On 10 September the High Court published its reasons for
decision on the appeal by insurers against the Court of Appeal in
Western Australia upholding the trial judge's decision to the
effect that the insured was entitled to indemnity.
The claims which were the subject of this litigation were made
on their insurer by Highway Hauliers, a trucking business
transporting freight to and from the eastern states. Their fleet
insurance covered accidental damage to their trucks and trailers,
two of which had been damaged in separate accidents in 2004 and
A requirement of the insurance policy was that the insured's
drivers should have achieved a minimum score and a driver test
known as the "PAQS test". In the instance of the losses
however, the drivers had not undertaken the tests and therefore the
policy condition could not be satisfied. Although there was no
suggestion that driver incompetence caused the losses, the
insurance claim was rejected on the basis of the absence of the
Insurers sought to characterise the condition relating to the
scope of the cover afforded by the policy and therefore outside the
ambit of the test of prejudice under s54 of the Insurance
Contracts Act 1984. That argument was rejected by Corboy J in
the WA Supreme Court and his decision had been upheld by the Court
In the Court of Appeal, McClure P acknowledged the insurers'
argument by stating at (72) "It is important to recognise that
s54(1) has no application to provisions of an insurance contract
that are fixed from commencement, in the sense that they are
unaffected by a subsequent act or omission of the insured or
another person. That will often be the case in relation to property
the subject of an 'event based policy'".
In rejecting the appellant's argument the High Court held
that as the respondent's claims related to accidents which
occurred during the period of insurance, it was sufficient to
engage s54(1), that the effect of the contract of insurance was
that the insurer may refuse to pay those claims by reason only of
acts which occurred after entry into the contract. The operation of
each vehicle by the untested driver was properly characterised as
having been an "act" that occurred after entry into the
contract of insurance and therefore susceptible to the application
of s54(1), and (arguable) by corollary, not a condition whose
operation was to limit the scope of the policy.
The effect of the decision is that the status quo is maintained.
This particular argument directed towards containing the ambit of
s54 was not successful, and perhaps properly so on the facts. The
scope of the policy coverage however, remains an important issue to
be considered in the context of indemnity questions arising out of
breach of condition.
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.
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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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