Australia: Who Proves Policy Terms And Conditions

Stewart v QBE Insurance (Australia) Limited [2008] NSWDDT 6

In this case the NSW Dust Diseases Tribunal held that both the legal and evidentiary onus of establishing the substantial terms and conditions of the insurance policy rested upon the insurer and not the party seeking to benefit from the alleged cover provided by the policy.

Facts

The plaintiff was the estate of Mr Stewart, a man employed by Pilkington between 1964 and 1967 at Pilkington's glass factory. He developed mesothelioma as a consequence of inhalation of asbestos dust and fibre liberated from protective asbestos gloves used when performing 'hot work'.

QBE was Pilkington's workers compensation insurer, however no records were located to clarify the substantive terms and conditions of the insurance as at 1967. As such no evidence was available as to the limit of cover provided by the policy as at 1967.

The policy was issued in accordance with the statutory form prescribed by the Workers Compensation Act 1926, which prescribed the minimum level of common law cover as at 1967 to be $40,000 inclusive of the claimant's costs plus defence costs.

Pilkington was deregistered some years prior to the commencement of proceedings. The plaintiff accordingly commenced proceedings against QBE pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). That section permits a claimant to proceed directly against an insurer and obtain a charge on the proceeds of the insurance policy insofar as the policy would respond to provide cover to the deregistered company in respect of a loss arising as a consequence of the breach of duty it owed to the claimant. Similar statutory provisions exist in other Australian jurisdictions.

QBE admitted that existence of a policy but did not admit the terms and conditions of the policy and in particular the limit of cover.

Argument

The plaintiff argued that once QBE accepted that it was the insurer, QBE had both the legal and evidential onuses of establishing that the policy had a limit of cover and the extent of that limit. The plaintiff relied upon a decision of Judge Curtis of the Dust Diseases Tribunal in De Cecco v Mercantile Mutual Insurance (Workers' Compensation) Limited. In that case, Judge Curtis held that Mercantile Mutual bore the onus of establishing the limit of cover, although there was a material difference as Mercantile Mutual had positively pleaded that its policy had a specific limit of cover. The positive pleading was arguably significant in transferring the onus of establishing that fact to the party asserting it, whereas QBE had not made a positive assertion as to cover.

QBE submitted that the both the legal and evidentiary onus of establishing the terms and conditions of the policy rested with the party seeking to benefit from those terms. QBE relied upon the decision of the NSW Court of Appeal in Royal & Sun Alliance Insurance Australia Limited v Betta Industries Pty Limited. That case concerned the onus of establishing policy coverage rather than the limit of cover. Betta Industries operated both an import and manufacturing business. The relevant breach of duty arose from the manufacturing work. Royal insured in respect of the importing but did not admit that its policy responded to losses from manufacturing. The critical underwriting documents were unavailable. Judge Curtis (in a consistent approach to his judgment in De Cecco) held that the onus of establishing the relevant terms and conditions of the policy rested upon the insurer.

However, on appeal the NSW Court of Appeal unanimously held that the onus rested upon the claimant not the insurer.

QBE submitted that there was no practical difference between the onus of establishing the extent of cover and the limit of indemnity and therefore the onus rested with the plaintiff.

Further QBE submitted that as no evidence had been produced as to the level of indemnity provided by the policy the only inference available was that the policy provided cover in accordance with the statutory minimum level of cover at that time, in this case $40,000.

Judgment

Judge Kearns held both the legal and evidentiary onus of establishing that there was a limit of cover and the extent of that limit rested upon the insurer. In coming to that conclusion His Honour considered that as a matter of judicial comity he should adopt what Curtis J held in De Cecco noting that De Cecco was not specifically considered by the Court of Appeal in Betta Industries. His Honour was also swayed by the view that the insurer would be in a better position to establish the terms and conditions of the insurance policy than a plaintiff or the insured.

In the absence of evidence as to the fact of a limit of cover and what that limit was His Honour held QBE's policy responded to provide unlimited cover.

The judgment is subject to an appeal likely to be heard in late 2008.

Comment

If Kearns J decision is upheld by the NSW Court of Appeal there could be significant implications for the insurance industry particularly in the area of dust disease where, because of the delay between exposure and symptoms, records have often been misplaced or destroyed. This decision would mean that the onus of establishing the terms and conditions of the insurance policy in all respects will rest upon the insurer. Further, on one view, the onus of proving that a policy does not exist may potentially fall upon the insurer.

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