The High Court has recently held that an insurer bears the onus
of proof when asserting the applicability of an exception that
precludes entitlement to indemnity or the existence of a limit of
Mr Stewart was exposed to asbestos during the course of his
employment with Pilkington Bros (Australia) Limited
(Pilkington). He developed mesothelioma and
commenced proceedings against Pilkington, QBE Insurance (Australia)
Limited (QBE) (as insurer of Pilkington) and
Wallaby Grip Limited (Wallaby) (the manufacturer
of the products containing asbestos). Mr Stewart died before the
matter was heard. The proceedings were continued by Mr
Stewart's wife in her capacity as legal representative of
At the time of Mr Stewart's employment, it was a
requirement of the Workers Compensation Act 1926 (NSW)
(the Act) that an employer obtain a policy of
insurance or indemnity from a licensed insurer in respect of the
employer's liability at common law for any injury to a
worker. Section 18(1) of the Act provided:
"Subject to (1A) of this
section, every employer shall obtain from an insurer licensed under
this Act to carry on business in the State, a policy of insurance
or indemnity for the full amount of his liability under this Act to
all workers employed by him and for an amount of at least forty
thousand dollars in respect of his liability independently of this
Act for any injury to any such worker and shall maintain such
policy in force."
In the proceedings against Pilkington, Mr Stewart alleged the
existence of a contract of insurance by which Pilkington was
entitled to be indemnified against its liability for damages
arising independently of the Act. During his employment, Pilkington
indeed had a policy of insurance or indemnity of the kind required
by the Act – it had a policy of insurance with Eagle Star
Insurance Ltd (Eagle Star) (the
Policy). QBE, as successor to Eagle Star, admitted the
existence of the Policy and that it was responsible to meet any
liability of Eagle Star to indemnify Pilkington, but it did not
admit the Policy extended beyond the statutory minimum.
A Notice to Produce was issued to obtain a copy of the Policy,
but it was not produced.
The Tribunal was asked to rule on which party had the onus of
providing the monetary limit of the indemnity. The Tribunal
concluded that at least an "evidentiary onus" lay upon
QBE because it was asserting a limit to its liability.
QBE appealed to the NSW Court of Appeal. The Court of Appeal
found the trial judge had erred:
"Where the extent of the cover
is defined by a maximum amount it may be said that cover is limited
to that amount but that is not to categorise that amount as an
exception to, condition of or limitation to cover. It is an
essential part of the primary obligation to insure."
The High Court granted special leave to Wallaby to appeal the
decision of the Court of Appeal. Contrary to the Court of Appeal,
the High Court considered it necessary only for Mrs Stewart to
establish that a contract of insurance under the Act was in
existence at the relevant time and that Pilkington was liable to
her husband for his injuries. The first was admitted, the second
was established by evidence. It followed that the claim was within
the terms of the cover provided and the insurer's
The High Court distinguished between asserting the applicability
of an exception (to preclude an obligation to indemnity from
arising) and the existence of a limitation (which would not
preclude the obligation to indemnify from arising but would limit
the amount payable).
While a limitation could be placed upon the extent of the
indemnity for the amount for which the employer was liable
(according to a judgment or other determination) that existence of
a limitation did not prevent the obligation to indemnify from
"Where an indemnity is limited
to payment of a specified maximum sum, proof of actual loss will
identify whether all or part of the loss is recoverable, but that
is merely a practical consequence. It does not reflect a condition
of the insurance contract."
However, the distinction between an exception and a limitation
of liability was of little practical significance in the subject
appeal as the High Court held that in each case (whether alleging
the application of an exception or the existence of a limit of
liability) the insurer bears the onus of proof:
"The legal burden of proof
arises from the principle: he who alleges must prove."
Consequently, QBE had to do more than decline to admit that
Pilkington was entitled to an indemnity greater than the statutory
minimum. It was required to establish what limit, if any, had been
placed upon its liability to indemnify. It did not do so.
Consequently, the High Court allowed the appeal.
This case illustrates that insurers, insureds and brokers should
all be careful that policies of insurance (regardless of how old)
are kept safely and within reach, as failure to do so may well
prevent an insurer from relying on an exclusion or applying a limit
of indemnity to cap the amount claimed.
Wallaby Grip Ltd v QBE Insurance (Australia) Ltd; Stewart v
QBE Insurance (Australia) Ltd (2010) 264 ALR 425
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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