CGU Insurance Limited v Lawless
Supreme Court of Victoria Court of Appeal
Maxwell P, Neave JA and Redlich JA
- The reasonable care condition of a public liability policy can only be relied upon by an insurer where there is a deliberate course of action or inaction which theinsured realises exposes him to the risk of someone being injured by the danger which has been recognised by him.
- The insured did not breach the reasonable care conditions of the policy when he operated a post driver even though the plaintiff was in close proximity to the post at the time.
- This finding could be made by the trial judge even though the insured's evidence was that he did not see the plaintiff when he operated the post driver.
- In Victoria and New South Wales (but not UK, NZ, SA, Qld and NT) the insured carries the onus of proving compliance with the reasonable care condition.
- The plaintiff (aged 10) was injured when his hand became caught between a post driver and a fence post. The post driver was being operated by Lawless who held a liability insurance policy with CGU. Liability to indemnify was denied on the basis that Lawless was in breach of the condition of the policy which required him to take all reasonable precautions to prevent injury.
- At first instance the trial judge gave judgment for the plaintiff and ordered CGU to indemnify Lawless in respect of that judgment finding that Lawless was not in breach of the condition of the policy requiring reasonable precautions.
- The trial judge stated:
- The court confirmed the well established principle that the term "reasonable precautions" in a contract of insurance must be construed having regard to the commercial purpose of the contract which was, inter alia, to indemnify the insured against liability for his personal negligence. The insured is not required to take precautions as should reasonably be taken so as not to be negligent or in breach of duty as an occupier or as an operator of dangerous machinery, as such a construction would be repugnant to the commercial purpose of the contract.
- A failure to take reasonable precautions will occur only where there is a deliberate course of action or inaction which the insured realises exposes him to the risk of someone being injured by the danger which has been recognised. There must be "a deliberate decision to court the danger."
- The insured must establish compliance with the condition in the policy by showing one or more of the following things:
1. there was no recognition of the danger or the extent of the danger of bodily injury;
2. particular precautions would not have been reasonable in the circumstances;
3. no particular precaution was considered or it was not regarded as reasonable or practicable in the circumstances; and
4. the failure to take the precautions was not due to a lack of desire and concern to prevent bodily injury.
- The trial judge had found that the negligence of Lawless was to operate the post digger whilst the plaintiff was holding the fence post. The difficulty arose because it was the evidence of Lawless that he did not see and was not aware that the plaintiff was holding the fence post when he operated the machine. The insurer argued, as a consequence, that Lawless could not demonstrate that he had in those circumstances complied with the reasonable care provisions and could not satisfy the court that he had regard to the safety of the plaintiff who was in fact holding onto the post and standing nearby the operations, when on his own evidence he was unaware of the presence of the plaintiff.
- The insurer argued that Lawless was not permitted to establish a state of mind in relation to facts which was inconsistent with the case he advanced at trial that he was not aware that the plaintiff was holding the post.
- The trial judge had drawn an inference from circumstantial evidence that Lawless did not recognise the danger of having his grandson (the plaintiff) hold the post. The Court of Appeal stated that it was proper for the trial judge to evaluate the competing hypothesis as to the state of mind of Lawless so long as it remained within the evidence and acted with procedural fairness to the parties. The Court of Appeal concluded that the trial judge did not err in finding that Lawless did not court the danger in circumstances where his own evidence was that he was not aware that the plaintiff was holding the post.
- In arriving at its conclusion the court had to consider whether Lawless (the insured) or the insurer bore the onus of proof in relation to the reasonable care condition in the policy.
- In Victoria (Strata Plan 4304 v Albion Insurance Co Limited (1982) VR699) and in NSW (Legal & General Insurance Australia Limited v Eather (1986) NSWLR390) it has been held that the burden of proving compliance with such a condition is born by the insured. The onus of proof has been found to rest upon the insurer in the United Kingdom, New Zealand, South Australia, Queensland and the Northern Territory.
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