By Belinda Lin, Lawyer

Summary

In the recent decision of Cleanaway Waste Management Ltd v Insurance Australia Ltd t/as Swann Insurance [2022] WADC 37, the District Court of Western Australia examined whether the defendant was able to deny liability (of the plaintiff’s claim) by relying on certain policy exclusions, including its (deceased) insured being “under the influence” or failing to take “reasonable precautions”. Ultimately, the Court found that the defendant was not able to rely upon these policy exclusions, noting that it was not satisfied with the evidence that the insured’s behaviour indicated that he was under the influence of methylamphetamine or his speed, distance and direct line of driving indicated that he had failed to take reasonable precautions. The Plaintiff was awarded damages in the amount of $73,337.84.

Background and facts

On 31 October 2013, Mr Anthony Goncalves (the Insured) died when the Harley Davidson motorcycle he was riding collided with a truck driven by Mr Michael Malloch, who was driving a truck owned by his employer Cleanaway Waste Management Ltd (the Plaintiff). The Insured was on the incorrect side of the road (in order to overtake a vehicle in front) when he struck the truck, and extensive damage was caused to the front of the Plaintiff’s truck as a result of the collision.

At the time of the collision, the Insured had a Harley motorcycle insurance policy (the Harley policy) with Insurance Australia Ltd trading as Swann Insurance (the Defendant). The Harley policy included third party liability cover, which was worded in the following manner:

“We will cover you for your Legal Liability to pay compensation for loss or damage to someone else’s property as a result of an accident anywhere in Australia.”

The policy also noted that it did not cover loss or damage deliberately caused, and included the following exclusions:

“…where at the time of the incident the rider or person in charge of your Motorcycle or last in charge of your Motorcycle:

• was under the influence of alcohol or drugs.
• has not taken reasonable precautions to avoid the incident.”

Witnesses of the collision noted that the Insured was not wearing a helmet, or sunglasses. A post-mortem blood pathology report showed that the deceased’s blood tested positive for methylamphetamine.

The Plaintiff’s position

The Plaintiff sought to recover, pursuant to s 51 of the Insurance Contracts Act 1984 (Cth) (the Act) from the Defendant the cost of damage caused to its property, as a result of the collision. s 51 of the Act provides that when an insured under a contract of liability insurance is liable in damages to another person and the contract provides insurance cover in respect of the liability and the insured has died, the other person may recover from the insurer an amount equal to the insurer’s liability under that contract.

The Defendant’s position

The Defendant denied liability on the basis that the Insured would not have been indemnified under the Harley policy because his conduct fell within one or more exclusions. The exclusions relied were referred to as:

1. the deliberate act exclusion;
2. the ‘under the influence’ exclusion; and
3. the reasonable precautions exclusion

Further, it was the Defendant’s argument that if indeed the Insured was indemnified by the Harley policy, the Plaintiff’s claim would be limited to the cost of repairing the damage to the truck and not to any other losses.

Issue

The issues for determination were:

1. Does the policy cover the deceased’s liability to the plaintiff – or was the loss and damage to the plaintiff’s truck caused by an accident or by deliberate action?
2. If the deceased’s actions were not deliberate, is the defendant’s liability under the policy excluded by reason of –

• The deceased having been under the influence of alcohol or drugs; or
• The deceased not having taken reasonable precautions to avoid the incident.

The Decision

Ultimately, the Court found that:

1. The collision between the Insured’s motorcycle and the plaintiff’s truck was an accident covered by the Harley Policy; and
2. The defendant had not proved on the balance of probabilities that any exclusions under the policy had been made out.

Was the collision caused by accident or by deliberate action?

It was found that the loss and damage to the plaintiff’s truck was caused by an accident, and not by deliberate action. The Court rejected the submission that the deceased’s decision to speed on the incorrect side of the road was indicative of suicide. The Court found that a more likely explanation was that the Insured collided into the truck negligently, due to a failure to see the plaintiff which could be reasonably explained by the lack of eyewear to protect his eyes from the rapid increase in speed, combined with a misjudgement of speed and direction.

Did any of the exclusions apply?

‘Under the influence’ exclusion

As the Harley policy did not define the term ‘under the influence of drugs’, the Court construed the meaning to be that some evidence was required that the drug was at a level capable of effecting behaviour. Based on this interpretation, the Court also found on the balance of probabilities, it was not satisfied the Insured was under the influence of methylamphetamine during the collision. This is because expert evidence had estimated the methylamphetamine was ingested outside the simulating window, and there was no evidence of behaviours displayed by the Insured associated with fatigue.

‘Reasonable precautions’ exclusion

Consistent with the Court’s finding that the collision was caused by accident, the Court found that there were reasonable explanations for the Insured’s conduct that did not involve any deliberate courting of danger, and it could not be satisfied that the Insured failed to take reasonable precautions on assessment of his conduct.

Damages

The Court awarded the plaintiff damages in the sum of $73,337.84 comprising:

1. Repairs to the Plaintiff’s truck: $68,729.54
2. Payment of the assessing fee: $97.00
3. Internal workshop repairs to the truck: $4,511.30

Implications

This decision provides some relevant pointers for insurers and their policies:

• Particularly in circumstances where a deceased Insured is unable to provide evidence and where the relevant terms in the policy are not clearly defined, there can be difficulty in satisfying the Court that policy exclusions apply.
• As a result, the Court may be more likely to award a claimant damages where a defendant denies liability based on such exclusions.

Link to decision: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/wa/WADC/2022/37.html?context=1;query=[2022]%20WADC%20%2037;mask_path=