In Allianz Australia Insurance Ltd v Inglis  WASCA 25, the WA Court of Appeal clarified the meaning of 'act' in s54 of the Insurance Contracts Act 1984 and reminded us how to construe insurance contracts.
- Section 54(1) of the Insurance Contracts Act 1984 prevents an insurer from refusing indemnity solely on the basis of an act of the insured or another person which occurs after the inception of the policy.
- In this context, 'act' means something done or being done by a person. It does not include a state of affairs or the description of a relationship. 'Normally living with' another person is not an act.
- The general principles of contractual construction apply to insurance contracts and there is no general rule that exclusion clauses are to be construed strictly or narrowly, absent ambiguity.
Stephen Sweeney drove a mower into Georgia Inglis, injuring her seriously.
Georgia Inglis sued Stephen Sweeney and his parents in the WA District Court. The Sweeneys then sued Georgia's father and brother, Stuart and James Inglis, claiming an indemnity, alternatively a contribution, on the basis that their negligence had caused Georgia's injuries.
Stuart and James Inglis sought indemnity under the legal liability section of their home insurance policy, which covered them for legal liability to pay compensation in respect of bodily injury occurring during the policy period.
Allianz declined indemnity on the basis of an exclusion in the policy that provided, "We will not cover your legal liability for injury to any person who normally lives with you".
WA District Court decision
The WA District Court found that Georgia Inglis was a person who normally lived with Stuart and James Inglis within the meaning of the exclusion. However, that fact was an 'act' for the purposes of s54(1) of the ICA which (in the absence of any prejudice) prevented the insurer from declining cover.
WA Court of Appeal decision
The Court of Appeal considered several issues but it was its interpretation of 'act' under s54(1) that effectively disposed of the appeal. The court held that living with another person is not an 'act', but a 'state of affairs' or a 'description of a relationship'. Here, the facts depended on an inference to be drawn from the conduct of all relevant persons over an extended period of time and did not depend on a single act of a particular person on the relevant day. So they could not amount to an 'act' within the meaning of s 54(1).
McClure P also considered two matters of contractual construction.
The policy defined the insured as Linda and Stuart Inglis and 'you' or 'your' as:
- any member of your own family and your spouse's or de facto family."
The Inglises argued that the exclusion relied upon by Allianz did not apply as 'you' meant all the insureds and so 'any person' had to mean any person other than an insured (including Georgia Inglis).
McLure P rejected the argument. After setting out the relevant principles of contractual construction, her Honour held that the meaning of 'you' was informed by its context and the nature or type of the insurance. At its widest, 'you' meant all the insureds under the policy severally. However, for the purposes of the relevant insuring clause, the context required that it meant only those insureds who were legally liable to pay compensation in respect of the bodily injury. In the present case, that meant Stuart and James Inglis, not all the insureds, and 'you' and 'your' had the same meaning in the exclusion. So Georgia Inglis qualified as 'any person'.
The second issue was whether a contribution claim was a claim which gave rise to a legal liability "for injury" within the meaning of the exclusion. Having regard to the text, context and purpose of the insuring clause and the exclusion, McLure P held that it was.
The Court of Appeal's decision clarifies the meaning of 'act' in s54(1) of the ICA. A state of affairs is not an 'act'.
The decision also provides a useful reminder that the court will determine the meaning of a policy provision, including exclusions, by reference to the text, context and purpose of the provision and the policy as a whole. Notably, here, although the policy definition of 'you' and 'your' referred to all insureds, the Court of Appeal found that this was not its meaning in the context of the legal liability cover and the exclusion.