By Louise Cantrill, Partner and Dinithi Katupitiya, Solicitor

An insurer’s contractual obligations to indemnify its insured against claims by a third party is not unbounded. It is limited by the contractual agreement between the parties reflected in the terms of the insurance policy.

In the case of Shannon Wetini v GWH Build Pty Ltd & Ors, the limits of an insurer’s responsibly were considered in a successful application by Hollard insurance Company Pty Ltd (Hollard) to dismiss proceedings brought against it as the insurer for a liquidated defendant. The proceedings against Hollard were dismissed following careful deliberation of the wording contained within the “four corners” of the policy and its schedule, resulting in the conclusion that the policy did not respond to the incident causing injury to the plaintiff.

Background

The plaintiff alleged that on 27 October 2020, he was working on level 11 of a construction site of a multi-storey residential dwelling. While carrying out his duties he stood on a section of plywood decking that suddenly dropped from beneath him, causing him to fall to the level below, suffering significant injury (incident). It was alleged that poorly constructed formwork played a key role in the collapse of the decking.

The first defendant, GWH Build Pty Ltd (GWH) was the head contractor for the site. The second defendant, ABG formwork Pty Ltd (ABG) was contracted to preform formwork at the site. ABG sub-contracted part of the formwork to the third defendant, Sapform Pty Ltd (Sapform).

Hollard was the public liability insurer of Sapform at that time of the incident and was joined to the substantive proceedings as the fourth defendant pursuant to the section 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Act) on the basis that:

1. Sapform had prospects of being found liable to the plaintiff arising from the allegations of poorly constructed formwork;
2. Hollard had issued a policy of insurance to Sapform which appeared on its face to respond to the claim. On this point we note that a “low bar” is applied to this question for the purposes of joinder. As long as there are prospects that the policy might respond, the court will generally take the view that this is otherwise a question for hearing based on findings of fact to be made at hearing. The insurer’s rights to argue this issue are otherwise preserved by the operation of section 7 of the Act.
3. Sapform was in liquidation and unlikely to meet any judgment against it.

Hollard’s Policy Coverage

Hollard did not consent to the joinder and, after investigation, made an application for the plaintiff’s claim and the cross claim by GWH to be dismissed on the basis that there were no reasonable prospects of proving that the policy would respond to the claim. On 3 May 2024, Hollard’s application was upheld.

Several arguments were made on behalf of Hollard as to why the Policy did not respond to the claim. However, key to its success was ensuring that the arguments were based on undisputed facts and not on matters that would require findings as to fact (with the latter being matters which might properly left to final adjudication).

The decision ultimately turned on the definition of the business being conducted by Sapform, defined as “concrete pumping (incl. non-domestic) excl. 5-metres above ground level”. None of the parties disputed that the work being conducted was above 5 metres.

Further, the policy had been issued through an automated digital platform which specifically asked about the height at which work was being conducted. Sapform had misrepresented that it was not doing work above 5 metres. If Sapform had responded to these specific questions correctly, cover would have been automatically declined and the policy would not have been issued.

As such, Hollard argued there was no reasonable cause of action against it because its policy of insurance would not respond to the events subject of the personal injuries claim made by the plaintiff in the proceedings, and the policy would never had been issued in the first place had correct information been provided by Sapform.

Decision of Waugh J

Upon hearing of motion, His Honour Waugh J concluded that the policy did not respond to the events that the plaintiff relied upon in bringing his claim against Sapform.

In making this decision, His Honour Waugh J  accepted that the definition of “business” limited cover to specific activities undertaken below 5 metres from ground level. His Honour additionally concluded that the responses provided by Sapform with respect to whether the insured would be completing works above a certain height provided important context to the significance of the definition of “business” and reference to the exclusion of activities above 5 metres.

What Does this Mean for You?

The decision highlights the importance of a carefully constructed policy and ensuring clear definitions within the policy and its adjoining schedule to clearly identify the parameters of an insurer’s responsibility. It also demonstrates the importance of unequivocal underwriting processes.

The decision additionally highlights the importance of understanding the factual matrix of a plaintiff’s claim, as it can be something seemingly insignificant, such as the height at which an incident occurred, that can determine whether an insurance policy ought to respond or not.