When it comes to the interpretation of exclusion clauses in insurance policies, the recent decision in OZ Minerals Holdings Pty Limited & Ors v AIG Australia Limited [2015] VSC 185, proves that ‘timing is everything’.


On 20 June 2008, the companies, later known as OZ Minerals Limited (OZ Minerals) and Oz Minerals Holdings Pty Limited (Holdings), merged pursuant to a scheme of arrangement.  In accordance with the terms of the scheme, OZ Minerals acquired the shares in Holdings and the shareholders of Holdings were reissued with shares in OZ Minerals.

On or about February 2014, Mr Mitic commenced proceedings against OZ Minerals, claiming, among other things, that OZ Minerals had breached its continuous disclosure requirements (under section 674 of the Corporations Act) and had made various misrepresentations regarding the merger.

The Policy

As all the wrongful conduct is alleged to have occurred prior to 20 June 2008, OZ Minerals sought contribution from Holdings. Holdings claimed on its Directors & Officers policy with AIG for the period 31 March 2008 to 31 March 2009 (Policy).

AIG denied cover on the basis of the alleged operation of a Major Shareholder & Board Position exclusion which provided:

“The Insurer shall not be liable to make any payment under this policy in connection with any Claim brought by any past or present shareholder or stockholder who had or has:

(i) Direct or indirect ownership of or control over 15% [or] more of the voting shares or rights of the Company or of any Subsidiary; and

(ii)  A representative individual or individuals holding a board position(s) with the Company”    

As the exclusion used both past and present tense wording, the main issue was whether the clause operated by reference to the corporate structure of the insured entities as at:

  1. the time of the wrongful act/occurrence; or
  2. the time of the third party claim.

In the event that the exclusion operated by reference to the time of the wrongful act, then the exclusion clause did not apply.  In the event that the exclusion applied by reference to the time at which the third party claim was made, then the exclusion clause would be enlivened (as OZ Minerals controlled over 15% of shares in Holdings and held a board position on Holdings).

The parties agreed that it would make no commercial sense to interpret the use of the past tense wording as a general reference to any time in the past without limitation.

Holdings contended that the exclusion required a ‘temporal connection with the Wrongful Acts giving rise to the contribution claims’ and therefore one must consider (only) the corporate structure of the business at the time of the Wrongful Act.  It was submitted that the ‘claims made’ structure of the Policy was simply a supplementary condition of cover.

AIG argued the use of both part and present tense within the exclusion indicated an objective intention that the exclusion should apply in respect of shareholders who held shares at either the time of the Wrongful Act or the time of the third party claim.  On this basis, AIG argued that its interpretation was conducive to giving a ‘business like’ effect to the Policy in that it was the objective intention of the clause to protect insurers from adverse claims that may arise when a claimant is a board representative and is therefore privy to the company’s internal workings or confidential information such as the terms of a policy.

Holdings argued that AIG’s interpretation was incongruent with the overall intention of the Policy – being to provide cover for directors and officers of Holdings / OZ Minerals against liability for Wrongful Acts.


The Court favoured AIG’s interpretation of the exclusion which it considered was consistent with both the grammatical structure and the commercial intent of the clause and achieved an ‘objectively reasonable’ outcome.  As such, the Court agreed that the exclusion applied to exclude claims brought by persons with the relevant shareholding or board positions at either the time of the Wrongful Act and at the time of the third party claim.

As OZ Minerals was a shareholder holding over 15% of the voting shares at the time of the claim, the exclusion applied such that the Policy did not indemnify Holdings in respect of the claim.

What does this mean for you?

This case confirms the current principles in place when interpreting exclusions within an insurance policy, which requires consideration of the objective commercial intention of the policy so as to ensure that a ‘business like’ interpretation is given to the policy.

The case also highlights the importance for parties drafting exclusions in insurance policies to carefully consider the intended temporal trigger so as to ensure that such trigger is clearly and unambiguously identified.

For a full copy of the decision, click here.