In Allianz Australia Insurance Ltd v Inglis 
WASCA 25, the WA Court of Appeal clarified the meaning of
'act' in s54 of the Insurance Contracts Act 1984 and
reminded us how to construe insurance contracts.
Section 54(1) of the Insurance Contracts Act 1984 prevents an
insurer from refusing indemnity solely on the basis of an act of
the insured or another person which occurs after the inception of
In this context, 'act' means something done or being
done by a person. It does not include a state of affairs or the
description of a relationship. 'Normally living with'
another person is not an act.
The general principles of contractual construction apply to
insurance contracts and there is no general rule that exclusion
clauses are to be construed strictly or narrowly, absent
Stephen Sweeney drove a mower into Georgia Inglis, injuring her
Georgia Inglis sued Stephen Sweeney and his parents in the WA
District Court. The Sweeneys then sued Georgia's father and
brother, Stuart and James Inglis, claiming an indemnity,
alternatively a contribution, on the basis that their negligence
had caused Georgia's injuries.
Stuart and James Inglis sought indemnity under the legal
liability section of their home insurance policy, which covered
them for legal liability to pay compensation in respect of bodily
injury occurring during the policy period.
Allianz declined indemnity on the basis of an exclusion in the
policy that provided, "We will not cover your legal liability
for injury to any person who normally lives with you".
WA District Court decision
The WA District Court found that Georgia Inglis was a person who
normally lived with Stuart and James Inglis within the meaning of
the exclusion. However, that fact was an 'act' for the
purposes of s54(1) of the ICA which (in the absence of any
prejudice) prevented the insurer from declining cover.
WA Court of Appeal decision
The Court of Appeal considered several issues but it was its
interpretation of 'act' under s54(1) that effectively
disposed of the appeal. The court held that living with another
person is not an 'act', but a 'state of affairs' or
a 'description of a relationship'. Here, the facts depended
on an inference to be drawn from the conduct of all relevant
persons over an extended period of time and did not depend on a
single act of a particular person on the relevant day. So they
could not amount to an 'act' within the meaning of s
McClure P also considered two matters of contractual
The policy defined the insured as Linda and Stuart Inglis and
'you' or 'your' as:
"the person(s) named in the
current schedule as the insured and those persons who live with you
permanently who are any of the following:
any member of your own family and your spouse's or de facto
The Inglises argued that the exclusion relied upon by Allianz
did not apply as 'you' meant all the insureds and so
'any person' had to mean any person other than an insured
(including Georgia Inglis).
McLure P rejected the argument. After setting out the relevant
principles of contractual construction, her Honour held that the
meaning of 'you' was informed by its context and the nature
or type of the insurance. At its widest, 'you' meant all
the insureds under the policy severally. However, for the purposes
of the relevant insuring clause, the context required that it meant
only those insureds who were legally liable to pay compensation in
respect of the bodily injury. In the present case, that meant
Stuart and James Inglis, not all the insureds, and 'you'
and 'your' had the same meaning in the exclusion. So
Georgia Inglis qualified as 'any person'.
The second issue was whether a contribution claim was a claim
which gave rise to a legal liability "for injury" within
the meaning of the exclusion. Having regard to the text, context
and purpose of the insuring clause and the exclusion, McLure P held
that it was.
The Court of Appeal's decision clarifies the meaning of
'act' in s54(1) of the ICA. A state of affairs is not an
The decision also provides a useful reminder that the court will
determine the meaning of a policy provision, including exclusions,
by reference to the text, context and purpose of the provision and
the policy as a whole. Notably, here, although the policy
definition of 'you' and 'your' referred to all
insureds, the Court of Appeal found that this was not its meaning
in the context of the legal liability cover and the exclusion.
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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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