If the precise terms of an insurance policy are not in evidence, who bears the onus of proving what it said?
The NSW Court of Appeal recently considered this issue in determining the extent of the liability of an insurer. It found that the question is governed by ordinary contractual principles, namely the party asserting an agreement must prove it. However, there may be exceptions...
The lost policy
The Respondent held a policy of insurance with the predecessor of QBE. The policy was held some 40 years before the trial, so the policy itself was not produced by either party. One of the preliminary issues was whether the policy was unlimited, as the respondent argued, or whether it was limited to the statutory minimum level of cover ($40,000) under the Workers Compensation Act 1926, which was applicable at the time.
At first instance, the NSW Dust Diseases Tribunal held that the onus of proving the limit of liability rested with the party asserting the limit on the policy. No evidence was put forward by the insurer and it was therefore held that there was no limit to liability. QBE appealed.
The Court of Appeal set aside the decision and allowed the appeal by QBE in a majority decision (Ipp JA and Gyles AJA; Brereton J dissenting).
Insured must prove agreement - insurance cover not unlimited
The majority held that the evidentiary onus of proof rests with the plaintiff according to ordinary contractual principles. The trial judge had erred in imposing an onus of proof on the insurer in respect of an essential part of the obligation to insure as opposed to a condition or exclusion.
Consequently, the majority held that the cover was limited to $40,000.
Gyles AJA stated:
Principles as to the construction and operation of conditions, exclusions and limitations have no application where the question is whether a term is included in a policy. That question is governed by ordinary contractual principles. The party asserting the agreement must prove it. The amount and subject of the cover are essential terms in proof of an insurance contract. ...Where the extent of cover is defined by a maximum amount it may be said that cover is limited to that amount but that is not to categorise that amount as an exception to, condition of or limitation to cover. It is an essential part of the primary obligation to insure.
Implications
This case provides some comfort for insurers and highlights the importance for insureds of keeping copies of their policies. Where the policy is lost, the insured does not have free reign to assert unlimited liability and broad coverage. The essential terms of the policy, including the policy limit, must still be established by the insured.
The outcome may have been different if the term in issue was an exclusion clause where the onus is generally on an insurer to prove that the exclusion applies.
Furthermore, if this case was not a Workers Compensation case, section 74 of the Insurance Contracts Act 1984 (Cth) may have been relevant. Section 74 of the Insurance Contracts Act provides that an insurer is to provide policy documents to the insured on request.
| Sydney | ||
| Ray Giblett | t (02) 9931 4833 | e rgiblett@nsw.gadens.com.au |
| Wendy Blacker | t (02) 9931 4922 | e wblacker@nsw.gadens.com.au |
| Brisbane | ||
| David Slatyer | t (07) 3231 1532 | e dslatyer@qld.gadens.com.au |
| Simon Carter | t (07) 3114 0129 | e scarter@qld.gadens.com.au |
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