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  •   Notable Unreported Decision

QBE Insurance Ltd v MGM Plumbing Pty Ltd

 

[2003] QSC 27

 

 

 SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO/S:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

DELIVERED ON:

19 February 2003

DELIVERED AT:

Townsville

HEARING DATE:

5 February 2003

JUDGE:

B W Ambrose J

ORDER:

I make the following declarations –

1.Each occurrence of property damage to an individual property as a result of alleged defective waterproofing works performed by MGM Plumbing Services Pty Ltd and particularised by Glenwood Homes Pty Ltd which forms part of the claim by Glenwood Homes Pty Ltd against the respondent is a separate occurrence under the relevant policies of insurance which MGM Plumbing Services Pty Ltd held at material times with QBE Insurance Ltd.

2.MGM Plumbing Services Pty Ltd is obliged to pay the $300 excess to QBE Insurance Ltd on each and every claim particularised by Glenwood Homes Pty Ltd which falls under the relevant policy of insurance held by MGM Plumbing Services Pty Ltd with QBE Insurance Ltd.

I order that MGM Plumbing Services Pty Ltd pay the standard costs of QBE Insurance Ltd to be assessed.

Liberty to apply with respect to the order for costs.

CATCHWORDS:

INSURANCE – Public Liability – Products liability – Construction of policy – application for declarations – consideration of use of words “occurrence” and “event” in policy – whether single excess payable for series of incidents resulting in damage or excess payable for each incident of damage

Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd(1973-1974) 130 CLR 1, considered

Windsurf Pty Ltd v HIH Casualty and General Insurance Ltd [1999] QCA 360, considered

COUNSEL:

M A Fellows for the applicant

A J Taylor for the respondent

SOLICITORS:

Quinlan Miller & Treston for the applicant

Roberts Nehmer McKee for the respondent

[1] AMBROSE J:  The applicant insurer (QBE) seeks declarations against the respondent insured (MGM) concerning their respective rights and obligations under policies of  insurance MGM held with QBE during the period of two years being 9 April 1997 to 9 April 1998, and 9 April 1998 to 9 April 1999.

[2] At all material times MGM carried on business in Townsville described in the policies as “plumbing and fibreglass sealant services and building renovations”.

[3] Within the period of insurance to which I have referred MGM sub-contracted with a building contractor Glenwood Homes Pty Ltd (“Glenwood”) to install waterproof membranes in bathroom areas of about 47 houses that were being built and/or renovated by Glenwood in the Townsville area.

[4] In an action commenced against MGM in 1999 Glenwood alleges that MGM negligently installed the waterproofing membranes to which I have referred and as a consequence when the bathrooms were used water escaped into areas of the dwelling houses which apparently Glenwood was called upon to rectify and repair which it did.

[5] Glenwood alleges that it has already cost something in excess of $77,000 to repair the defective work performed by MGM on the 47 premises to which I have referred and contends that it is likely that it will have to repair defective work on a further 129 premises which will cost an estimated $451,500.

[6] MGM defends the action Glenwood brings against it raising inter alia by way of defence that the method it used to waterproof relevant parts of the houses under construction was that which Glenwood specifically instructed it to use. MGM pleads that to the extent that any damage was suffered by Glenwood as a consequence of the method used to install waterproof membranes such loss was caused by MGM following instructions Glenwood gave to MGM as to the precise manner in which such installations should be effected.

[7] On 9 February 2000 MGM lodged with QBE a “liability claim” after the institution of proceedings by Glenwood against it seeking to recover the cost of repairing the 47 consecutive water membrane applications raised in the pleadings and the first amended claim.

[8] The only issue debated on this application was whether under the terms of the relevant policies MGM is obliged to bear an excess of $300 in respect of each of the allegedly defective installations or is obliged to bear only one excess of $300 in respect of all defective installations giving rise to its liability, if any,  to Glenwood to meet the cost of repairing them.

[9] The form of the policy in issue is of the sort described in Sutton on Insurance Law of Australia (3rd ed) at 717 as “industrial special risks” policies and “broad form” policies.

[10] The policy document in question indemnifies against a variety of risks most of which it is unnecessary to consider.

[11] It is not clear on the material read on this application whether the policy covering the risk in respect of which MGM claims indemnity is covered by one termed “liability/public” or perhaps by one termed “liability/products” or perhaps by both.

[12] It probably does not matter for the purpose of this application because there is a limit of indemnity expressed to be “$5m each occurrence” in respect of the “public liability” cover and “$5m all claims happening in any one period of insurance” in respect of the “liability/products” cover.

[13] The various policies together come under the rubric of a “Commercial Package Policy”.

