AMP United Insurances Ltd, Re [1996] QSC 25

IN THE SUPREME COURT OF QUEENSLAND O.S. No. 1203 of 1996 IN THE MATTER of the Rules of the Supreme Court of Queensland Order 64 Rules 1A and 1BB - and - IN THE MATTER of an application by AMP UNITED INSURANCES LIMITED for the construction of a policy of insurance issued by MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED to the QUEENSLAND WILDLIFE HOSPITAL ("The Policy") JUDGMENT - DERRINGTON J. Delivered: 29 February 1996 CATCHWORDS: Insurance - Claim for contribution by one insurer against another - Personal injury caused on employee's land to third party by employee's dog - Employee liable - Employee and third party on land for purpose of employer's business - Employee's insurer claim against employer's insurer - Employer's policy cover occurrence "in connection with business" and employees "acting within scope of duties" - Whether injury "in connection with" business - Whether causal nexus required between liability and acting scope of duties. Counsel: Mr S. Doyle for the Applicant Mr S. Couper QC for the Respondent Solicitors: Clayton Utz for the Applicant Ian Barron & Company for the Respondent Hearing Date: 22 February 1996 -- 1 of 9 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 1203 of 1996 IN THE MATTER of the Rules of the Supreme Court of Queensland Order 64 Rules 1A and 1BB - and - IN THE MATTER of an application by AMP UNITED INSURANCES LIMITED for the construction of a policy of insurance issued by MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LIMITED to the QUEENSLAND WILDLIFE HOSPITAL ("The Policy") JUDGMENT - DERRINGTON J. Delivered 29 February 1996 This is a claim for contribution by one insurer against another insurer of the same insured in respect of indemnity provided by the former to them in respect of their liability to a third party claimant for damages for personal injury caused by an attack by their dog. Their liability was strict because they were scienter to the animal's proclivity to attack. This occurred on land occupied by them which was contiguous to their employer's premises. At the time they were acting within the scope of their duties in the capacity of employees for by arrangement with their employer they sometimes carried out some of their duties on their own land, and were doing so at the time of the attack. Moreover the third party claimant had come onto their land purely for the purpose of their employer's business and so while the ownership of the dog and their liability for its conduct were their private concern, the occurrence that produced the liability had this connection with the business. In addition to their own liability insurance policy, they had the cover provided by the defendant's policy which had been taken out by their employer and covered the employer as well. -- 2 of 9 -- 3 That insurer denies that the cover extends to their liability in these circumstances, arguing that it applied relevantly only to their liability when it arose out of their acting within the scope of their duties as employees; in other words, that there had to be a causal relationship between their employment activity and the accrual of their liability. It is not challenged that the third party was attacked while the insured was engaged in such employment activity, but it is correctly asserted that no action or omission of the insured in connection with that activity had anything to do with the attack or their liability consequent upon it. The only connection was temporal, the insured's keeping the dog at the time of the attack while knowing of its disposition and the occurrence of the harm both being contemporaneous with their carrying out of their duties. The plaintiff's case is that this is enough to bring it within the terms of the cover, and that is its only point. It is necessary therefore to examine the relevant terms of the defendant's policy, remembering that the matter of double insurance is not germane to the enquiry; and to approach the enquiry as though the insured depended on this cover alone. The multipartite nature of 'the insured' introduces some contextual complexity, but the policy is designed to overcome that, and this should be accorded some value when that matter is under consideration. The relevant terms are: "1. DEFINITIONS When used in this Policy F (including Endorsements) the following definitions shall apply:- . . . 1.3 "YOU/YOUR' means the Insured named in the Certificate including as if they were You: . . . 1.3.2 any director, executive officer or employee of You or a company designated in paragraph 1.3.1 but only whilst acting within the scope of their duties in such capacity; 1.3.3 any principal in respect of his or her liability arising out of the performance by You or any company designated in paragraph -- 3 of 9 -- 4 1.3.1 above of any contract or agreement for the performance of work for such principal to the extent required by such contract or agreement but subject always to General Exclusion 8; . . . For the purpose of this Policy You and each of the parties described above shall be considered as a separate legal entity and the insurance under this Policy shall apply to each party as if a separate policy had been issued to each of the said parties but nothing herein contained shall operate to increase Our Limits of Liability as stated in the Certificate. . . . 