Interpreting commercial insurance policies - Zelmai Noori v H&A Majestic Plumbing Pty Ltd & Ors [2021] VSC 63

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By Stuart Eustice, Partner, Holly White, Lawyer and Georgia Sim, Law Graduate

Background Facts

While working as an apprentice, the plaintiff, Mr Noori, was carrying a length of guttering on a scaffold which touched an overhead electrical powerline causing injury. The scaffold was erected in a ‘No Go Zone’, in contravention of OHS and other regulations and guidelines.

Noori brought proceedings against his employer, the builder, and two companies that erected the scaffold. One such company, the fourth defendant, was Dhillon Scaffolding Pty Ltd (Dhillon). Dhillon joined its insurer as a third party to the proceedings after it denied cover under Dhillon’s public liability policy (insurer).

Zelmai Noori v H&A Majestic Plumbing Pty Ltd & Ors [2021] VSC 63 considers interpretation of the policy, ultimately deciding the insurer was liable to indemnify Dhillon.

Relevantly, the evidence demonstrated Dhillon was not in charge of erecting the scaffold, only assisting. Although it was aware of the ‘No Go Zone’, it brought it to the attention of the primary scaffolder and was directed to continue.

The insurer denied indemnity on the basis that Dhillon’s breach of the regulations was a breach of an essential condition of the policy. The insurer submitted that it sought to only accept risk for injuries where Dhillon had acted in accordance with regulations.

Dhillon however argued the obligations imposed by the policy was for it to take reasonable precautions, rather than requiring strict compliance.

Principles

Justice Forbes relied on the following principles for interpreting commercial insurance policies:

  • Words are to be given their plain meaning, interpreted to give effect to the objective intentions of the parties within the commercial circumstances of the contract[1]
  • In the event of ambiguity, a commercially sensible interpretation should be used[2]
  • The test that applies for an insured to take all ‘reasonable precautions’ is whether their conduct demonstrates recklessness or a deliberate courting of risk[3]

Decision

Forbes J rejected the insurer’s interpretation because it would lead to a policy that would in effect insure ‘no fault’ circumstances of injury, but not those creating a legal liability to pay damages. Forbes J considered the policy’s wording, ‘liability to pay damages for / and arising out of personal injury’, finding the commercial purpose was to provide indemnity for injuries that occurred when the insurer was legally responsible for damages.

Forbes J stated clauses requiring an insured to take reasonable precautions are not breached by actions that amount to negligence. In these circumstances, Dhillon had not acted recklessly or deliberately and therefore was covered by the policy.

[1] Citing Hutton v Watling [1948] Ch 398; Pacific Carriers Ltd v BNP Paribas (2004) CLR 451, 461-2.

[2] Citing All State Exploration NL v QBE Insurance (Australia) Ltd [2008] VSCA 148 [7].

[3] Citing Fraser v B N Furman [1967] 3 All ER, 58.

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