[14] Under the terms of the policy covering various risks “excess” is defined –

““Excess” - the amount specified in the Schedule, payable by you on each and every claim arising out of one event under that Policy Section.

Should more than one excess be payable under this policy for any claim or series of claims arising from the one event, such excesses shall not be aggregated and the highest single level of excess only shall apply.”

[15] The terms under the heading OUR AGREEMENT include inter alia

“We will not pay the Excesses shown in the Schedule. If any loss or damage leads to a claim under more than one Section of this Policy, you must pay the highest applicable Excess, but you need to pay only one Excess.”

[16] Under the broad form liability section “occurrence” is defined –

“Occurrence” - an event including continuous or repeated exposure to substantially the same general conditions, which results in … Property Damage neither expected nor intended to happen by You.”

[17] Under the same section “property damage” is defined –

Property Damage” -

 physical damage to or destruction of tangible property including its loss of use following such physical damage or destruction;

 loss of use of tangible property which has not been physically damaged or destroyed provided that the loss of use has been caused by an Occurrence;”

[18] Under clause 2 of the broad form liability section it is provided inter alia

“Where…Property Damage is caused by Your Products, the maximum amount we will pay for all claims happening in any one Period of Insurance is the Limit of Indemnity specified in the Schedule.

For all other claims or series of claims for…Property Damage caused by or arising from the same Occurrence the maximum amount we will pay is the Limit of Indemnity specified in the Schedule.

All…Property Damage arising out of continuous or repeated exposure to substantially the same conditions shall be construed as arising out of one Occurrence.”

[19] Under clause 4 it is provided –

EXCESS

If an Excess is specified in the Schedule, then You will be liable to pay that amount for every Occurrence for which You lodge a claim under this Section.”

[20] Under clause 6.3 it is provided inter alia  –

Notices

As soon as possible You are to provide Us written notice and all relevant information of;

 every Occurrence, claim, writ, summons, proceedings, impending prosecution, and inquest which may result in a claim under the Policy, whether or not You believe any claim might fall below any deductible stated in the Schedule…”

[21] Under the general conditions applicable to all sections of the insurance cover it is provided inter alia

“2. CLAIMS

If anything occurs which could give rise to a claim under any Policy Section other than the Liability Section. (Refer to the Liability Section for special provisions that apply).

2.1 you are to give immediate notification to us and as soon as possible give us full information in writing concerning the Occurrence and supply us with all assistance and documents which we may reasonably require;”

[22] Under the broad form liability section of the policy “occurrence” is defined –

““Occurrence” – an event including continuous repeated exposure to substantially the same general conditions, which results in ... Property Damage neither expected nor intended to happen by You.”

[23] Under clause 4 of the broad form liability section it is provided –

“4. EXCESS

If an Excess is specified in the Schedule, then You will be liable to pay that amount for every Occurrence for which You lodge a claim under this Section.”

[24] Under the heading “General definitions applying to sections of this policy” “Excess” is defined –

Excess” – the amount specified in the Schedule, payable by you on each and every claim arising out of one event under that Policy Section.

Should more than one excess be payable under this policy for any claim or series of claims arising from the one event, such excesses shall not be aggregated and the highest single level of excess only shall apply.”

[25] In Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1973-1974) 130 CLR 1 the High Court construed a clause in a public risk policy which limited compensation payable to any number of claimants in respect of or arising out of any one occurrence or in respect of and arising out of all occurrences of a series consequent on or attributable to one source or original cause”. It was held that the “occurrence” or “occurrences” referred to in that limitation clause were the mishaps as a consequence of which various victims suffered death, injury or illness and not what they actually suffered.

[26] Stephen J at 18 observed –

In the case of policies which provide indemnity over a period it has long been the practice of insurers to impose an upper limit upon their liability in the case of each event which may occur, during the period of cover, giving rise to a liability to indemnify. Much litigation has ensued where one mishap has resulted in injury to many, the question being whether, as the insurer contends, the one limit of liability to indemnify applies to the mishap as a whole and, thus, to all claims flowing from it, or rather to each individual claim, as the insured would have it. This is just such a dispute, but here the limitation clause is expressed in terms more detailed than in most reported cases.

The debate has, as a rule, concerned the meaning of the particular noun, usually “accident” or “occurrence”, employed to describe that to which the limit is to apply, and whether it refers to the mishap itself or to the injury or death of each person involved in it; whether, in other words, it looks at the matter from the viewpoint of the insured or of the injured victim.

