Australia: Insurance Cover May Determine Legal Liability For Insurers: Imbree V Mcneilly

Last Updated: 9 February 2009
Article by Robert Samut

Date Of Judgement 28 August 2008

THE FACTS

Paul Imbree had organised a four-wheel drive tour around far North Queensland and the Northern Territory with his two sons, Paul junior and Reece and a young friend of Paul juniors. Paul junior was 16. He had a learner's permit but his friend did not. When in the outback Paul Imbree let his son and friend drive the vehicle on 2 or 3 occasions. The friend was driving out of Kings Canyon on the way to Alice Springs when he was confronted with a piece of tyre debris on the road. The young driver reacted by veering sharply to the right, without braking, causing the vehicle to roll and Paul Imbree senior to suffer serious spinal injuries. He was rendered a tetraplegic.

THE LITIGATION

Mr Imbree issued proceedings against the young driver and the owner of the vehicle. He succeeded at first instance. The trial judge held that the young driver had "behaved with carelessness over and above what could be attributed merely to inexperience". Damages were assessed at more than $9.5million and then reduced by 30% to account for Mr Imbree's contributory negligence. The young driver and owner of the vehicle appealed.

The New South Wales Court of Appeal followed an earlier decision of the High Court in Cook v Cook as establishing a principle that accidents caused by a learner driver's inexperience, and lack of qualification, rather than any superimposed or independent carelessness did not in isolation constitute a breach of the duty of care owed by the driver to a supervising licensed driver. In a majority judgement the New South Wales Court of Appeal held that the young driver had been careless and negligent in swerving off the road, but following Cook v Cook was prepared to reduce Mr Imbree's damages by two thirds for contributory negligence.

Mr Imbree appealed to the High Court. His central proposition was that the young driver should be held to have owed him the same objective standard of care as a licensed driver, and that the decision in Cook v Cook should be overruled.

THE APPEAL

The High Court upheld the appeal, and unanimously overruled the decision in Cook v Cook. With the air of a man set to retire Justice Kirby took a different route to arrive at his decision.

Justice Kirby saw it as being central to the finding in favour of Mr Imbree that such liability, although arising under the common law, fell to be determined in the context of statutory insurance covering the liability of drivers and owners of motor vehicles operating on public roads. His Honour observed:

"Moreover, judges (and others) are more willing than in the past to acknowledge the relevance of insurance (especially compulsory statutory insurance) to the content of negligence liability, suggesting an acceptance that it is a consideration material to defining the content and standard of the duty of care owed in the circumstances".

He went on to say that if compulsory insurance was not there behind the scenes, and if it were the case or even possible that someone in the position of the driver or owner of the vehicle might be personally liable for the consequences of the accident, it would be extremely unlikely (in his view) that the courts would impose liability on either of them, particularly in the case of Mr Imbree's claim for millions of dollars.

In openly acknowledging the influence of insurance cover on his decision His Honour suggested that it was time that "fiction acknowledged reality". He referred to the traditional view of English law that the existence or absence of a policy of insurance was irrelevant to the legal liability of the insured, and then went on to examine more recent English cases which departed from that view. He referred to Lord Griffiths in Smith v Bush (1991) AC 831 who was quoted:

"There was once a time when it was considered improper even to mention the possible existence of insurance cover in a law suit. But those days are long passed. Everyone knows that all prudent, professional men carry insurance, and the availability and cost of insurance must be a relevant factor when considering which of two parties should be required to bear the risk of a loss".

In an unusually revealing paragraph His Honour disclosed that the existence of insurance cover influenced his findings in many high profile cases including:

  • Sweeney v Boylan Nominees Pty Ltd (2006) HCA 19 (duty owed by small independent contractors engaged by quasi employers).
  • Brady v Girvan Bros Pty Ltd t/as Minto Mall (1986) 7 NSWLR 241 (occupiers and employers liability).
  • Pyreness Shire Council v Day (1998) HCA 3 (duty of care owed by local authorities).
  • Northern Sandblasting v Harris (1997) HCA 39 (duty of care owed by landlords).
  • Neindorf v Junkovic (2005) HCA 75 (duty of care owed by householders holding a garage sale).

COMMENT

The judgement as a whole is not as controversial as what it may appear to be to some. Insurers, particularly CTP insurers, have long recognised that their presence will often facilitate a finding in favour of an injured plaintiff, with the result that very few contentious matters go to trial. What is interesting is His Honour's disclosure of how the existence of insurance affected his findings in a number of very high profile decisions. Of the 5 listed above, His Honour was in the minority on 3 occasions. One should however not read too much into this. The reality is that in a number of cases the existence and extent of insurance cover will play a part in a determination of legal liability.

Such a situation has long been recognised by leading academics in tort law. His Honour quotes Professor John Fleming from his text The Law of Torts (9th Edition 1998):

"While in theory insurance follows liability, in experience, insurance often paves the way to liability. In short, it is a 'hidden persuader'."

His Honour also refers to Professor Peter Cane, one of the leading academics today in the field, where he says:

"The size of damages awards in personal injury cases is explicable only on the basis that judges are influenced by the widespread presence of insurance."

In litigation insurers can do little to conceal their existence. Their identity (which in itself is often relevant) is something able to be better hidden. Proportionate liability, where it applies, makes things a little easier for insurers in multi-defendant claims.

When you as an insurer are involved in litigation involving uninsured defendants, your reserve ought to be set to account for this. Where insurance does not cover the entire potential exposure of your insured, then in many cases that fact ought to be made known to the plaintiffs at an appropriate time.

Finally, the consequences of the High Court overturning Cook v Cook is something which CTP insurers need to price in. Justice Kirby acknowledged that the decision had "obvious economic consequence about which this Court has no or little specific information". Over to you.

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.

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