Australia: Professional Indemnity: Interpreting contracts of insurance

Insurance Update

Livesay v Hawkins & Ors (2012) 17 ANZ Insurance Cases 61 - 933


A recent decision of the Supreme court of Queensland once again highlights that the terms of a contract of insurance are to be construed by reference to what a reasonable person armed with knowledge of the surrounding circumstances at the time of entry into the contract would consider the terms to mean.


Proceedings were commenced by the plaintiff, Shirley Livesay, against the first and second defendants, Jeremy and Gaylene Hawkins, and the third defendant, Neville Newman.

Ms Livesay was the tenant of a residential premises owned by Mr and Mrs Hawkins. Mr Newman was the real estate agent engaged by Mr and Mrs Hawkins to perform property management services in relation to the residential premises.

On 25 April 2005, Ms Livesay claimed she suffered personal injuries when the framework above the toilet door at the premises fell and struck her.

The following day, Ms Livesay delivered a letter to Mr Newman detailing the incident and injuries sustained by her, as well as complaining about the state of the property. The letter then went on to enumerate some 17 repairs to the property which she claimed were required urgently and foreshadowed legal action if such repairs were not attended to. In her letter, Ms Livesay expressly stated that such contingent legal action "does not include Personal Injury Claim that we are currently entitled to due to injury caused by dangerous fixture [sic]."

In September 2005, Ms Livesay served on Mr Newman a Form 1 Notice of Claim under the Personal Injuries Proceedings Act 2002. On 4 October 2004, Mr Newman caused a copy of Form 1 along with the 26 April letter to be lodged with his professional indemnity insurer, American Home Assurance Company (AHAC).

On 4 November 2005, AHAC wrote to Mr Newman denying indemnity under the policy. In denying indemnity, AHAC stated that no claim had been made by Ms Livesay against Mr Newman during the policy period (which expired on 24 July 2005).

Following the commencement of the proceedings by Ms Livesay, the court ordered that there be a separate determination of AHAC's denial of indemnity to Mr Newman in relation to Ms Livesay's claim. In making this order, the court identified the following questions for determination:

  1. whether Ms Livesay's letter of 26 April 2005 to Mr Newman was a "claim" made within the policy period; and
  2. whether a clause of the policy purporting to exclude liability for "bodily injury" applied to deny any liability on the part of AHAC in relation to Ms Livesay's claim.

The policy

Clause 1.1 of the policy of insurance provided as follows:

The Insurer will pay on behalf of the Insured all Loss which the Insured is legally liable to pay by reason of any Claim first made against the Insured during the Policy Period and notified in writing to the Insurer during the Policy Period ..."

Clause 2 contained definitions of terms used in the policy including the following:

"2.2 Claim means:
  1. any written demand;
  2. any civil proceeding
  3. for compensation made against the Insured but only in respect of the performance of Professional Services by the Insured."

Clause 3 of the policy set out exclusions from the policy. It relevantly provided:

"The insurer is not liable to make any payment for Loss in connection with any Claim:


3.5 Bodily Injury

for bodily injury or nervous shock, sickness, disease, death or mental anguish of any person. This Exclusion does not apply to damages for mental anguish in respect of a Claim for defamation which is covered under this policy."

A document that was described as a "schedule" to the policy contained the following statements:

"Retention/Excess: 1. $10,000 arising our of bodily Injury or Property damage to which this policy responds.

Was the 26 April letter a "claim"?

In reaching its decision, the court emphasised that the terms of a contract of insurance are to be construed objectively by reference to what a reasonable person would have understood the terms to mean in light of both the plain meaning of the text used, as well as the surrounding circumstances known to the parties at the time of entry into the contract.

Accordingly, the question of whether the 26 April letter was a "claim" under the insurance policy was one of substance and not of form; the essential requirement being that there be a "written demand ... for compensation".

In holding that the 26 April letter constituted a "claim" the court found that in the letter Ms Livesay:

  • expressed a clear entitlement to recover for a personal injury said to have been caused by a dangerous fixture at the premises; and
  • made a sufficiently clear assertion of liability on the part of Mr Newman in relation to that personal injury.

The fact that the letter went on to detail and make demands about other defects with the property did not, in the court's view, detract from the conclusion that the 26 April letter, even when read in the context of the other matters mentioned, clearly constituted a "written demand ... for compensation" and therefore a "claim" within the meaning of the insurance policy.

The exclusion clause

The court went on to consider whether the "bodily injury" exclusion clause operated to absolve AHAC from any liability under the policy in relation to Ms Livesay's claim.

In addressing this point, the court rejected the proposition (advanced on behalf of Mr Newman) that the meaning and operation of the clause 3.5 "bodily injury" exclusion was tainted by ambiguity occasioned by the express nomination in the schedule to the policy of a retention/excess for bodily injury claims.

The court once again emphasised that the terms of a contract of insurance must be construed objectively and as a whole in light of the circumstances known to both parties at the time of entry into the policy.

The court noted that although the schedule to the policy provided for a retention/excess in relation to claims involving "bodily injury" it expressly did so only in relation to such bodily injury claims "to which this policy responds". This express caveat would, in the court's view, cause a reasonable person to enquire as to the circumstances in which the policy responds to a bodily injury.

The court found that upon making such an enquiry, a reasonable person would find that, pursuant to clause 3.5, the policy does not in fact apply to bodily injury, except for "mental anguish" caused by defamation.

As the claim by Ms Livesay did not involve any allegation of mental anguish caused by defamation, the court concluded that clause 3.5 clearly and unambiguously operated to exclude any liability on the part of AHAC under the policy for this claim.

The court therefore concluded that Mr Newman was not entitled to be indemnified by AHAC under the policy in relation to Ms Livesay's claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.