In South Staffordshire Tramways Co v Sickness and Accident Assurance Association [1891] 1 QB 402, a limit of "£250 in respect of any one accident”, in a policy indemnifying against liability for “accidents caused by vehicles” was held to apply to each of the claims of some 40 injured passengers in one of the insured’s trams which overturned; it was not the overturning of the tram but the injury to each passenger to which the words “one accident” applied; as Bowen LJ said at 407 “one accident” meant one accident to the person.

In the recent case of Forney v Dominion Insurance Co Ltd [1969] 1 WLR 928 at 934, Donaldson J attributes to this interpretation given by the Court of Appeal to “accident” what he describes as the subsequent use in policies of the word “occurrence” rather than “accident” when an insurer seeks to limit liability in respect of any one mishap, regardless of the number of persons injured thereby. In Allen v London Guarantee and Accident Co Ltd (1912) 28 TLR 254 the limitation of liability referred to claims “in respect of or arising out of any one accident or occurrence” and Phillimore J, following the South Staffordshire Case, held that where two were injured in the one incident for which the insured was responsible there were two “accidents”; however there was, he said, only one “occurrence”; thus the limitation of liability applied to the total of the two separate claims by those who were injured as a result of that one occurrence….

In the present case the relevant limitations of liability clause, contained in the proviso to the endorsement, refers to “occurrence” and not to “accident”, the latter being more likely to operate favourably to the interest of an insured. Moreover the maximum amount is not expressed to be applicable merely to “any one occurrence”; instead still further protection is afforded to the insurer, first by the reference to several claimants in respect of the one occurrence and secondly because claims in respect of two or more occurrences are nevertheless made subject to the one maximum amount of $100,000 so long as they form a series and are consequent on, or attributable to, one source or original cause.

The proviso must, of course, be read in its context in the endorsement; the compensation payable to claimants of which it speaks must refer to sums for which the insured becomes legally liable arising out of death…which is occasioned as set out in the opening words of the endorsement.

Quite apart from authority I would not regard the word “occurrence” in this context as apt to refer to the death of a victim or to his illness or injury but rather to the mishap causing such death, illness or injury and this is borne out by the contemplation of the proviso that there may be a number of distinct claimants although only one occurrence. In Forney’s Case, Donaldson J regarded the policy’s contemplation that a number of claims might arise out of one occurrence as indicating that “occurrence” there meant the mishap, not its consequences. So do I; although in the case of a victim’s death there may be several dependent claimants yet, generally speaking, the existence of several claimants will predicate the existence of several persons injured, made sick or killed, and is thus inconsistent with an interpretation of “occurrence” in the singular as referring to these happening rather than to the mishap which gave rise to them. Moreover, the contrary construction ignores the effect which the opening words of the endorsement give to the words “all compensation” in the proviso.”

[27] Stephen J continued at 20 –

“If “all compensation” bears this meaning the words of the proviso which follow, “in respect of or arising out of any one occurrence”, will not refer back to a victim’s death, injury or illness, but rather to the event causing that death, injury or illness.

I accordingly conclude that the occurrence or occurrences spoken of in the proviso refer to mishaps in which victims suffer death, injury or illness and not to that which they suffer

...

Whether or not an occurrence is the mishap or its consequences, as manifested in the victim’s injuries, it seems clear that in the present case there was no one occurrence in respect of which or arising out of which compensation may become payable to all these infant claimants. Only if the links in the chain of causes be traced as far back as the act on the part of the insured in distributing “Distaval”, can one event common to each claimant be found and the proviso should not, I think, be construed as including such a remote cause within the meaning of “occurrence”.

Accordingly the insurer must seek to rely upon that part of the proviso which extends its operation to several occurrences, which, if they form a series having one source or original cause, will still serve the insurer’s purpose in confining the extent of its liability to the one sum of $100,000.”

[28] At 21 Stephen J continued –

“The meaning of “series” in the proviso is, I think, that of a number of events of a sufficiently similar kind following one another in temporal succession. By the express words of the proviso, relevant occurrences must have “one source or original cause” and must, by the operation of par (b) of the proviso, occur within a relatively short time span. Since any number of distinct events will, unless by coincidence they occur simultaneously, necessarily occur in a temporal sequence, the only remaining attribute of the concept of a “series” to be satisfied is that the events should be, in a sufficient degree, similar in nature.”

[29] At 22 Stephen J continued –

“The insured contended that the limit was to be applied to each claim against it, each being a distinct accident, and not to the total of those claims. In the Ontario Supreme Court, Mackay J considered a number of English decisions, including the South Staffordshire Case and Allen’s Case, and, finding that there had occurred four separate and distinct accidents occurring at different times and all from the one cause, vibrations, concluded that they constituted a “series of accidents” so that the limit of $1000 was applicable to the total.”

