Ali v Insurance Australia: Clarifying the operation of statute of limitations in property damage insurance proceedings

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By Louise Cantrill, Partner, Enoch Hui, Associate and Mason Thomas, Lawyer

In this article, we provide a short case summary on the recent decision of Ali v Insurance Australia Limited,[1] which considered the date at which a statute of limitation began in respect of a policyholder’s previously denied claim on a home and contents insurance policy.

Background facts

On 9 October 2013, an unknown person broke into the plaintiff’s home, stole goods from, and caused damage to, the house and its contents. The next day, the plaintiff made a claim on his home and contents insurance policy. The defendant insurer denied cover on 20 May 2014. On 16 October 2019, the plaintiff commenced proceedings in the District Court of NSW, seeking damages for the defendant insurer’s failure to comply with its obligations under the policy.

The defendant insurer argued the proceedings were brought out of time, exceeding the 6-year period prescribed by section 14 of the Limitation Act 1969 (NSW). The plaintiff contended the proceedings were brought in time on the basis that the defendant’s liability arose when it later denied cover.

The issue for determination centred on whether the defendant was liable under the policy on the occurrence of the break-in (9 October 2013), or when it denied cover (20 May 2014). If the former, the proceedings would be time barred.

Decision

His Honour Judge J Smith SC found in favour of the defendant, and determined the plaintiff’s cause of action arose on the occurrence of the break-in. His Honour therefore concluded the proceedings were time barred.

His Honour cited the following extract from the Court of Appeal’s decision in Globe Church Incorporated v Allianz Australia Insurance Ltd (2019) 99 NSWLR 470:

Absent a provision in an indemnity insurance policy that makes lodgement of a claim a condition precedent to liability, the concept of a promise to indemnify (to make good the loss or to hold harmless against loss) in the context of a property damage insurance policy is such that the promise is enlivened when the property damage is suffered. …[2]

Applying the above to the present case, his Honour found there was nothing in the wording of the policy which overruled this starting position, despite the plaintiff’s submissions to the contrary.

His Honour held that the obligation of the defendant to cover the insured arose upon the occurrence of the break-in on 9 October 2013. As such, the proceedings commenced on 16 October 2019 fell outside the 6-year limitation period, albeit narrowly.

Closing remarks

In short, Ali v Insurance Australia upholds the common law position that the relevant statute of limitation period is triggered upon the occurrence of the particular loss to which the policy relates. Policyholders must always be cognisant of the relevant limitation periods, should they wish to bring proceedings against insurers following a denied claim, particularly since losses relating to property damage are not afforded the same leniencies with regard to extending statute of limitations as seen in personal injury matters.

[1] Ali v Insurance Australia Limited [2021] NSWDC 369 (“Ali v Insurance Australia”)

[2] Globe Church Incorporated v Allianz Australia Insurance Ltd (2019) 99 NSWLR 470, 514 (209) (Bathurst CJ, Beazley P, Ward JA).

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