Insurers successfully relied on an exclusion clause to avoid a third party claim under section 51(1) of the Insurance Contracts Act 1984 (Cth) (ICA) in the decision of Murray’s Transport NSW Pty Ltd v CGU Insurance Ltd [2012] SADC 172.

Facts

On 16 June 2008, there was a head-on collision between two vehicles on a highway in South Australia. One was a Jaguar. The other was a prime mover towing two semi-trailers, known as a B-double. The driver of the Jaguar was killed on impact. He held a comprehensive motor vehicle insurance policy with CGU Insurance Ltd.

The owners of the B-double, Murray’s Transport, subsequently went into liquidation. Insurers of the B-double exercised their right of subrogation to make a claim directly against the Jaguar’s insurer, CGU, for the driver’s liability in damages to Murray’s Transport. Murray’s Transport claimed the cost of repairs to the B-double and associated expenses.

Right to recover against CGU

The claim was made under section 51(1) of the ICA, which allows third parties to make a direct claim against insurers where the insured has died and the contract of insurance provides cover in respect of the insured’s liability in damages to a third party.

The issue was whether the CGU policy provided insurance cover in respect of the driver’s liability to Murray’s Transport.

Did the CGU policy respond?

The policy provided cover for an incident that causes loss or damage to someone else’s property. Relevantly, it contained an exclusion clause to the effect that there would be no cover for loss, damage or liability deliberately caused by the driver.

In considering the meaning of the word ‘incident’, the Court referred to a decision of the NSW Supreme Court on analogous facts, Rail Corporation v Vero Insurance Ltd [2012] NSWSC 632. In that decision, the word ‘accident’ in the insuring clause of the policy was given its ordinary and natural meaning – an unintended mishap or an untoward event – as it was undefined elsewhere in the policy. To view our article on that decision, click here.

The Court considered that the word ‘incident’ probably carried an even wider meaning than the word ‘accident’ and, as a result, the damage to the B-double came within the scope of cover under the policy.

The onus of proving that the exclusion clause applied therefore fell on CGU.

Fulfilling the onus of proof

In arguing that the damage was deliberately caused by the driver of the Jaguar, CGU relied on the following matters: that the driver of the Jaguar deliberately steered his vehicle into the B-double’s lane in order to achieve a collision; that the driver took no evasive action prior to the collision; and, that the driver’s financial and legal position provided motive to commit suicide. There was evidence that the driver of the Jaguar owed over $20 million to investors and, had he survived the crash, he would have faced criminal charges.

Given the gravity of CGU’s allegations, the Court considered that the degree of proof required was at the higher end of the scale (although not at the top of the range) before it could be reasonably satisfied that, on the balance of probabilities, the damage was deliberately caused.

In response to CGU’s allegations, Murray’s Transport argued that there were other possible explanations for the collision, such as sun glare or an acute heart event, and that there was no evidence of suicidal plan or intent.

In light of all of the evidence, the Court found that the driver of the Jaguar deliberately caused the damage to the B-double and in so doing held that the exclusion clause in the policy applied. Murray Transport’s claim was therefore dismissed.