equity Division by the claimants against the opponent, McClellan J ordered the separate determination of three questions, namely:

          1. Whether, on the true construction of Directors & Officers Liability Insurance Policy No 01 DO 0298798 ("the Policy"), issued by the Defendant absent an existing judgment, order or other final adjudication adverse to the Plaintiff, the Defendant can rely on Exclusion Clause 3.1 in answer to the Plaintiff's claim for indemnity under the Policy;

          2. Whether, on the true construction of the Policy issued by the Defendant the Defendant itself is entitled to seek a judgment, order or other final adjudication adverse to the Plaintiff and, thereby, exclude liability for a claim under clause 3.1 of the Policy in…

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AGLC
Silbermann v CGU Insurance Ltd [2003] NSWCA 203
Case
[2003] NSWCA 203
Decision Date

CaseChat Overview and Summary

In *Silbermann v CGU Insurance Ltd*, the New South Wales Court of Appeal considered a dispute between an insured, Mr Silbermann, and his liability insurer, CGU Insurance Ltd. The core of the disagreement concerned whether the insurer could avoid its obligation to indemnify the insured based on an exclusion clause in the policy, specifically relating to dishonesty and fraud, before a final judgment or adjudication had been made against the insured.

The Court of Appeal was required to determine the proper interpretation of the exclusion clause and, in particular, whether the insurer's liability to indemnify could be resisted on the grounds of the insured's alleged dishonesty or fraud prior to a definitive finding of such conduct by a court. This involved considering the temporal scope of the exclusion and the conditions precedent to its invocation by the insurer.

The Court held that the exclusion clause, which stipulated that the policy would not cover loss arising from dishonest or fraudulent acts, required a judgment or final adjudication establishing such conduct before the insurer could rely on it to deny indemnity. The Court reasoned that to allow the insurer to unilaterally determine the insured's dishonesty and refuse indemnity prior to a judicial determination would undermine the purpose of liability insurance and the insured's expectation of cover. The legal principle applied was that exclusionary clauses in insurance policies are to be construed strictly against the insurer, and their operation must be clearly and unequivocally established.

In each of the matters before the Court, leave to appeal was granted, but the appeals were ultimately dismissed with costs.

Orders

Orders of the court

1. In each matter, leave to appeal granted. ; 2. In each matter, appeal dismissed with costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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