The Plaintiff, Mr Walsh, commenced proceedings in the District Court of New South Wales for injuries suffered when he slipped and fell on tiled stairs at a residential property (the Property). Mr Walsh sued the owners of the Property, Ms Yang and Mr Xu (the Insureds), as well as their insurer, Insurance Australia Limited (Insurer). The Insureds also sued the Insurer.
This article is not legal advice. If you require advice about an insurance or personal injury matter, contact Denning Insurance Law.
Facts of the case
In 2018, Mr Walsh and his partner, Ms Radovan moved into the Property. They paid rent at a reduced rate because Mr Walsh was performing domestic jobs around the Property.
The Insureds described Mr Walsh and Ms Radovan “like family”. However, the couple lived separately from the Insureds in a flat separate from the main house.
The Insureds had converted the flat where Mr Walsh lived without development consent, breaching environmental planning regulations. In 2015, the Council instructed the Insureds to disconnect certain services from the flat. In 2018, they reconnected these services when Mr Walsh moved in, and they reinstalled kitchen appliances to make the flat habitable.
In November 2018, Mr Walsh experienced the first of two (2) falls at the Property while he moved a fridge from the flat to the storeroom.
He had his second fall at the Property on 24 March 2019. He slipped on wet, tiled stairs – the same type of tiles he had slipped on in November 2018.
The Insureds sought indemnity under a policy of home and contents insurance taken out with the Insurer on 19 February 2019 (the Policy).
In determining the case, the Court had to decide:
- The liability of the Insureds for Mr Walsh’s injuries.
- Whether the Policy’s exclusions applied to the claim by Mr Walsh against the Insureds.
- If the Insureds were “clearly informed” of the relevant exclusions.
Liability of Defendants to the Plaintiff
Expert evidence led the Court to find that the stairs were sub-standard and posed risks, especially when wet. The Insureds, aware of the 2018 incident, could have implemented several low-cost safety measures in response to the risk. The Court was satisfied the Insureds breached their duty of care to Mr Walsh.
Exclusions relied upon by the Insurer
The Insurer relied upon several exclusions under the Policy, in refusing to indemnity the Insureds. An Insurer bears the onus of proving any qualification or limitation on cover.
The exclusions relied upon by the Insurer and the Court’s findings in respect of each exclusion were as follows:
|Business occupation and business use exclusions
|The Policy didn’t define “business”, and no evidence proved the existence of a "business" during the relevant period.
|Unlawful activity exclusion
|The exclusion suggests an activity exceeding mere occupation. Occupation and activity are conceptually different and the exclusions dealt with them as such.
|Ordinary resident exclusion
|Mr Walsh didn’t live with the Insureds nor belonged to their household.
|Building regulation and local authority regulation exclusions
|Both exclusions broadly covered liability related to the conversion and occupation of the flat.
Insurer to “clearly inform” of exclusions
Though the Insureds received the policy wording when applying for coverage through the Insurer’s online portal, the Court needed to decide if providing the policy wording alone “clearly informed” the Insureds of non-covered events.
The Insureds argued that section 35 of the Insurance Contracts Act 1984 (Cth) (ICA) prevented the Insurer from refusing coverage for Mr Walsh’s claim.
Conversely, the Insurer argued that section 35 contemplates that an insurer can “clearly inform” an insured by simply providing a copy of the policy wording.
What is section 35 of the Insurance Contracts Act 1984 (Cth)?
Section 35 of the ICA requires insurers to notify insureds, before or at the policy’s inception, that certain events won’t receive coverage in specific insurance policies. This consumer protection provision ensures that policyholders understand their policy’s exclusions.
Were the Insureds “clearly informed” of the exclusions?
The Court ultimately found that the Insureds were not “clearly informed” of the exclusions, noting:
- Providing the policy wording can be one way to “clearly inform” an insured party of exclusions under section 35, but it isn’t always sufficient.
- There was no explanation in the Policy or in any material made available to the Insureds explaining how the building regulation and local authority regulation exclusions applied.
- No evidence demonstrated that the Insureds knew of the exclusions (other than from the policy wording) or that they should have been aware their liability to Mr. Walsh wouldn’t be covered.
- The policy featured 29 separate exclusions in the Legal Liability Cover section of the Policy. There were a further 45 separate exclusion in the General Exclusions section, cross-referenced with the legal liability exclusions and referring to multiple risks.
- It is not incumbent on an insurer to annotate a policy in order to prove that it “clearly informed” an insured.
The Court found that the Insurer had not made out its claim that the exclusions applied and therefore, couldn’t deny cover.
In finding for Mr Walsh and the Insureds, the Court made orders as follows:
- Judgment in favour of Mr Walsh against all Defendants in the sum of $102,508 plus costs.
- Judgment in favour of the Insureds against the Insurer, in respect of their liability to Mr Walsh.
- The Insurer to pay the Insureds’ solicitor own client costs for defending the proceeding, together with their ordinary costs against the Insurer.
The outcome in this case illustrates the challenges and potential cost consequences to insurers when denying indemnity to an insured. Insurers must not only demonstrate that an exclusion applies but also show that that exclusion was clearly communicated to an insured.
The case serves as a reminder to insurers and insureds alike to consider how policy terms operate in less formal (but not uncommon) rental arrangements like this.
If you need legal advice about an insurance or personal injury law matter relating to private property, contact Denning Insurance Law for an appointment.