Australia: When a calculated risk doesn't pay off: insurance policies and accidents

Last Updated: 5 October 2016
Article by Mark Waller

A negligent decision made with an appreciation of the risk can still be an "accident" and covered by insurance, but it can be difficult to assess when the line is crossed and the conduct and the loss/damage is no longer accidental.

We all take calculated risks from time to time, but what if we do so negligently, and that risk eventuates? Is any damage or loss the result of an accident or not? This is an important issue for both insurers and policy holders, but not always one with a clear answer. There has now been some guidance from the Queensland Court of Appeal, which found in favour of an insured when the materialisation of a known and appreciable risk was considered to be an "accident" and "accidental damage" (Matton Developments Pty Ltd v CGU Insurance Limited [2016] QCA 208).

The Court found that for there to be no coverage under the insurance policy, both the damage and the action that caused the damage must have been expected and the conduct of the insured must be so reckless, hazardous or culpable that the damage caused was not accidental.

Twelve seconds to disaster

Matton Developments Pty Ltd owned a 100 tonne telescopic "crawler" crane which could lift a maximum of 100 tonnes. It was damaged beyond economical repair while being used to lift a concrete tilt panel weighing about 39 tonnes. Why was the crane damaged if the weight of the panel was within its capacity?

The answer lies in the manner in which it was being lifted. The crane had to be operated on level ground or near-level ground of a gradient no greater than 0.3 degrees, but for this job the crane needed to travel over uneven ground to move the panel. The crane operator, Mr Hitaua, attempted to level the ground by spreading unreinforced concrete rubble over the area, a common method of ground-filling in the industry.

Critically, Hitaua had expected that the weight of the crane and concrete panel would compress the concrete rubble as the crane drove over it and provide a level platform. In the 12 seconds that the crane was being operated before the boom collapsed, the concrete rubble did not compress; the crane was being operated on a 7 degree slope and became overloaded. This was in contravention of the manufacturer's manual and the relevant Australian standards, and the cause of the collapse of the boom.

The insurance policy and the Accidental Overload clause

CGU Insurance Limited provided Contractors Plant and Machinery insurance in respect of the crane. Matton sought cover pursuant to the policy's Accidental Overload additional benefits clause. Although the policy contained exclusions which excluded damage caused by reason of the crane being operated with a load that is in excess of a safe working load or contrary to the manufacturer's manual or Australian standards, it also contained an extension:

"We will pay for accidental sudden and unforeseen physical loss of or damage to a machine caused by or resulting from accidental overloading which is non-deliberate and clearly unintentional.

The onus rests with you to substantiate any claims relating to accidental overload."

CGU refused indemnity under the policy by stating that the damage was not accidental, and therefore not covered. The case turned on whether:

  • the "Accidental Overload" clause extended to circumstances where there was a structural overloading of the crane; and
  • the damage was caused by an "accident".

Decision at first instance: a deliberate courting of the risk

At first instance (Matton Developments Pty Ltd v CGU Insurance Limited (No 2) [2015] QSC 72), Justice Flanagan held that Matton was not entitled to indemnity under the Accidental Overload clause because:

  • the structural overloading that occurred was not "overloading" within the meaning of that term in the Accidental Overload clause;
  • the overloading was not "accidental"; and
  • the damage to the crane was not "accidental, sudden and unforeseen".

Adopting a narrow interpretation, he held that "overload" in the policy should be interpreted separately from the circumstances of operation, and so it simply meant that the crane was "physically overloaded with an excessive load". Accordingly, he held that the Accidental Overload clause only applied where the crane was overloaded in its normal operating conditions (eg. a 105 tonne weight was mistakenly lifted instead of the maximum 100 tonnes), as opposed to being overloaded because it was on a slope.

So, was the collapse of the boom accidental? Justice Flanagan said it was not; he characterised the facts as a deliberate courting of the risk.

A broader approach to the Accidental Overload clause in the Court of Appeal

The Court of Appeal took a broader approach to interpreting the policy and looked at the text, the surrounding circumstances, the purpose of the policy, the coverage and the object of the transaction before holding that "overload" within the policy included structural overloading caused by operation of the crane outside of the manufacturer's guidelines and the relevant Australian standards. This was because:

  • the Accidental Overload clause did not contain limiting words so as to read "machine which is located and in use in the manner in which it was designed to be used" to qualify the cover afforded by the scope of cover clause; and
  • "overload" was given its natural meaning (i.e. an excessive load or burden).

For Matton to be deprived of the benefit of the Accidental Overload clause, both the overloading itself and the resultant damage must have been expected. They would be considered accidental if each could be categorised as "an unlooked-for mishap or an untoward event which is not expected or designed".

The method of operation (laying the unreinforced concrete rubble in the expectation that it would compress) was not inherently hazardous, was standard in the industry and was an acceptable method of accessing the relevant area. The hazard and incident occurred because the concrete did not compress as expected. Hitaua had only driven along the ramp for 12 seconds before the boom collapsed.

By the time Hitaua had realised that the ground was not compressing as he had expected, the overloading and collapse of the crane was imminent and unavoidable. Hitaua simply did not have enough time to realise that the rubble had not compressed as planned. As President McMurdo concluded, while Hitaua deliberately courted a risk, he did not invite the disaster which ensued. The operation of the crane was not so hazardous that the subsequent overloading and resultant boom collapse could not be called an accident.

Otherwise applicable exclusions within the policy (for example, excluding damage where a machine was being used contrary to the manufacturer's guidelines or Australian standards) were read down heavily against CGU's interests. If they had not been, the Accidental Overload clause would have been illusory and had no effect.

The Court of Appeal allowed Matton's appeal, set aside the trial judgment, and ordered that CGU indemnify Matton's loss of approximately $2.5 million, with interest.

When will your insurance policy respond to an accident?

Only time will tell whether CGU seeks special leave to appeal this decision to the High Court. The Court of Appeal's decision confirms that the conduct of an insured, while on its face clearly negligent, may still be found to be "accidental, sudden and unforeseen" and covered by a policy.

There is a point at which a risk taken by an insured is sufficient that its consequences are no longer "accidental" but, as this case shows, it can be difficult to assess when that line is crossed.

Further, while exclusion clauses may assist insurers in limiting liability, specific coverage and additional benefits clauses will take priority over potentially applicable exclusions to ensure that all coverage clauses have a role to play. Where there is any doubt in the interpretation, the courts will be reluctant to adopt an outcome which is against the interests of the policy-holder.

For insureds, this decision makes it worth your while to review your policies to ensure that any additional benefits clauses that conflict with general limitations or exclusions make it clear that the benefit takes priority.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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