Australia: A Focus on the Insuring Clause in Liability Policies

Insurance Update (Australia)
Last Updated: 14 April 2013
Article by Andrew Sharpe

The insuring clause in a commercial policy of liability insurance will typically provide cover for "liability for any claim... in connection with (or similar words such as "'in respect of" or "arising from" or "in the conduct of") the insured business".

This article looks at a series of recent legal decisions that have focused on two of the main triggers of cover in such insuring clauses:

  • The identification of the types of claim covered
  • The concept of connection to the insured business.


In commercial liability policies, the cover provided in the main insuring clause is generally restricted to claims for compensation. This limitation is most commonly found in the definition of "claim". In some policies it may be contained in the insuring clause itself or in the definition of the "loss" covered. Two recent cases provide some guidance as to the way in which this limitation may operate in practice.

Hamcor Pty Ltd v The State of Queensland [2013] QSC 9

Hamcor was the owner of land that contained a chemical manufacturing plant operated by a tenant. In August 2005, the property was destroyed by a fire. Large quantities of water were used by the fire brigade to bring the fire under control. Those waters became contaminated with chemicals and contaminated the land and surrounding waterways.

The Environmental Protection Agency (EPA) issued a remediation notice and obtained orders requiring Hamcor to remove contaminated substances from the property and surrounding land and to clean relevant structures. Hamcor spent over AU$10 million complying with the notice and orders.

The Supreme Court of Queensland considered whether those costs fell for cover under the insuring clause of a policy covering public, pollution and products liability. The issue arose in the form of a stated case brought for separate determination by Hamcor's broker, which had been sued for, among other things, failure to ensure that Hamcor was noted as an insured under the policy. The insuring clause covered "liability to pay compensation" for "claims... made against the insured".

The court held that "the costs incurred by [Hamcor] in complying with the notices issued by the EPA, and the subsequent court orders are costs met by the respondents in respect of their own property. They do not constitute a liability to pay compensation in respect of a claim made against the insured. The fact that they arise as a result of action taken by a statutory authority is insufficient to allow them to be properly categorised as a liability to pay compensation in respect of a claim made against the insured".

Kyriackou v Ace Insurance Limited [2012] VSC 214

In May 2007, the Australian Securities and Investments Commission (ASIC) commenced Federal Court proceedings seeking interlocutory and final relief against Mr Kyriackou and others. The proceedings related to Mr Kyriackou's alleged involvement in an unregistered managed investment scheme. ASIC sought numerous forms of relief, including that Mr Kyriackou be restrained from promoting or advancing the relevant scheme.

Mr Kyriackou incurred substantial legal costs in defending the ASIC proceedings. In July 2008, ASIC discontinued the proceedings. Mr Kyriackou sought indemnity for such costs and expenses pursuant to a policy of professional indemnity insurance with ACE Insurance Limited (ACE). Mr Kyriackou's claim was declined. He commenced proceedings against ACE.

The insuring clause covered "loss arising from any claim". "Claim" was defined as "a written demand for, or an assertion of rights to, civil compensation or civil damages arising out of the firm's business or a written intimation of an intention to seek such compensation or damages".

The central question was whether the ASIC proceeding was a "claim" as defined.

The court interpreted "civil compensation" or "civil damages" to mean a claim for pecuniary redress for some actionable wrong, as that concept was considered in Kantfield Pty Ltd v Lockwood [2003] VSC 420 at [12] per Byrne J. The originating process and affidavits in the ASIC proceedings did not comprise (nor allude to) a claim against Mr Kyriackou for "civil compensation" or "civil damages". Accordingly, the definition of "claim" within the policy was not met and Mr Kyriackou was not entitled to indemnity.


In "claims made" policies, the insuring clause is triggered by a "claim" being made against the insured during the policy period. As such, the entitlement of an insured to indemnity under any particular policy will require the identification of precisely what constitutes a "claim" and when the claim was "first made".

Sometimes that will be clear, such as when an insured receives a statement of claim out of the blue. In other cases, particularly where a client or customer makes a complaint, the question of whether that complaint constitutes a "claim" can be far more complicated. That was the situation considered by the Queensland Supreme Court in the recent case of Livesay v Hawkins [2012] QSC 122.

Mr Newman, the managing agent of a rental property, was sued by Mrs Livesay as a result of an accident in which a curtain pelmet came away from the bedroom wall and struck her on the head in April 2005.

The following day, Mrs Livesay and her husband, who were the tenants of the property, sent a long and rambling letter of complaint to Mr Newman. The letter raised 17 separate items of maintenance, which the tenants sought to have addressed. The letter also included the following comments:

  • "We are currently seeking medical advice and will advise you of our intentions on this matter."
  • "As per the Tenancy Act and advice from the 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."
  • "This does not include the 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."

At the time that Mr Newman received the letter, he was insured under a professional indemnity policy issue, which had a policy period of 24 July 2004 to 25 July 2005. Mr Newman did not notify the insurer of his receipt of the letter.

