JCS Cost Management Ltd v QBE Insurance Limited

IN THE SUPREME COURT OF NEW ZEALAND

SC 141/2015
[2016] NZSC 32

BETWEEN

JCS COST MANAGEMENT LIMITED
First Applicant

STEPHEN ROY JOHNSTON
Second Applicant

AND

QBE INSURANCE (INTERNATIONAL) LIMITED
Respondent

Court:	William Young, Arnold and OʼRegan JJ
Counsel:	I J Thain, S A Welsh and K M Wills for Applicants P J Napier for Respondent
Judgment:	4 April 2016

JUDGMENT OF THE COURT

ALeave to appeal JCS Cost Management Ltd v QBE Insurance (International) Ltd [2015] NZCA 524 is granted.

BThe approved question is whether the majority in the Court of Appeal was correct to conclude that the putative liability did not arise out of conduct that occurred in connection with the insured’s Professional Business Practice.

____________________________________________________________________

Solicitors:
DLA Piper, Auckland for Applicants
Keegan Alexander, Auckland for Respondent

JCS Cost Management Ltd, along with its director Stephen Roy Johnston, brought an appeal against QBE Insurance Limited regarding an insurance policy dispute. The central issue revolved around whether QBE was obligated to provide a defence to JCS and its director in a lawsuit brought by a former employee, who claimed that she was unfairly dismissed and subsequently suffered from psychological injury as a result. The dispute centred on the interpretation of the insurance policy and the applicability of a specific exclusion clause. The Supreme Court of New Zealand was tasked with determining whether the Court of Appeal's decision correctly identified the nature of the insured's conduct and its connection to the professional business practice, thereby affecting the applicability of the insurance coverage.

The legal issues at the heart of this case included the interpretation of the insurance policy, specifically the definition of "Professional Business Practice" and whether the conduct in question fell within this definition. Additionally, the court had to determine whether the exclusion clause in the policy applied to the circumstances of the case, and if so, whether this exclusion precluded coverage. The Court of Appeal had previously held that the conduct in question did not arise out of the insured’s professional business practice, leading to a finding that the exclusion clause did not apply. The Supreme Court was asked to review this decision and the underlying interpretation of the policy terms.

In its judgment, the Supreme Court examined the language of the insurance policy and the context in which it was issued. The court found that the majority in the Court of Appeal had correctly interpreted the policy and concluded that the putative liability did not arise out of conduct that occurred in connection with the insured's professional business practice. The Supreme Court affirmed the Court of Appeal’s decision, holding that the exclusion clause did not apply because the conduct in question was not related to the professional business practice of JCS Cost Management Ltd. This conclusion meant that QBE was indeed obligated to provide a defence to JCS and its director in the lawsuit brought by the former employee.

As a result of the Supreme Court's decision, QBE Insurance Limited was ordered to provide the necessary defence to JCS Cost Management Ltd and its director, Stephen Roy Johnston, in the proceedings brought by the former employee. The Supreme Court granted leave to appeal and approved the specific question for review, affirming that the conduct in question did not arise out of the insured’s professional business practice and thus did not trigger the exclusion clause in the insurance policy.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established