The Supreme Court of Queensland once again considers what constitutes a "Claim" for a policy of insurance
In finding that the form of letter in dispute in the proceedings constituted a "Claim" for the purposes of a professional indemnity policy of insurance, the Supreme Court of Queensland's decision in Livesay v Hawkins & Ors1 is a timely reminder to insurers of the difficulties in seeking to deny indemnity on the basis that certain communications by aggrieved claimants made, but not notified, during the policy period are not a "Claim".
The facts
The third defendant carried on business as a real estate agent and property manager at Crestmead, south east of Brisbane. The third defendant held, at the material time, a professional indemnity insurance policy with American Home Assurance Company ("AHAC"). The plaintiff rented a property managed by the third defendant.
The plaintiff claimed that she suffered personal injuries on 25 April 2005 when a pelmet above a sliding door in the property fell and struck her on the head. She sued the first, second and third defendants claiming damages for personal injuries.
AHAC declined indemnity to the third defendant for the plaintiff's claim on the basis, inter alia, that the "Claim" was not made until after the expiration of the third defendant's policy of insurance and the third defendant had not notified circumstances giving rise to the "Claim" during the policy period.
The third defendant issued third party proceedings against AHAC claiming that AHAC was liable to indemnify the third defendant. In October 2011 the issue of AHAC's liability to the third defendant was ordered to be the subject of a separate determination in the proceedings.
The third defendant's professional indemnity policy of insurance with AHAC was for the period 24 July 2004 to 24 July 2005.
On 26 April 2005 the third defendant received a letter of complaint about the rental property from the plaintiff. The letter relevantly stated:
Dear Property Manager,
As you requested by your offices, further to our pleas for help, we are informing you in writing of the current Breaches to our lease agreement and hope for a resolve...
On 25 April at approx 10 am Mrs Livesay attempted to enter the bathroom in this premise (most sliding doors in this house are hard to open and need attention) as she opened the door the overhead pelmet dismantled from the wall and fell on top of her. It caused Personal Injury to her left hand and what appears to have cracked her nose. We are currently seeking medical advice and will advise you of our intentions on this matter.
As per our references, you will see that we are good tenants and have always maintained and cared for our rental properties to a high standard. We have the utmost respect for our Agents and the Owners of any property we rent. We expect the same in return. This house is not safe and we have two small children that reside here, we request that you display professionalism and immediate attention to the repair of this property treating these repairs with urgency. As per the Tenancy Act and advice from Rental Tribunal, Ray White Real Estate and the owners of a rental property will be held liable for any personal injury claims arising from damage caused to the tenants due to poor living conditions.
...
We are very disappointed by the state of this home and wish to have the above-rectified ASAP. We are not bad people and wish to enjoy a happy time in our new home ensuring the owners that we will care for their home as if it were our own. If the owners of this property disagree to having the premises repaired and brought to a good standard for the rent they are asking, we will have to vacate the premises and will seek legal advice from the rental tribunal for compensation of any costs involved to do so, due to the breach of our lease. This does not include Personal Injury Claim that we are currently entitled to due to injury caused by dangerous fixture. We will take no legal action if this property is repaired effectively and promptly and made safe for living in. We state again, that we would be happy for the owners of this property to visit and meet us and inspect their property.
Sincerely,
Mr and Mrs Justin & Shirley Livesay (emphasis added)
In September 2005 the plaintiff delivered a Form 1 Notice of Claim under the Personal Injuries Proceedings Act 2002 ("PIPA") to the third defendant claiming damages for personal injuries for the pelmet incident on 25 April 2005.
The third defendant notified AHAC of the plaintiff's PIPA claim on 4 October 2005.
"Claim" was defined at clause 2.2 of the third defendant's policy of insurance with AHAC to mean:
- any written demand;
- any civil proceeding
for compensation made against the Insured but only in respect of the performance of Professional Services by the Insured.
Supreme Court says yes to letter triggering Claim coverage
In respect of whether the letter of 26 April 2005 constituted a "Claim" the court observed:
The determination of this question requires close attention to the terms of the policy, and especially the particular definition of "Claim". It is clear enough in principle that a contract of insurance is to be construed objectively. The meaning of terms in the contract of insurance are to be determined by what a reasonable person would have understood them to mean...It is also clear that the question of what amounts to a claim against an insured, within the meaning of that term in the relevant policy, is one of substance and not of form.2
The court held that the plaintiff's letter to the third defendant of 26 April 2005 constituted a "Claim" for the purposes of the policy on the basis, inter alia, that the letter:
expressly asserted an entitlement on the part of the plaintiff to recover for her personal injury claim "due to injury caused by dangerous fixture"....The letter further made it clear that the plaintiff appreciated, and contended, that she had such a claim against [the third defendant] – she expressly referred to [the third defendant's] business being "held liable for any personal injury claims arising from damage caused to the tenants due to poor living conditions."3
The third defendant's failure to notify the "Claim" as soon as practicable during the policy period was an omission within the meaning of section 54 of the Insurance Contracts Act 1984. Accordingly AHAC was not able to refuse to pay the plaintiff's claim by reason of the third defendant's failure to notify the "Claim" as soon as practicable during the policy period.4
Implications
Similarly to Cassidy v Leslie5 and Junemill Ltd (in liq) v FAI General Insurance Company Ltd6, Livesay v Hawkins7 confirms that whilst each decision will turn upon its individual facts and circumstances, there is a consistent judicial approach to what will constitute a "Claim" for a claims made policy of insurance. A number of common factors are able to be identified from the judgments in determining when a claim is a "Claim" including:
- the terms of a contract of insurance should be construed objectively, and where there is ambiguity, for the benefit of an insured;
- look at the gravamen of the allegations;
- it is a question of substance not of form;
- do not rely on "semantic gymnastics" – the wording of complaints, assertions or intimations of liability and letters of demand by claimants is beyond the control of insureds.
Footnotes
1 [2012] QSC 122
2 Ibid [36]
3 Ibid [42]
4 Indemnity was ultimately denied on different grounds
relating to the application of a bodily injury exclusion
5 [2010] NSWSC 742
6 [1999] 2 Qd R 136
7[2012] QSC 122
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