2. COVERAGE We will indemnify You for Compensation which You shall become legally liable to pay by reason of liability imposed on You by law in respect of: 2.1 Personal Injury; 2.2 Property Damage occurring within the Territorial Limits during the Period of Insurance as a result of an Occurrence happening in connection with the Business as described in the Certificate." The term 'occurrence' is defined only in respect of certain limited occasions that have no place here and so it should be given its ordinary meaning. The infliction of the injury by the dog was the occurrence in this case, but nothing turns on that because it is common ground that it took place while the insured were engaged in their employment activity. The first point of note is that in the above terms there are two separate factors introduced by the insurer to define and limit the cover, each factor being applied to a different purpose and consequently having a different nature. In paragraph 1.3.2 there is a limit applied as to the circumstances (to use a broad and neutral term for the moment) in which the cover would be provided to an employee or other person mentioned. In paragraph 2 it is predicated that the insured employee comes within the former limitation and the scope of the cover is then defined by reference to the nature of the harm done, the territorial limit, a time limit (the policy period) for the occurrence, and a nexus of the occurrence with the business. It is only the lastmentioned that -- 4 of 9 -- 5 needs attention, and then only to note that the defendant makes no suggestion that the nexus did not exist. This is correct because the attack and injury occurred because and while the third party was on the insured's land for the purpose of the employer's business. The very wide scope of the expression, 'in connection with', commands such a result, for harm may occur 'in connection with' the insured's activity though the act of negligence causing it may be outside it: London & N.E. Ry Co Ltd v Furness Shipbuilding Co Ltd (1934) 48 Lloyds L.R. 1; (on app 44 Lloyds L.R.131; Wright v Tyne Improvement Commissioners (1968) 1 Lloyds Rep 113,116. It might be observed for other purposes that this nexus is not limited to a connection in time. No doubt recognising the danger of relying on the limits contained in paragraph 2, the defendant turns instead to that contained in paragraph 1.3.2, arguing that it requires a causal nexus between the liability of the insured and their acting within the scope of their duties as employees. It is in answer to this that the plaintiff argues that only a temporal nexus is required; and while the defendant controverts this it concedes that such a limited nexus exists. The resolution of this issue will provide the answer to the whole claim. The words used to define that limit must be given their ordinary meaning unless there is good reason to depart from it, and the primary meaning of 'whilst' and its equivalent, 'while', is essentially temporal only. In an attempt to overcome this serious problem, the defendant has mounted some interesting arguments on broad conceptual lines which, it says, provide good reason to depart from that meaning. They are directed to the justification of the inclusion of a causal element by logical implication. These have largely turned upon the view that it is unsuitable to use a purely temporal measure to limit the occasion when the cover should be extended to an employee. Rather, it is said, the measure should be read as referring to the occasion where the liability arises out of the -- 5 of 9 -- 6 performance of the employment; for that is more closely related in principle to the extension of liability cover to an employee than the mere contemporaniety of the time of the accrual of liability and the time of the performance of the role of employee. It is not enough, the argument goes, that the employees are acting as such at the time if their liability has nothing to do with their employment. Attractive as it is, this proposition fails to afford due attention to the structure of the means by which the cover is defined by the use of these forms of limitation in different ways for their respective purposes. The system adopted is to state in paragraph 1.3.2 when an employee is to come within the protection of the cover, and in paragraph 2 the limited nature of the liability to which that cover will apply. The defendant is correct in logically expecting that there should be some limitation on the cover requiring a nexus of some feature triggering the cover with the business of the party who took out the insurance. It appears principally in paragraph 2 where it is required that the harm for which the insured is liable must be a result of an occurrence happening in connection with the employer's business. This alone should be enough to dispel the need for any implication that the defendant would argue for; but even paragraph 1.3.2, though temporal in effect, adds some further ingredient associated with the business to the limitation when it applies. It does this by requiring that at least the employee must be acting in a way connected with the business at the relevant time. But its purpose is only to limit access by employees to the cover, and because of the general limit associated with the business imposed in paragraph 2 it is sufficient for its purpose to impose only a temporal limit linked to the employment rather than to add to the general business-linked limitation of the cover. Consequently there is no need to search further for the latter in paragraph 1.3.2. Given that -- 6 of 9 -- 7 in such cases as this the limit in Paragraph 1.3.2 has this temporal link with the affairs of the business and that in addition the second measure requires that there must be a connection of the harm with the