Ten year old Georgia Inglis was seriously injured when she was run over by a ride-on lawnmower operated by her neighbour, Stephen Sweeney. The lawnmower belonged to Georgia’s father and had been driven to the Sweeneys’ house by Georgia’s brother. Georgia sued the neighbour’s parents, who in turn claimed contribution from Georgia’s father and brother.

Georgia’s father and brother made a claim on the family’s home insurance policy, which provided cover for legal liability in respect of bodily injury. However the policy contained the following exclusion:

We will not cover your legal liability for injury to any person who normally lives with you… 

The insurer denied the claim on the basis that Georgia ordinarily resided with her insured father.

Section 54(1) of the Insurance Contracts Act prevents an insurer from refusing to pay a claim ‘by reason of some act of the insured or some other person, being an act that occurred after the contract was entered into’. At trial, Georgia’s brother and father submitted that the section prevented Allianz from relying on the exclusion clause to decline the claim. Allianz argued that section 54(1) did not apply because Georgia was normally a member of the Inglis household before the policy commenced. Allianz also submitted that to normally live with someone is not ‘some act’ that occurred after the contract was entered into, but a pre-existing state of affairs.

The trial judge found that Georgia normally lived with the insured and that doing so constituted an act for the purposes of section 54(1). She decided that section 54(1) prevented Allianz from relying on the exclusion to decline the claim.

However, the Western Australian Court of Appeal did not agree and noted that an ‘act’ means ‘something done or being done to a person’ which differs from a ‘state of affairs’. In allowing the appeal, the Court found that Georgia living with the insured was a state of affairs rather than an act, and that an act for the purposes of section 54(1) had not occurred. The insurer was therefore entitled to deny the claim.

Allianz v Inglis

This decision highlights the need for section 54 acts or omissions to be both properly defined and distinguished from ongoing states of affairs.