Compulsory common law coverage in Queensland only commenced on 1 July 1963. In cases where injuries are latent and for instance, in occupational mesothelioma injuries where the exposure to asbestos occurred before this date; the proof of the existence of a policy of insurance may well become an issue, especially if the insured has since been deregistered or become insolvent and the only “asset” is the policy of insurance.
QLD unlike NSW provides unlimited common law coverage once a policy answers to it.
Whilst this High Court case is concerned with the extent of the coverage of the policy in NSW (where there is limited common law indemnity) and the onus of proof with respect to the limit; their Honours reasoning as to the approach to apply in insurance contracts of indemnity is nevertheless helpful.
FRENCH CJ, GUMMOW, HAYNE, HEYDON AND KIEFEL JJ:
In insurance contract law an insurer promises to pay money to the insured if the circumstances stated in the policy exist. The insurer’s promise may be equated with the cover provided by the insurance contract. The insured must prove such facts as are necessary to prove that the loss was covered by the contract, or as Bailhache J said in Munro Brice & Co v War Risks Association Ltd, the plaintiff must prove such facts as bring the claim within the terms of the insurer’s promise.
Professor Malcolm Clarke in The Law of Insurance Contracts refers to three elements as ordinarily present in the circumstances necessary to the performance of the insurer’s promise. The first is the insured event. Much may turn upon how it is described. The other two elements are the subject matter, which may be a class of persons, and the cause of the loss, usually referred to as the risk. The contract of insurance in this case identifies the insured event as the liability of the employer for injury to a worker arising at common law; the subject matter is workers, of whom Mr Stewart was one; and the risk was injury to a worker. Each of these elements was established. The question then is whether there is any other circumstance necessary to be established by Mrs Stewart before QBE could be said to be obliged to indemnify under the policy.
Indemnity insurance involves payment for the loss actually suffered by the insured. It may be compared with other forms of insurance, where a value is given with respect to the subject matter of the policy and the insured recovers that amount. As Kitto, Taylor and Owen JJ explained in British Traders’ Insurance Co Ltd v Monson, the agreement in the case of a valued policy is not as to the amount of the loss, but as to the value of the subject matter, and the assessment of the loss of the insured must proceed on the basis of that agreed valuation.
It is said that it is necessary for an insured under a contract of indemnity insurance to prove the extent or amount of the loss claimed, but this is because the indemnity concerns only actual loss. The purpose of the proof required is not to establish that the loss is within the cover of the contract of insurance; it is to establish that loss has occurred and to give it a value. In the circumstance where there is a limit placed upon the extent of the indemnity, proof of actual loss does not create “a condition precedent” to that obligation. Where an indemnity is limited to payment of a specified, maximum sum, proof of actual loss will identify whether all or part of the loss is recoverable, but that is merely a practical consequence. It does not reflect a condition of the insurance contract.
The word “indemnity” implies payment for the loss suffered, which is to say the whole loss. Many contracts of indemnity insurance involve a full indemnity. Nevertheless something less than payment of the full amount may be provided for under an insurance contract. This may be achieved by placing a cap or ceiling on the amount payable under the indemnity, which then operates as a limitation upon the amount recoverable. As was explained by the Privy Council in AMP Fire & General Insurance Co Ltd v Miltenburg, with respect to the statutory form of policy here in question, but for such a limitation, under the terms of the policy the insurer would be obliged to pay the sum awarded by a judgment.
A consideration of the terms of the policy confirms the correctness of this approach. Read conformably with s 18(1) and (3)(a), the operative part of the policy provided that the indemnity given by the insurer attached to the liability of the employer. The indemnity therefore extended to payment of the amount for which the employer was liable, according to a judgment or other determination. There was no qualification upon the insurer’s promise, as discussed in Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association or Munro Brice & Co v War Risks Association Ltd. A limitation could be placed upon the extent of that indemnity, so that the insurer was obliged to pay no more than a specified sum under the indemnity, but that did not prevent the obligation to indemnify from arising. The question is whether such a limitation was put in place. It is to that question that matters of proof are directed.
The approach taken by the majority in the Court of Appeal proceeded upon an assumption about the terms of the insurance. It foreclosed the prospect that the amount of the cover could only be expressed as a limitation upon the amount payable under the indemnity, when regard is had to the terms of the policy and the indemnity contained within it. Indeed both Ipp JA and Gyles AJA saw the question as not involving a limitation on the amount payable.
QBE did not raise an exception in its defence, as Gyles AJA observed, but it did seek to raise a limitation, albeit obliquely. The difference between the two is that an exception may prevent an insurer’s liability from arising, whereas a limitation of the kind here in question operates after the obligation to indemnify has arisen and upon the amount payable pursuant to it. It limits the extent of the insurer’s liability. What they have in common is the purpose of limiting an insurer’s liability, where the circumstances necessary for it have otherwise been shown to exist. In each case the insurer should bear the onus of proving the limitation.
In The “Torenia” Hobhouse J observed that the “legal burden of proof arises from the principle: [h]e who alleges must prove” and that the “incidence of the legal burden of proof can therefore be tested by answering the question: [w]hat does each party need to allege?”, by reference to the contract of insurance. In the present case it was necessary for Mrs Stewart to establish that a contract of insurance under the Act was in existence at the relevant time and that Pilkington was liable to her husband for his injuries. The first was admitted, the second was established by evidence. It followed that the claim was within the terms of the cover provided and the insurer’s obligation arose. QBE had to do more than decline to admit that Pilkington was entitled to an indemnity greater than the statutory minimum, a matter which, in any event, had not been raised in the Further Amended Statement of Claim. It was required to establish what limit, if any, had been placed upon its liability to indemnify. It did not do so.
This analysis follows upon the construction of the policy of insurance. Looking to the policy in its statutory setting, it may be observed that conditioning a worker’s right to recovery to proof of the level of indemnity agreed between the employer and the insurer does not accord with the general purposes of the Act. It creates an obstacle to recovery, when the statutory intention was to facilitate claims against insurers. The Act does not provide a means by which a worker is informed of the arrangements made by the employer. A worker may never have seen the policy.
The appeals should be allowed and QBE should pay the costs of the appellant in each appeal. The orders of the Court of Appeal should be set aside and it should be ordered instead that the appeal to that Court by QBE be dismissed with costs.
Brisbane Barrister – David Cormack