On 10 September 2014, the High Court of Australia
delivered its decision in Maxwell v Highway Hauliers Pty
Ltd  HCA 33, dismissing an appeal against the decision
of the Western Australian Court of Appeal, overturning the decision
in Johnson v Triple C Furniture & Electrical 
QCA 282 and widening the ambit of section 54(1) of the
Insurance Contracts Act 1984 (Cth) ('the
By way of background, Highway Hauliers
('HH') owned a fleet of vehicles, which it
used to operate an interstate transport business. HH entered into a
contract of insurance with Lloyd's Underwriters ('the
insurers'). Under the contract, the insurers indemnified HH
against specified loss, damage or liability occurring to or in
respect of the vehicles during the specified period.
The insurance contract explicitly stated it would be subject to
the terms and conditions of a specific policy ('the
Policy'), which stated that indemnity would only be provided to
the drivers of HH B double trucks if the relevant driver had an
appropriate PAQS profile score or equivalent.
HH later made two claims under the insurance contract in
relation to damage sustained to two of its B double trucks. At the
time of both incidents, both trucks were being driven by drivers
who were not qualified under a PAQS program or equivalent.
The insurers rejected the claims, relying on the fact that
HH's drivers were not qualified.
Section 54(1) of the Act provides that an insurer may not refuse
to pay a claim, on the basis of an act of the insured that did not
cause any part of the loss claimed, even if the contract of
insurance expressly provides for cover to be declined as a result
of the act. For section 54(1) to apply, the act must have occurred
during the period of insurance.
The Western Australian Court of Appeal upheld the trial
judge's findings that section 54 of the Act required the
insurer to indemnify HH, notwithstanding their drivers were not
qualified. It had been established that the drivers' lack of
qualifications had not caused the loss claimed.
The insurer appealed, arguing that section 54(1) of the Act only
applied to clauses that created exceptions to coverage under the
policy, not to qualifications to the scope of cover itself. This
had widely been understood to be the position (at least in
Queensland) following the Queensland Court of Appeal's decision
The High Court reiterated that section 54 focuses on the acts or
omissions of the insured, not the legal character or reason that
might entitle the insurer to refuse to pay the claim. It was noted
that HH's omission of failing to ensure driver qualification
occurred during the period of insurance, therefore
engaging section 54(1). The High Court unanimously found the
insurer's refusal to indemnify HH was a breach of contract.
This decision overrules the decision of Johnson, which
narrowed the scope of section 54 and allowed valid exclusions in
the policy to operate and exclude cover.
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
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Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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