Australia: Beaconsfield Mine Collapse – Insurance Developments

Last Updated: 28 November 2007
Article by Brendan Hammond

Allstate Explorations (NL) & Ors -v- QBE Insurance (Australia) Ltd [2007] VSC 380


Wotton + Kearney acts in this matter for QBE Insurance (Australia) Limited (QBE) which arose out of the closure of Beaconsfield Gold Mine (the Mine) following the roof fall on Anzac Day 2006 which caused the death of one miner and trapped two others underground for a number of weeks.

The Issues

On 10 October 2007 Justice Hargrave of the Supreme Court of Victoria handed down a judgment on a threshold insurance issue in connection with a claim for business interruption (BI) losses of approximately $45 million made by Allstate Explorations (NL) and others, the owners and operators of the Mine (Allstate), against QBE pursuant to an Industrial Special Risks (ISR) insurance policy issued by QBE to Allstate.

ISR policies of insurance are property insurance policies. Subject to the terms, conditions and exclusions of the policy standard ISR policies are divided into 2 sections - Section 1 of the policy operates to provide cover for material damage to property insured and Section 2 of the policy covers BI losses in consequence of the damage to property insured.

Allstate did not advance its BI Claim under Section 2 of the ISR policy as it acknowledged that:

  • the closure of the Mine had not been in consequence of damage to insured property, but rather was the result of cessation notices issued by Workplace Standards Tasmania and the Chief Inspector of Mines pursuant to the Workplace Health & Safety Act 1995 (Tas);
  • its BI losses were not the result of physical loss or destruction of or damage to insured property, with the result that Section 2 of the policy was not engaged.

However the ISR policy contained the following condition (the Condition):

"Civil Authority

23. Notwithstanding anything contained herein to the contrary, the Property Insured under this Policy is also covered against the risk of loss, destruction or damages arising from the actions of any civil authority during a conflagration or other catastrophe and for the purposes of preventing, minimising or retarding same and shall also include the closure of any Premises/operations by any civil authority due to the operation of a peril insured against."

Allstate contended that the Condition provided freestanding cover operating independently of Sections 1 and 2 of the policy and that, on this basis, it was entitled to recover its BI losses under the policy despite the fact that those losses were not attributable to damage to property insured. QBE disagreed and denied indemnity.

Although on the basis of the pleadings filed in the proceedings issued by Allstate against QBE a wide variety of contentious legal and factual issues arose, the threshold issue for Allstate was its contention that the Condition should be construed in a manner which afforded it a gateway to claim BI losses where those losses had not resulted from physical loss or damage to property insured. The Court was asked to determine this issue as a preliminary question.

Allstate relied upon the fact that the Condition did not refer to or use the term "physical loss" but instead used a different form of words which Allstate contended provided a broader form of cover in respect of any "loss, destruction or damages". Allstate contended that:

  • its construction was objectively reasonable because it was a natural consequence that if premises or operations were closed by the actions of a civil authority then BI loss would result;
  • such closure was unlikely, as a natural consequence, to cause damage to property; and
  • if the second limb of the Condition was dependant on physical damage then it would have no work to do since in those circumstances Section 2 of the policy would itself be engaged to provide cover.

QBE argued that:

  • if it was the intention of the parties to provide ‘stand-alone’ cover of the type contended for by Allstate (which cover was extensive) then it would have been a simple matter for the Condition to clearly say so;
  • in the context of the manner in which the whole policy was structured it was unlikely that significant cover would have been incorporated by the form of the words used in the Condition; and
  • it was clearly open for the Court to determine that the Condition operated to remove doubt or to clarify cover afforded elsewhere by the Policy.

The Judgment

In his judgment Justice Hargrave rejected Allstate’s submissions that the Condition provided freestanding cover (operating independently of Sections 1 & 2 of the policy) and agreed with QBE that physical loss, destruction of or damage to insured property was required in order to engage the Condition. He concluded that:

  • when the Condition was construed in the context of the policy as a whole it was apparent that the policy contained a clear structure – that of providing cover for losses (including BI losses) arising from or consequent upon any event causing physical loss or destruction of or damage to property insured;
  • clear language would be required before additional cover could be said to be afforded outside this defined structure and such language was not present here;
  • the independent work to be done by the second part of the Condition was to clarify and modify the "government order" exclusion appearing elsewhere in the policy;
  • use of the plural "damages" rather than the singular "damage" should be considered to be a mistake;
  • the "…risk of loss, destruction of or damage to Property Insured…" are words which should be read as qualifying both parts of the Condition;
  • the text of the policy was to be given "primary significance" and "should not be displaced unless the words actually used would lead to a result which did not accord with commercial common sense"; and
  • the fact that loss of business revenue might be the more obvious risk than physical loss or damage did not mean that there was no commercial common sense to adopting a construction which required physical loss or destruction of or damage to insured property before the Condition was engaged.


This decision is of considerable interest and importance to insurers. In particular the decision is a good example of the central importance applied by the Court to the overall structure of the policy when determining questions of construction.

There is clear and practical sense in adopting this approach. To construe the Condition as providing a ‘stand-alone’ form of cover would raise a host of practical complications which are likely to have been outside the consideration of the parties when entering into the insurance contract - for example the Basis of Settlement for BI losses under Section 2 of the Policy would be of no apparent application and the policy was silent as to how a claim made pursuant to the Condition was to be measured. It was also not apparent what (if any) deductibles would apply to a claim made under the alleged ‘stand-alone’ cover.

Whilst it is obvious that, where a business is closed for a period due to the actions of a civil authority BI losses will inevitably result, this judgment highlights the necessity to use clear language if cover is required for those losses in the absence of physical loss or destruction of or damage to insured property (e.g. by use of a deeming clause). Restrictions in the availability to adduce evidence of contractual intention (rather than surrounding circumstances) will result in the Court giving primary significance to the actual words used in the policy.

The case heightens the importance of ensuring that careful consideration is given at all stages of the underwriting process to matching the cover required with the words used in the insurance policy.

Finally, regardless of whether or not an appeal is pursued by Allstate, this case is a good example of the appropriateness (and cost effectiveness) of addressing a threshold issue at the earliest possible stage in the proceedings prior to the parties having to commit considerable additional resources and incur considerable associated expense to addressing all of the more general factually-intensive matters in issue in the proceedings.

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.

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”

Mondaq Advice Centre (MACs)
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.