[30] He continued “…I would regard the occurrence or occurrences to which the proviso refers not as the injuries suffered by the infant claimants but rather as the relevant events precedent to that injury, each of which had the same source or original cause and formed, with the others, a series of occurrences such as is referred to in the proviso”.

[31] More recently in Windsurf Pty Ltd v HIH Casualty and General Insurance Ltd [1999] QCA 360, de Jersey CJ at para 7 considered a definition of “occurrence” in terms similar to that in the broad form liability section definition (vide para 16 hereof). He referred to the trial judge’s observation that an event was “something that happened at a particular time, at a particular place, in a particular way…an occurrence or an incident”.

[32] In that particular case a pedestrian was injured when a carpet which had been negligently laid shifted as she walked upon it. The contention that the “occurrence” or the “event” was the negligent laying of the carpet and the related negligent inspection was rejected. At para 9 de Jersey CJ observed –

“The use of the word “event” would ordinarily invite one to focus on the proximate or immediate incident leading to the injury, here the shifting of the carpet, which occurred outside the period of insurance. The word means something which happens (The Macquarie Dictionary), an incident (Shorter Oxford English Dictionary). What, in ordinary parlance, was the “event”, the happening or incident, from which Mrs Colston’s injury flowed? Surely the shifting of the carpet and her fall. That conclusion itself answers an additional contention for the appellant, that the injury could be seen to have resulted from more than one occurrence.”

[33] His Honour applied the observations of Stephen J in Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd(1973-1974) 130 CLR 1 at 20 (vide para 27 hereof).

[34] In my view unless the words “event” and “occurrence” used in this policy may properly encompass the only thing common to all deficient installations which was the adoption by MGM of the same unworkmanlike and unacceptable method of installation of the waterproof membranes during the period of insurance when performing sub-contract work for Glenwood, QBE must succeed.

[35] In my view such a construction would depart from the ordinary meaning of event which is something which has “happened at a particular time, at a particular place, in a particular way…an occurrence or an incident”.

[36] In my view it was the unworkmanlike application of the membrane on each of the occasions it was installed in the many houses in respect of which MGM contracted with Glenwood which was the “event” or “occurrence” against liability for which MGM was entitled to be indemnified by QBE. It would be an unsustainable construction of the policy to hold that the relevant “event” or “occurrence” was the adoption, probably prior to the commencement of the operation of the policies, of an unacceptable method of doing subcontract work for Glenwood in the future so that each of the deficient installations could then be treated as a consequence of that one event or occurrence.

[37] Similarly in my view the provisions in the policy which refer to “continuous or repeated exposure to substantially the same conditions” (vide para 18 hereof) do not upon proper construction permit the unworkmanlike method of membrane installation by MGM to be categorised as a “condition” exposure to which caused all the deficient membrane installations to “arise”.

[38] Those provisions, in my view were directed to cases such as where a building operation conducted over a period of time causes damage to separate properties or different persons by the escape from the site of vibrations, noxious substances, etc.

[39] I take a similar view as to the proper application of the definition of “occurrence” in the broad form policy definition (vide para 22).

[40] In my view the proximate occurrence or event upon the facts of this case in respect of which MGM was indemnified by QBE was the unworkmanlike and unacceptable installation of each waterproof membrane when it was effected pursuant to the terms of each subcontract with Glenwood.

[41] I therefore make the following declarations –

 

1. Each occurrence of property damage to an individual property as a result of alleged defective waterproofing works performed by MGM Plumbing Services Pty Ltd and particularised by Glenwood Homes Pty Ltd which forms part of the claim by Glenwood Homes Pty Ltd against the respondent is a separate occurrence under the relevant policies of insurance which MGM Plumbing Services Pty Ltd held at material times with QBE Insurance Ltd.

2. MGM Plumbing Services Pty Ltd is obliged to pay the $300 excess to QBE Insurance Ltd on each and every claim particularised by Glenwood Homes Pty Ltd which falls under the relevant policy of insurance held by MGM Plumbing Services Pty Ltd with QBE Insurance Ltd.

[42] I order that MGM Plumbing Services Pty Ltd pay the standard costs of QBE Insurance Ltd to be assessed.

[43] Liberty to apply with respect to the order for costs.

Close

Editorial Notes

  • Published Case Name:

    QBE Insurance Ltd v MGM Plumbing P/L

  • Shortened Case Name:

    QBE Insurance Ltd v MGM Plumbing Pty Ltd

  • MNC:

    [2003] QSC 27

  • Court:

    QSC

  • Judge(s):

    Ambrose J

  • Date:

    19 Feb 2003

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status