The New South Wales Court of Appeal has confirmed time starts for the limitation period for first party property insurance on the happening of the damage, even if a claim is made at a later time. In coming to this conclusion, the majority followed Australian intermediate appellate authority and the United Kingdom in concluding the happening of the property damage is the trigger for a claim under the Policy.

McCabe Curwood appeared for the second defendant, Ansvar Insurance Ltd, and we provide you with our summary of the important decision of Globe Church Incorporated v Allianz Australia Insurance Limited & Anor [2019] NSWCA 27.

Judgment date: 26 February 2019 Citation: [2019] NSWCA 27 Jurisdiction: NSW Court of Appeal

Principles

  • The indemnity which is provided under first party property insurance is for an insured to be held harmless as soon as property damage arises. It follows that the cause of action accrues on the happening of the property damage (the insured event); and
  • The insured event for first party property insurance is in contrast to third party liability insurance, where the cause of action accrues on the insured's liability to the third party being established.

Background

The decision of Globe Church Incorporated v Allianz Australia Insurance Limited & Anor involved determination of the limitation period for a claim for property damage, made under an Industrial Special Risk (ISR) policy of insurance. The claim, for damage to buildings arising from major storms in 2007, was declined by the ISR insurers in 2011, with proceedings commenced for a declaration of indemnity in 2016, being more than 6 years after the damage.

By consent of the parties, the question of whether the proceedings were maintainable pursuant to s 14(1) of the Limitation Act 1969 (NSW) was referred to the Court of Appeal for determination in advance of the hearing of the proceedings.

Globe Church submitted time started to accrue when the ISR insurers breached their obligations under the Policy, by failing to indemnify Globe Church (2011). This was within 6 years of the commencement of the proceedings. Globe Church said that only when the ISR insurers failed to do what was required of them (the granting of indemnity) could a cause of action for damages for breach of contract accrue.

The ISR insurers submitted the proceedings were not maintainable as, absent any contrary terms in the Policy, a cause of action for breach of contract accrued immediately upon the happening of the damage (2007). At this time, the ISR insurers' obligation to indemnify arose, and time started to accrue for the limitation period.

Decision

Majority decision

The Court of Appeal was divided, with the majority (Bathurst CJ, Beazley P and Ward JA) determining the claim under the Policy was statute barred as proceedings were not commenced within 6 years of the damage.

The key findings of the majority were as follows:

  • The indemnity provided under the Policy is for an insured to be held harmless as soon as property damage arises. It follows that the cause of action accrues on the happening of the property damage (the insured event);
  • The insured event for first party property insurance is in contrast to third party liability insurance, where the cause of action accrues on the insured's liability to the third party being established; and
  • The position adopted by the ISR insurers is consistent with Australian intermediate appellate authority and the United Kingdom, and there is no basis to depart from this position.

Dissenting decisions

In dissent, Meagher JA stated the express terms of the Policy imposed an obligation on the ISR insurers to indemnify Globe Church by paying a sum of money ascertained in accordance with the Basis of Settlement provisions. Accordingly, where the Policy did not specify an express time for the obligations to be performed on the happening of the damage, the law implies it must be done within a reasonable time.

Leeming JA, in agreeing with Meagher JA, held it was wrong to proceed on the premise that an insurer could be in breach of its obligations under a policy of insurance to hold an insured harmless, even before it has been notified of the claim.

The dissenting decisions held the decision of what constituted a 'reasonable time' could not be determined in the absence of further facts.

Why this case is important

To date, there has been inconsistent authority on the accrual of the cause of action in claims made under first party property insurance. This decision confirms the cause of action accrues on the happening of the property damage (the insured event), and in accordance with s 14(1) of the Limitation Act 1969 (NSW), any claim for indemnity must be brought within 6 years of the damage.