employer's business, there is no reason why the first should otherwise extend beyond that simple temporal connotation. It is a suitable and simple measure to apply and easily understood by those affected. Such a temporal, as distinct from a causal, measure is far from uncommon in similar usages in insurance policies; see, e.g., Dawson v Mercantile Mutual Insurance Co Ltd (1932) VLR 380, 388. See also, by way of example, paragraph 4.4.2 of the policy. Conversely, it would be quite inappropriate for the definition of the cover to use two divergent measures in the same field to limit it, that is, a relationship of the harm with the business as the defendant would have it in order to bring the employee within the cover in the first place and then a different relationship of the harm with the business in order that the employee's liability should come within it. There is no reason why such disparate measures should be applied in this way. Further, while they would be apparently cumulative, the limit which the defendant would attribute to paragraph 1.3.2 would subsume that referred to in paragraph 2. Of course, if the two were identical it would not avail the defendant, for as it has been shown the claim meets the latter. It is also useful to compare the usage of the limitation described in paragraph 1.3.3 which is set out above. There the appropriate use of a causal element is necessary to the nature of the extension of the cover. Its interest here is that it demonstrates that when a causal limitation is intended, it is clearly expressed as such. This further undermines the argument that a similar meaning should be given to an expression that is temporal and is easily justified as such. The defendant advanced an argument that referred to the cover enjoyed by the employer insured who took out the policy. It was said that in some way the cover is defined differently for that party and that an employee who is enjoying the benefit of the cover as a volunteer should be in -- 7 of 9 -- 8 no better position. The latter part of this proposition is reasonable, but the former is not entirely accurate. There is a difference between the respective covers extended to them, but whereas by paragraph 1.3.2 the employee has it only while acting as such in the scope of his duties, there is no equivalent limitation imposed on the cover afforded to the employer. This is reasonable but the distinction does not assist the defendant's argument. Conformably with the defendant's proposition there is still a limitation relating to the business that is common to both forms of cover, that is, the limitation imposed by paragraph 2. This does not help it because, as it has been shown, the present claim is within that limitation. Indeed, contrary to the defendant's argument, it supports the proposition that the limitation in paragraph 1.3.2 does not bear any such causal element. If the causal element for the employer's cover is fully stated in paragraph 2, and if the limitation in that respect would be expected to be the same for the employee's cover, then it be contrary to this reasoning to impose an additional and different limitation of that kind by paragraph 1.3. 2. The defendant tried to fortify its submission by presenting the indemnity clause of the policy with interpolations containing the reference to an employee, with full details of the limitation, in each place where that clause made reference to the insured; but the exercise did not continue to the end of that clause where it referred to the business-link limitation. Had it done so the presence of the diversity of the limitations for which the defendant strives and the availability of a sufficient business-linked limitation within the clause would have been revealed. Moreover, the interpolations, properly read, lent nothing to the defendant's cause. Some of the defendant's argument transgressed the effect of the last and unnumbered part of paragraph 1.3, for in the case of multiple cover, when the policy is read in respect of the party to whom the cover is extended he becomes the new assured and the policy must be construed for and against him as if he were the contracting insured: Digby v General Accident Fire & Life Assurance -- 8 of 9 -- 9 Corporation Ltd (1943) AC 121, 141. However, it is still valid to refer to the comparison of the cover provided to each of the parties in the manner adopted above. For all these reasons the plaintiff's version of the construction of these parts of the policy should be accepted. It is unnecessary to have recourse to the contra proferentem doctrine, but if the above reasoning were erroneous it would follow that there would be such ambiguity as to provoke the application of the doctrine, and that would lead to the same conclusion. IT IS THEREFORE DECLARED THAT: 1. the liability of Kevin Francis Winney and Nedda Margaret Winney to Julie Anne Field in respect of her injury sustained on 19 March 1991 is an event in respect of which the respondent agreed to provide indemnity to Kevin Francis Winney and Nedda Margaret Winney pursuant to the Policy; 2. the applicant is entitled to contribution from the respondent to the extent of 50% of the sum of $26,000 paid by the applicant in relation to District Court Action No. 122 of 1993 between Julie Anne Field and Kevin Francis Winney and Nedda Margaret Winney; 3. the applicant is entitled to contribution from the respondent in the amount of 50% of its reasonable costs of conducting the defence of such action. AND IT IS ORDERED that the defendant pay the plaintiff's costs of the application to be taxed. -- 9 of 9 --