Wallaby Grip Limited v QBE Insurance (Australia) Limited; Stewart v QBE Insurance (Australia) Limited
The High Court of Australia delivered its judgment in this important insurance case on 30 March 2010.
The decision is relevant to 'lost policy' situations and clarifies the onus of proof in these types of situations.
The court also considered the appropriate construction of the NSW Workers Compensation Legislation as regards coverage under the Employer's Indemnity Policy.
Mr Stewart worked for Pilkington, a glass manufacturer, until 1969. In the course of that employment, he was provided with protective equipment manufactured from asbestos cloth. He inhaled asbestos dust and ultimately developed mesothelioma which caused his death.
His widow commenced proceedings against QBE, being the successor to the liabilities of Eagle Star, Pilkington's Employers Indemnity Insurer as at 1969. That case was available against QBE due to the deregistration of Pilkington and NSW legislation permitting proceedings to be brought directly against an insurer.
QBE conceded that Eagle Star insured Pilkington but the documents specifying the terms and conditions of that insurance were not available. Accordingly it did not admit the substantive terms and conditions of the insurance policy and in particular the sum insured by the policy.
The policy was underwritten in accordance with a statutory prescribed form of policy. The terms were prescribed by the Workers Compensation Regulation 1926. At the relevant time clause 18(3)(a) prescribed a minimum required level of cover of $40,000. Further, the Regulation prescribed that the form of the insurance policy contain the words in the insuring clause that the cover was for a sum 'no greater than $40,000'.
The Trial Judge held that the onus of establishing the sum insured under the policy rested on QBE because it was in a better position to have access to the documents than the plaintiff, and as such establish the cover.
QBE successfully appealed to the NSW Court of Appeal. The majority of the NSW Court of Appeal held that the sum insured was a fundamental term of the insurance policy and the onus of establishing the sum insured rested upon the claimant on the policy, not the insurer. Further, on a construction of the Regulation and in light of the prescribed statutory form of policy wording, the majority of the Court of Appeal held that the fact that the policy was required to be issued with cover of at least $40,000 was evidence that the policy provided at least that level of cover and, as the plaintiff could prove no more, held that to be the policy coverage.
In the High Court the plaintiff and Wallaby Grip (a co-defendant) argued that, when appropriately considered, the Employers Indemnity Policy was, just that, an indemnity policy. Accordingly, it prima facie gave unlimited insurance cover to an insured subject to the sum insured provision of the policy. The sum insured provision was argued to be a 'cap' of the same character as a limitation or exclusion and as such fell within the onus of proof of the insurer rather than the claimant on the policy.
QBE maintained the argument as to the fundamental nature of the sum insured to the insurance contract and that it was an essential term.
The High Court unanimously held that the sum insured on an indemnify policy was properly characterised as a limitation on insurance cover and accordingly fell within the onus of proof borne by the insurer.
In relation to the construction of the policy QBE argued that as the form of the policy was prescribed to give cover of no greater than $40,000 it had effectively discharged any prima facie onus it had and thus the evidentiary onus passed back to the claimant on the policy to establish that, as a matter of fact, Pilkington had taken out a higher level than statutory minimum required cover.
The High Court disagreed and explained the inconsistency between clause 18 of the Regulation and the statutory prescribed form of policy wording by stating that the fact that the words '$40,000' were written into the prescribed form of wording was an example of what the policy would look like if the insured took out statutory minimum required level of cover as required as a minimum by the Regulation. Accordingly the court held that the fact that those words were included in the statutory prescribed form of policy was not evidence on which QBE could rely in establishing a prima facie level of cover.
The case has clarified the onus of proof in all forms of liability insurance policies. All indemnity policies are prima facie of unlimited cover and will be held as such unless the insurer is able to establish that there was a limitation on that insurance cover. That class of policy includes public risk and professional indemnity lines of insurance and the case is of significantly broader impact than just to employer's indemnity cases.
The impact is unlikely to arise in 'modern' insurance relationships assuming that the insurer maintains detailed records of its policy wording, the schedule of insurance, and that the claim arises reasonably contemporaneously to the period of insurance. However the case is likely to have significant ramifications to 'long tail' lines such as toxic tort litigation where the claims are often made 30 years or more after the conclusion of the period of insurance or latent defect property damage / personal injury cases.
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.