Mrs Hawkins commenced proceedings against Mr Newman in relation to the injury in September 2005. By that time the policy was no longer in force.

Mr Newman's claim on the policy was declined on the basis that no claim, as defined in the policy, had been made during the policy period. Mr Newman joined the insured to the proceedings commenced by Mrs Livesay. The central issue in the dispute between Mr Newman and his insurer was whether the letter was a "claim" as defined in the policy.

Claim was defined to include "any written demand... for compensation made against the insured but only in respect of the performance of professional services by the insured".

The court held that the letter did contain a demand for compensation. In doing so, the court cited with approval the following passage from the judgment of Fryberg J Junemill (in liq) v FAI [1997] QCA 261:

"There is no formula which must be included in a claim by a third party. What is required, unless the policy expressly so stipulates, is a form of demand or assertion of liability, not a formal demand or assertion of liability. It must be remembered that the wording is a matter quite beyond the control of the insured."

The court held that it was sufficient that the letter asserted an entitlement on the part of Mrs Livesay to recover for her personal injury claim "due to injury caused by dangerous fixture". Even in the context of the other matters mentioned in the letter, it was clear that Mrs Livesay was making an assertion of liability on the part of Mr Newman. It was not necessary that the "compensation" sought be expressly identified. It was sufficient that the letter asserted the existence of a liability (which must implicitly involve a right to compensation).


The recent case of Rian Lane v Dive Two Pty Ltd [2012] NSWSC 104 concerned a scuba diving instruction business owned and operated by its sole director, Mr Todd. On 29 July 2006, Mr Todd was driving a boat owned by Dive Two when it collided with a fishing boat. Mr Lane, who was in the fishing boat at the time of the collision, commenced proceedings against Dive Two and Mr Todd, seeking compensation for his injuries.

Liberty Mutual Insurance Company (Liberty) issued a master policy issued to "PADI Asia Pacific and individual members, dive centres and resorts and others as agreed". Dive Two, a member of the PADI Asia Pacific group, was noted as an insured under the policy. The policy was a combined general and products and professional indemnity policy. The cover provided under the policy extended to Mr Todd as a director of the company.

Liberty contended that it was not liable to indemnify the defendants because the claim did not arise "in connection with the insured business".

The "insured business" was defined as "scuba diving", which was defined as "... principally incorporating class and water based learning activities and modules including first aid training and certification, including the determination of standards by the accrediting agency and all activities relating to training, instructing, observing and control of recreational scuba diving. This includes all activities relating to snorkelling, skin diving, swimming, recreational surface supplied air to a maximum depth of 10 meters, servicing hiring and repairing of equipment and sales of related products, tours of reefs by glass bottom boats (under 12 meters), transportations of people from one island to another, bird watching, guided tours of island when not diving, jungle and/or bush walking, fishing, underwater photography/video, whale watching, scuba doos, beach games".

After the collision, Mr Todd told the police that the boat trip was for the purpose of a private function for his wife and her friends. Mr Todd later asserted that the trip was for marketing purposes or as a "thank you" to friends who had referred business. That evidence was rejected. As a result of that finding, the central issue in the dispute became whether the accident, which occurred in the course of a private boat trip, was "in connection with the insured business".

Dive Two argued that because the term "insured business" was defined by reference to a list of activities, which included the activities that were being engaged in at the time of the accident, the claim fell within the insuring clause.

Her Honour held that the activities identified in the definition of "insured business" would only be covered where they were undertaken for business, rather than private, purposes. To find otherwise would be to ignore the fact that the parties have chosen to use the words "insured business" in the insuring clause.

Her Honour also rejected Dive Two's argument that sufficient "connection" to the insured business could be established by the fact that the boat was owned by the company, that Mr Todd was the company's usual boat skipper or that the boat was being operated in the general vicinity of the area in which diving excursions were generally undertaken by the company.

Her Honour stated that the necessary connection to the business must be "real and not merely tenuous". However, the words "in connection with" were words of broad import and ought not be interpreted narrowly. In the event that Mr Todd's evidence that the outing had a promotional or marketing purpose had been accepted, such connection would have been sufficient to attract cover.


The insuring clause in any liability policy is fundamental to the cover provided. As these recent cases show, there continues to be areas of uncertainty in relation to how these clauses operate. It is essential for insureds and brokers to understand the limitations inherent in the insuring clause of the policy and to ensure that the cover provided is sufficient to meet the insured's needs. It is also important to remember that automatic and optional extensions and endorsements will often be subject to the insuring clause and must be read together with it. It is usual for such terms to be stated to be subject to all other policy terms and condition unless otherwise stated.

Finally, great care needs to be taken in considering the appropriateness of the description of the insured business. Where it is defined by reference to activities, great care needs to be taken to ensure that all relevant activities are included. Otherwise, the insured may not be fully covered.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions