AMI Insurance Ltd v Legg - [2017] NZCA 321

IN THE COURT OF APPEAL OF NEW ZEALAND

CA371/2016
[2017] NZCA 321

BETWEEN

AMI INSURANCE LIMITED
Appellant

AND

ROSS JOHN LEGG AND ANNETTE JILL LEGG
First Respondents

NEW ZEALAND FIRE SERVICE
COMMISSION
Second Respondent

SELWYN DISTRICT COUNCIL
Third Respondent

EVOLVING LANDSCAPES LIMITED
Fourth Respondent

LUMLEY GENERAL INSURANCE (NZ) LIMITED
Fifth Respondent

Hearing:	13 June 2017
Court:	Miller, Cooper and Clifford JJ
Counsel:	M G Ring QC, I J Thain and S R Merkin for Appellant A N Riches and T E Hutchinson for First Respondents No appearance for Second to Fifth Respondents
Judgment:	26 July 2017 at 3.00 pm

JUDGMENT OF THE COURT

AThe appeal is allowed. Judgment is entered for AMI.
BThe first respondents must pay the appellant costs for a standard appeal on a band A basis and usual disbursements.
CCosts in the High Court are to be determined in that Court in light of this judgment.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

Table of Contents

Background [5]
The policies [14]

The AMI policy [15]
The Lumley policy [18]

The appeal [21]
Connection between legal liability and excluded business activity [22]

Does “arising from” qualify “in connection with”?  [23]
“In connection with”  [25]
“In connection with”, in context  [32]

Was the necessary connection between legal liability and excluded activity established on the facts?  [39]
Does it matter that the fire commingled insured and excluded activities?       [45]
Decision  [55]

The phrase “in connection with” occurred twice in the Leggs’ policy of insurance for their lifestyle block: once to extend cover to damage “arising from or in connection with” farming activities, and once to exclude it for damage “arising out of or in connection with” any other business.
The Leggs built and burned a fire heap on the property. Some of the material in the heap came from farming activity on the lifestyle block and some from a separate landscaping business run by their company, Evolving Landscapes Ltd (ELL).
Several weeks after the fire appeared to have gone out the remains of the heap unexpectedly reignited in very dry conditions, causing extensive damage to neighbouring properties. Under rural fire legislation the Leggs were strictly liable to the New Zealand Fire Service Commission and Selwyn District Council for the costs of putting out the fire.[1] The Leggs seek indemnity from their insurer for the lifestyle block, AMI.
[1]We were given to understand that other claims from neighbouring owners are pending. We express no view about them.
The Leggs and AMI agree that the policy extended to legal liability for burning green waste and rubbish from farming activities on the lifestyle block. They part company over the exclusion. AMI says the exclusion applies because some of the green waste came from ELL’s business and there exists a sufficient connection between that business activity and the damage. It argues that causation is unnecessary; rather, it suffices if the one thing “has to do with” the other. In the High Court Nation J rejected this argument, reasoning that AMI must prove…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NZCA 321
Decision Date: 26 July 2017 at 3.00 pm

CaseChat Overview and Summary

The appeal was brought by AMI Insurance Ltd against the Leggs, who sought indemnity for the costs of extinguishing a fire on their property. The Leggs conducted both a farming operation and a separate landscaping business on their property. They insured the farming operation with AMI and the landscaping business with another insurer, Lumley. The fire was caused by a fire heap on the property, some of the contents of which were material from the farming operation and some from the landscaping business. The heap reignited, causing damage to nearby properties. The Leggs were strictly liable for the costs of extinguishing the fire under rural fire legislation. The High Court held that AMI was liable to indemnify the Leggs for the costs of extinguishing the fire, but the Court of Appeal allowed AMI's appeal. The Court found that the exclusion clause in the AMI policy applied because the Leggs' legal liability was incurred in connection with the excluded business activity. The exclusion was effective because the excluded cause was an effective cause of the loss, and the included and excluded causes were interdependent. The Court held that the Wayne Tank principle applies, and therefore the exclusion applies.

Orders