Australia: Insurance Update: So I Don’t Need to Prove What my Insurance Policy Says?

The High Court's decision in Wallaby Grip Limited v QBE Insurance (Australia) Limited; Stewart v QBE Insurance (Australia) Limited [2010] HCA 9 (30 March 2010)

Last week the High Court of Australia (HCA) reconsidered the NSW Court of Appeal's decision in QBE Insurance (Australia) Ltd v Stewart [2009] NSWCA 66 (NSWCA) (see gadens lawyers' previous update here). Allowing the appeal, the HCA determined that in the absence of a policy in evidence, the insurer bears the onus of proving any limitations on cover.

Background

Mr Angus Stewart (Stewart) held a policy of insurance with the predecessor of QBE. The policy was held some 40 years before the trial, so the policy itself was not produced by either party. One of the preliminary issues was whether the policy was unlimited, as Stewart argued, or whether it was limited to the statutory minimum level of cover ($40,000) under the Workers Compensation Act 1926, which was applicable at the time.

At first instance, the NSW Dust Diseases Tribunal held that the onus of proving the limit of liability rested with the party asserting the limit on the policy. No evidence was put forward by the insurer and it was therefore held that there was no limit of liability.

Court of Appeal

The Court of Appeal set aside the decision and allowed the appeal by QBE in a majority decision (Ipp JA and Gyles AJA; Brereton J dissenting). The majority held that the evidentiary onus of proof rests with the plaintiff according to ordinary contractual principles. The trial judge had erred in imposing an onus of proof on the insurer in respect of an essential part of the obligation to insure, as opposed to a condition or exclusion.

Consequently, the majority held that the cover was limited to $40,000. Gyles AJA stated:

The High Court

On appeal, QBE contended that as the plaintiffs were claiming that the policy of insurance had been altered from the prescribed form to a coverage level greater than the statutory minimum, it should be the plaintiffs' responsibility to prove this higher level of cover had been agreed upon. Further, QBE maintained its argument before the NSWCA whereby it asserted that the policy limit was a core aspect of the policy and should be viewed in its own right as a fundamental term of the contract.

The HCA unanimously held that policy limits in indemnity policies are correctly characterised as limitations on insurance cover and accordingly fall within the onus of proof borne by the insurer.

The HCA also explained the inconsistency between Clause 18 of the Workers Compensation Regulation 1926 and the statutory prescribed form of policy wording. The HCA stated that the '$40,000' written into the prescribed form of wording was a mere example of what the policy would look like at the minimum required level of cover. The court held that the fact that those words were included in the statutory prescribed form of policy was not evidence establishing a prima facie level of cover.

The HCA thus limited the insured's role to simply establishing that a policy existed and was responsive to a claim. Any limitations placed on the policy were of a separate nature and QBE bore the onus of proof in that regard.

Implications

This case provides little comfort for insurers and highlights the importance of keeping copies of issued policies. Where the policy is lost, the insured may have scope to assert unlimited indemnity and broad coverage.

For insureds, the essential terms of the policy must still be established by the insured. If this case was not a workers compensation case, section 74 of the Insurance Contracts Act 1984 (Cth) may also have been relevant. Section 74 of the Insurance Contracts Act provides that an insurer is to provide the provisions of the contract to the insured on request.

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