Corporate Risk And Insurance Update

Australian Meat Holdings Pty Ltd v Sayers [2007] QSC 390

6 December 2007

This recent decision is important as it:

1. Identifies the obligations of a claimant to provide authorities directed to a relevant statutory authority; and
2. Rejects the approach taken by claimants' lawyers to obtain records and provide only extracts that they consider relevant.

Facts

1. Sayers delivered a Notice of Claim to Australian Meat Holdings (AMH) for a back injury allegedly sustained whilst at work on 5 May 2005.
2. AMH raised a number of compliance issues in relation to the Notice of Claim, including, the adequacy of the Respondent's authority to Medicare to obtain information. Sayers provided a limited form authority however, Medicare refused to release information on the basis of this authority.
3. Sayers submitted:
   1. Section 275(7) of the Workers' Compensation and Rehabilitation Act (2003) (WCRA) only requires an authority to be provided which permits the release of relevant information and documents; and
   2. The alternative procedure should be adopted whereby Sayers solicitors filters the Medicare documentation and provides AMH with only relevant material.

Findings (Daubney J)

1. Sayers was required to sign and return to AMH the authority in Medicare's required format. There is an implied obligation on Sayers to provide an authority to enable AMH to obtain Medicare information referred to in section 257(7).
2. The alternative proposal of Sayers' solicitors acting as a filter of information received from Medicare is not contemplated by the legislation, and would not fulfil the mandatory requirements of section 257(7).
3. Daubney J also expressed the view that it was unsatisfactory for a Medicare officer to sift through information to answer a form of limited authority. The only form of authority by which Medicare will release information is one which will result in AMH receiving information that is relevant and irrelevant to the claim.

Article by Jim Gurry, Brisbane

"What Is A Caravan? - Court Looks To Object Of Policy"

Introduction

The New South Wales Court of Appeal recently handed down its decision in Caine v Lumley General Insurance Limited [2008] NSWCA 4 in which it upheld the object or intention of the policy at the expense of a more pedantic interpretation of the policy. This is good news for insurers. However, the insurer in this case may be disappointed by the fact that an "extra costs" provision meant that the insurer ultimately paid more than the intended limit of indemnity. The message from this is that insurers should review their policies to avoid the same unintended result.

Overview of the case

The appellants, Mr Caine and Ms Byfield, owned and operated a caravan park on the far north coast of New South Wales. Several caravans were permanently located at the park, each with an annex adjoining one side of the caravan and structure built over it known as a 'tropical roof'.

On 16 January 2002, the park was struck by a severe storm, including hail and torrential rain. Damage was caused to the caravans, annexes and tropical roofs.

Lumley paid out $100,000 under the policy on the basis that this was the limit for damage caused to the caravans by hail. Exclusion 15 provided that the policy did not cover damage to "[c]aravans and all aluminium foam sandwich construction where caused by hail, unless the hail penetrates the entire thickness of the material damaged, causing water to enter. Limit of Liability $100,000 any one year."

Caine and Byfield instituted proceedings against the insurer, seeking to recover: $95,700.00 for the caravans; $85,031.25 for the tropical roofs; $477,903.17 for the annexes; $53,760.00 for extra costs relating to raising the annex floors; and $72,880.00 for the extra costs of reinstating the annexes and tropical roofs so as to comply with Council requirements.

The respondents resisted the claim on the basis that:

• The appellants were not entitled to any separate payment for damage caused to the annexes and tropical roofs as they were part of the 'caravans' within the meaning of the policy;
• The appellants' entitlement was capped at $100,000, as the proximate cause of the damage to the caravans was hail; and
• The policy limits applied to the whole claim, including the claim for the extra costs of reinstatement.

Definition of 'caravan'

The appellants argued that the annexes and tropical roofs did not form part of the caravans and therefore were not subject to the $100,000 limit. They cited dictionary definitions as well as the definition of 'caravan' in the Local Government (Caravan Parks, Camping Grounds and Moveable Dwellings) Regulation 1995 (NSW).

At first instance¹, Justice Einstein decided that in the context of the policy, the caravans were not used in the sense of a mobile home as typically understood. Instead, they were permanent or semi-permanent structures and the annexes and tropical roofs formed part of those structures. Consequently, the caravans, annexes and tropical roofs were to be treated as one and thereby subject to the one limit of indemnity, rather than separate limits.

The Court of Appeal agreed. It emphasized that the policy is a commercial document and must be interpreted in light of the language used by the parties, the commercial circumstances which it addresses, and the objects which it is intended to secure. In this case, the commercial object of the policy was to insure the 'structures' which the appellants offered as accommodation, not their individual components.

The Court also observed that the policy's identification of 'caravans' as an asset, without separate reference to the annexes or tropical roofs, demonstrated that the reference to 'caravans' was intended to encompass the entire structure.

Causation

For Exclusion 15 to apply, the proximate cause of the damage had to be hail. The appellants argued that wind, rain and hail were each a proximate cause and that therefore Exclusion 15 did not apply.

This reasoning was rejected by the Court of Appeal. In doing so, the Court noted that commonsense standards were to be applied in determining what is the proximate cause. The Court of Appeal observed that damage which was caused by hail, without other elements of a storm coinciding, would be a meteorological anomaly.

The court held that the analysis of the evidence compellingly demonstrated that the penetration of the hail into, or through, the various fabrics of which the caravans were constructed was the proximate cause of the damage. As the court pointed out, the damage was not caused by wind (the caravans were not "blown away and broken up as they tumbled over"), nor was the damage caused by rainwater entering the caravans other than through the holes created by the hail.

In any event, the court held that even if there were two concurrent causes of the damage, one covered by the policy and the other excluded, the insurer would not be liable².

Extra costs of reinstatement

Clause D5 in the policy provided that insurers would pay the extra costs of reinstatement necessarily incurred by the insured to comply with the requirements of any statute or regulation or of any municipal or statutory authority.

While acknowledging that the D5 clause was not an insuring clause, the Court of Appeal held that it did mean that these reinstatement costs were not limited by the cap of $100,000 in Exclusion 15.
Article by Nicholas Linke, Adelaide

Footnotes

^{1. Robert Lewis Caine v Lumley General Insurance Limited [2006] NSWSC 337.}

^{2. Following the recent decision of McCarthy v St. Paul International Insurance Co. Ltd [2007] FCAFC 28.}

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.