The Court of Appeal of Western Australia has weathered a storm of creative arguments to hold that “normally living” at a residence, within the meaning of an exclusion clause (in home insurance liability cover), is not an ‘act’ within the meaning, or attracting the operation, of section 54(1) of the Insurance Contracts Act 1984 (Cth)(ICA).
Sadly, the circumstances arose from a tragic accident on 17 October 2004, when Georgia Inglis (10) was run over and injured by their family’s ride-on mower. Her brother James Inglis (12) had reportedly ridden the mower to the house of family friends, the Sweeneys, and the mower was being driven by 11 year-old Stephen Sweeney at the time.
Georgia eventually commenced proceedings in the District Court of Western Australia against the Sweeneys claiming damages for personal injuries. The Sweeneys filed third party proceedings seeking indemnity and/or contribution from James Inglis and Mr. Stuart Inglis (James’ father and the owner of the mower). James and Stuart then sought indemnity from their home insurer, Allianz, relying on the ‘legal liability’ cover afforded in clause 14 of the policy.
Allianz denied indemnity, relying on exclusion 1(b) within clause 14, which stated that Allianz would not cover legal liability for “injury to any person who normally lives with you…”.
Section 54(1) ICA
Relevantly, section 54(1) of the ICA is remedial in character and provides that, but for that section where an insurer under a contract of insurance may refuse to pay a claim in whole or in part “by reason of some act of the insured or of some other person”, being an act that occurred after the contract was entered into, the insurer may not refuse to pay the claim by reason only of that act but may reduce its liability by the amount that fairly represents its prejudice.
District Court Decision
On 1 April 2015, an arguably ominous date, the District Court found that Georgia Inglis’ “normally living” with the insureds (her family) was an “act” within the meaning of s.54(1) of the ICA and, in the absence of any evidence of any prejudice to Allianz from that “act”, then s.54(1) precluded Allianz from refusing to pay the claim under the clause 14.1.(b) exclusion.
It is difficult to see how this reasoning would leave any utility to the exclusion clause.
On appeal, Her Honour McLure P generously entertained and answered a number of creative submissions, however, ultimately, the ratio decidendi was that “normally living” with the insureds does not constitute an “act” within the meaning of s.54(1).
As explained by Mitchell J: to identify Georgia Inglis as normally living with the insureds was to describe the character of her relationship with the insureds, rather than her conduct.
Therefore, the effect of the Policy was that Allianz could refuse to pay the claim under exclusion 14.1(b) by reason of the fact that Georgina Inglis normally lived with the insureds, and this was not an ‘act’ under s.54(1) of the ICA.
Post by Freida Stylianou and Todd Porman