If the precise terms of an insurance policy are not in evidence,
who bears the onus of proving what it said?
The NSW Court of Appeal recently considered this issue in
determining the extent of the liability of an insurer. It found
that the question is governed by ordinary contractual principles,
namely the party asserting an agreement must prove it. However,
there may be exceptions...
The lost policy
The Respondent held a policy of insurance with the predecessor
of QBE. The policy was held some 40 years before the trial, so the
policy itself was not produced by either party. One of the
preliminary issues was whether the policy was unlimited, as the
respondent argued, or whether it was limited to the statutory
minimum level of cover ($40,000) under the Workers Compensation
Act 1926, which was applicable at the time.
At first instance, the NSW Dust Diseases Tribunal held that the
onus of proving the limit of liability rested with the party
asserting the limit on the policy. No evidence was put forward by
the insurer and it was therefore held that there was no limit to
liability. QBE appealed.
The Court of Appeal set aside the decision and allowed the
appeal by QBE in a majority decision (Ipp JA and Gyles AJA;
Brereton J dissenting).
Insured must prove agreement - insurance cover not
The majority held that the evidentiary onus of proof rests with
the plaintiff according to ordinary contractual principles. The
trial judge had erred in imposing an onus of proof on the insurer
in respect of an essential part of the obligation to insure as
opposed to a condition or exclusion.
Consequently, the majority held that the cover was limited to
Gyles AJA stated:
Principles as to the construction and operation of
conditions, exclusions and limitations have no application where
the question is whether a term is included in a policy. That
question is governed by ordinary contractual principles. The party
asserting the agreement must prove it. The amount and subject of
the cover are essential terms in proof of an insurance contract.
...Where the extent of cover is defined by a maximum amount it may
be said that cover is limited to that amount but that is not to
categorise that amount as an exception to, condition of or
limitation to cover. It is an essential part of the primary
obligation to insure.
This case provides some comfort for insurers and highlights the
importance for insureds of keeping copies of their policies. Where
the policy is lost, the insured does not have free reign to assert
unlimited liability and broad coverage. The essential terms of the
policy, including the policy limit, must still be established by
The outcome may have been different if the term in issue was an
exclusion clause where the onus is generally on an insurer to prove
that the exclusion applies.
Furthermore, if this case was not a Workers Compensation case,
section 74 of the Insurance Contracts Act 1984 (Cth) may
have been relevant. Section 74 of the Insurance Contracts
Act provides that an insurer is to provide policy documents to
the insured on request.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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