Australia: The High Court Finds That An Insurer Bears The Onus Of Proof When Asserting A Limited Level Of Cover
Curwoods Case Note - Asbestos Litigation

Wallaby Grip Limited v QBE Insurance (Australia) Limited; Stewart v QBE Insurance (Australia) Limited [2010] HCA 9

Judgment date: 30 March 2010, High Court of Australia¹

In Brief

• The High Court of Australia was asked to consider whether an insurer's liability to indemnify a NSW employer was limited to the minimum level of cover under the common law extension to the statutory form of workers compensation policy.
• A crucial consideration was which party bore the onus of proving whether there was any limit to the level of cover afforded under the policy of insurance.
• The High Court found that a plaintiff is required to establish that a policy of insurance was in existence at the relevant time and responded to the claim. However, the actual level of cover (if limited) was a separate issue which required proof from the insurer asserting that the policy was limited.

Background

Angus Stewart commenced proceedings in the Dust Diseases Tribunal of New South Wales seeking damages in respect to the condition of mesothelioma alleged to have arisen from his exposure to asbestos whilst employed by Pilkington Bros (Australia) Limited from 1964 to 1967.

Proceedings in the Tribunal were commenced against QBE Insurance (Australia) Limited (QBE) on the basis that it was the relevant workers compensation insurer of the plaintiff's employer at the relevant time. Proceedings were also issued against the alleged manufacturer and supplier of the asbestos products to which the plaintiff was exposed.

Dust Diseases Tribunal Decision

Judgment was entered in favour of the plaintiff against the defendants sued and QBE was granted leave to appeal.

QBE did not produce any evidence in relation to any contract of insurance between it, or its predecessors and the employer. There was therefore no evidence before the trial judge in relation to the level of cover available under the relevant policy of insurance.

The trial judge adopted the findings of Curtis J in Di Cecco v Mercantile Mutual Insurance (Workers Compensation) Limited² in which it was held that the insurer bore the onus of establishing that the relevant policy of insurance was limited in its cover.

The trial judge found that it was within the power of QBE to have called evidence from a number of people in the insurance industry as to practices in similar circumstances which may have assisted in determining whether at the relevant time, policies tended to be underwritten for the statutory limit only, an amount greater than the statutory limit or perhaps without a limit.

In the absence of any proof of the level of cover available pursuant to the common law extension to the statutory form of workers compensation policy, it was held that QBE had an unlimited level of cover as distinct from the amount of $40,000, being the minimum limit of an employers' indemnity policy under the Workers Compensation Act 1926 (NSW) as at 1967.

Court of Appeal Decision

The main issue raised on appeal was the extent of the liability of QBE as an insurer.

The Court of Appeal noted that in its defence of the primary action, QBE expressly put the extent of cover in issue. The Court of Appeal (Ipp JA, and Gyles AJA, Brereton J dissenting) then held that the trial judge erred in holding that the insurer bore the onus to establish that the policy of insurance was limited. The fact that QBE could not produce a copy of the relevant policy did not transfer the onus of proof from the plaintiff to QBE.

In his dissenting judgment Brereton J found that the plaintiff was not required to plead or prove every term of the contract; it need only plead and prove sufficient to establish the existence of an enforceable contract of insurance containing the terms on which it relied. However, if QBE intended to rely upon any other term of the contract, it bore the onus of proving that term.

Brereton J held that a fundamental contractual and pleading principle required a party relying on a term of a contract to show that it did all that was reasonable in the circumstances to bring the relevant term to the attention of the plaintiff. Brereton J found that QBE bore the onus of proving any limitation of the level of cover available and that it failed to discharge that onus.

However, the majority of the NSW Court of Appeal (Ipp JA and Gyles AJA) found that QBE was entitled to rely upon the statutory minimum level of cover.

High Court Decision

QBE argued that if an employer and insurer were to agree on an amount of cover greater than the statutory minimum, s 18(3)(a) of the Workers Compensation Act 1926 (NSW) required that a policy first be issued in the prescribed form (which contained the statutory minimum) and then amended.

It was QBE's contention that as the plaintiff was claiming that the policy of insurance had been altered from the prescribed form to provide a level of cover greater than the statutory minimum then the plaintiff was required to prove that a higher level of cover had been agreed upon between employer and insurer.

The High Court observed that given indemnity could be for any amount, it did not seem sensible to suggest that the Act required that a policy first be obtained for the statutory minimum amount and then amended by endorsement.

The High Court made reference to three elements ordinarily present in circumstances where an insurer is held liable to indemnify. Those elements were the insured event, the subject matter insured, and the cause of the loss suffered (or risk).

In the present proceedings, the insured event was regarded as the liability of the insured employer to the plaintiff for a common law injury. The subject matter was employees of the insured (which the plaintiff satisfied) and the risk was injury to an employee.

It was found that if the three elements referred to above were established, the policy of insurance and the obligation to indemnify would be triggered.

The actual amount payable under the policy of insurance was a separate issue to the question of indemnity and QBE bore the onus of proving that there was some limitation on the amount of cover. In the absence of such proof, the policy of insurance would be deemed to respond to the actual loss (being the judgment amount awarded).

The plaintiff's obligation was limited to establishing that a policy of insurance existed at the relevant time and that the policy of insurance responded to the claim. Any limitation on the policy was a separate issue which QBE bore the onus of proving.

Implications

1. This decision overturned the NSW Court of Appeal's findings and has upset the practice otherwise adopted by workers compensation insurers in the Dust Diseases Tribunal of asserting on the statutory minimum level of cover in the absence of any evidence to the contrary.
2. It will be necessary for insurers asserting a limited level of cover to be able to adduce evidence that the policy of insurance was limited. This may be particularly difficult in latent disease claims given that the periods of insurance called on were underwritten from the 1950s through to the 1970s.
3. It is now critically important for insurers (and helpful for insureds) to keep accurate and comprehensive records of policies issued to demonstrate the level of cover available, especially given the damages regime under which the Dust Diseases Tribunal of New South Wales operates.

1. French CJ, Gummow, Hayne, Heydon and Kiefel JJ

2. [2002] NSWDDT 1

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