The recent case of Matton Developments Pty Ltd v CGU
Insurance Ltd  QCA 208 demonstrates the difficulties
faced by insurers seeking to argue that a policy does not respond
because of the reckless actions of the insured.
Matton held an insurance policy with CGU that covered damage to
equipment. The policy contained an additional benefit clause that
provided CGU would pay for damage caused by 'accidental
overloading which is non-deliberate and clearly
On 1 February 2009, a subcontractor of Matton was operating a
mobile crane lifting a load of approximately 39 tonnes when the
boom collapsed and the crane was damaged beyond repair.
During the course of the lift, the crane had to pass over an
area of unreinforced concrete rubble. The subcontractor was aware
that the crane needed to be operated on level ground or near-level
ground (with a gradient of less than 0.3 degrees). The
subcontractor banked up the rubble to level the ground, a common
method of ground filling in the industry. He was told by another
employee of Matton that the rubble had been banked too high but
disregarded that advice. He considered that the combined weight of
the crane and the load would compress the rubble to the necessary
level as the crane drove over it and would provide a level
The crane moved forward for 12 seconds before the boom
collapsed. In those 12 seconds, the concrete rubble did not
compress as the subcontractor had expected. This meant that the
crane was operating on a 7 degree slope. The crane became
overloaded, causing the boom to collapse.
Matton made a claim under its policy with CGU for $2.5 million
comprising the value of the crane ($1.4 million) and a further $1.1
million for loss of revenue. CGU refused indemnity under the policy
on the basis that that the damage was not 'accidental'.
Was the damage caused by 'accidental' overloading?
The Court explained that the test for determining if the
overloading and resultant damage was 'accidental' was
whether each could be categorised as 'an unlooked-for mishap or
an untoward event which is not expected or designed'.
The Court found the overloading and resulting damage to the
crane was 'accidental'. In coming to this conclusion, the
Court considered the following factors:
The subcontractor had prepared the rubble in accordance with
industry practice and taken the necessary time to do so.
The subcontractor's decision to traverse the banked up
rubble in the anticipation that it would compress was not so
hazardous as to have courted the disaster that ensued.
Disregarding the other employee's advice did not make the
subcontractor's overloading of the crane deliberate as the
subcontractor was the expert who had the last say in the
appropriateness of the embankment of the rubble.
By the time the subcontractor realised that the rubble was not
compressing as expected, the overloading and ensuing damage had
become imminent and unavoidable.
The Court found that the subcontractor's opinion that the
rubble would compress, and his failure to realise in time that it
was not compressing, may have been wrong, even negligent. However,
it did not reach the point where it could be said that:
the 'risk of the mishap was foreseen or courted even though
it was thought unlikely that it would occur';
Matton was gambling or courting the risk, or taking a
calculated risk, deliberately accepting the outcome;
Matton voluntarily embarked on a foolhardy venture, with the
damage an inevitable consequence, by 'courting, inviting or
wooing' of the risk; or
Matton deliberately incurred the risk.
The Court therefore ordered that CGU indemnify Matton's loss
of approximately $2.5 million.
Lessons to be learned
The Court of Appeal's decision illustrates the high bar that
insurers must overcome in seeking to refuse cover for accidental
damage because of the seemingly reckless actions of the
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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Whereas most insurance policies exclude liability arising under contract, insurers can
positively benefit where an insured has limited or excluded its liability under contract.
This usually arises where the insured's contract has a limitation or exclusion of liability clause in the insured's favour.
In commercial negotiations, a principal may insist on being named as an insured on the contractor's insurance policy.
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