- Notable Unreported Decision
SUPREME COURT OF QUEENSLAND
General Motors Acceptance Corp Aust v RACQ Ins Ltd  QSC 080
GENERAL MOTORS ACCEPTANCE CORPORATION AUSTRALIA ARBN 007 480 382
2282 of 2002
19 February 2003
12 February 2003
MOTOR VEHICLES – INSURANCE – CONSTRUCTION OF POLICY – INSURANCE CONTRACTS ACT – MOTOR VEHICLES RISKS INSURED – applicant claimed the benefit of policy of insurance as a third party – whether insurer able to resist payment to the third party on the same grounds relied on to decline payment to the insured – whether applicant is to be regarded as ‘the insured’ under the policy of insurance – application of s 48(1) of the Act
Insurance Contracts Act 1984 (Cth), s 48
Uniform Civil Procedure Rules, r 483(1)
C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25
Commonwealth Bank of Australia v Baltica General Insurance Co Ltd  28 NSWLR 579
GIO Australia Ltd v P Ward Civil Engineering Pty Limited  NSWSC 371
MacDonald v C E Heath Underwriting & Insurance (Australia) Limited (1997) 9 ANZ Ins Cas 61-362
Trident General Insurance Co Ltd v McNiece Bros Pty Limited (1988) 165 CLR 107
V L Credits Pty Ltd v Switzerland General Insurance Co  VR 938
R P S Jackson for the applicant
S L Doyle SC, with him D Kelly, for the respondent
Corrs Chambers Westgarth for the applicant
O’Shea Corser & Wadley for the respondent
The matter for determination
- The issue to be determined in these proceedings (by way of determination of preliminary questions or issues under r 483(1) of the Uniform Civil Procedure Rules on an agreed statement of facts) are whether the applicant financier is precluded from recovering its loss under a policy of insurance entered into by the insured borrower with the respondent insurer –
- Pursuant to s 48(1) of the Insurance Contracts Act 1984 (Cth); or
- Alternatively, at common law under the principle enunciated in Trident General Insurance Co Ltd v McNiece Bros Pty Limited (1988) 165 CLR 107.
- The applicant financed the purchase by the insured of an off road vehicle which the insured insured under a policy of insurance with the respondent. “The applicant’s interest in the vehicle is noted on the policy of insurance.” Either the insured or someone at her direction deliberately destroyed the vehicle, the insured made a fraudulent claim in respect of its loss and the respondent is not obliged to indemnify her.
The applicant’s submissions
- The purpose of s 48 of the Act is to overcome the doctrine of privity of contract;
- Section 48(3) makes applicable to a third party’s claim any contractual limits provided for in the policy; but the effect of the subsection is not to enable an insurer to resist payment merely because it would have grounds for declining payment to the insured. Rather the insurer may resist payment to the third party if facts are established against the third party which, if established against the insured, would have enabled the insurer to avoid payment;
- The policy covers the insured against accidental loss or damage. “Accident” is defined in terms of an event which is “unexpected and unintended” from the point of view of the insured. For the purposes of the claim, the applicant is to be regarded as the insured. The relevant event was “unexpected and unintended” from the applicant’s point of view and thus an accident.
- Before addressing these contentions, it is desirable to set out the relevant provisions of the Act, the policy and the policy certificate.
Section 48 of the Act
“48 Entitlement of named persons to claim
(1) Where a person who is not a party to a contract of general insurance is specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends, that person has a right to recover the amount of the person's loss from the insurer in accordance with the contract notwithstanding that the person is not a party to the contract.
(2) Subject to the contract, a person who has such a right:
(a)has, in relation to the person's claim, the same obligations to the insurer as the person would have if he were the insured; and
(b)may discharge the insured's obligations in relation to the loss.
(3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured. (emphasis added)”
The relevant provisions of the policy
- Relevant provisions of the insurance policy are as follows:
“‘You’ means person or persons shown as the insured on the policy certificate
If motor comprehensive insurance is shown on your policy certificate, we insure you against theft or of damage to your vehicle (including its tools or accessories attached to it or in it at the time) caused by an accident occurring during the insurance term.
‘An accident’ is an event that is unexpected and unintended from your point of view and that occurs during the insurance term
Your policy covers you only when the insured vehicle is being used:
-. privately for social, domestic or pleasure purposes, including tuition, when the tuition is given free; or
.in connection with a business, but only if:
-used for business is shown on your policy certificate; and
-it is not a caravan
Whatever type of insurance you have your policy does not cover you if any accident, loss, damage, theft or legal liability:
.arises directly or indirectly out of:
-your intentional acts or the intentional acts of a person in control of your vehicle with your permission …
- OTHER INTEREST
Your policy does not cover the interest of another person in the insured vehicle unless that interest is shown on your policy certificate.
- WHAT CAN AFFECT YOUR ENTITLEMENT
… If you or any other person makes a false or fraudulent claim, we can refuse to pay it.
In either case we may also cancel the policy, as permitted by law.
12.1THE AGREEMENTS BETWEEN US
If two or more persons are named as the insured on the policy certificate, each of them are (sic) responsible both individually and together for:
compliance with the conditions of the policy.”
The policy certificate
- The certificate relevantly states –
“Motor Comprehensive Insurance [These words are typed at the top right hand corner of the policy]
policy holders [the insured’s name is inserted]
vehicle finance GMAC finance
drivers [the insured’s name and the name of another person are inserted].”
Is the applicant an “insured” entity within the meaning of the policy or otherwise specified or referred to in the contract “… as a person to whom the insurance cover .. extends”?
- The respondent argues that the applicant is not “a person … specified or referred to in the contract … as a person to whom the insurance cover … extends”. Its point is that the applicant is not shown on the certificate as the insured or identified as a person covered by the policy and that the purpose and effect of its name being stated in the certificate, viewed in the light of clause 9.5, is to provide cover to the insured for the mortgagee’s insurable interest in the vehicle.
- The respondent’s contentions concerning the inapplicability of s 48 of the Act, arguably, are inconsistent with the agreed statement of facts which record in para 4 - “The applicant’s interest in the vehicle is noted in the policy of insurance.”
- It is conceivable also that extrinsic evidence relevant to the construction of the policy certificate could be lead and also that such evidence may be relevant to a case that the respondent is estopped from denying cover to the applicant.
- Despite these considerations the applicant chose to continue with the hearing in its present form and I concluded that it is possible and desirable to determine the issues in dispute. That can be done by reference to clauses 3.1, 8.1 and 9.4 without the necessity of ruling on the merits of the first point raised by the respondent.
The effect of Clauses 3.1 and 8.1
- Clause 8.1 restricts the cover provided under the policy to damage to the insured vehicle incurred “when the insured vehicle is being used” for nominated purposes. It follows, in my view, from the fact that the vehicle was destroyed deliberately by the insured or by another at her behest that the damage to the vehicle could not have occurred when it was being used for one of the nominated purposes.
- The applicant seeks to counter this argument by contending that clause 8.1 is “directed to the general use of the vehicle … and does not .. equate events such as theft and destruction with use”. It is further asserted that deliberate damage or destruction is dealt with by clause 9.4 to the exclusion of other provisions. I do not accept these arguments which seek, without justification, to limit the scope of a provision which assists in defining the extent of the policy cover by reference to a provision which has quite a different operation. The effect of clause 9.4 is to deny cover in circumstances in which cover otherwise would have been afforded under the terms of the policy where the damage to the insured property was sustained in a prescribed manner.
- I am fortified in my decision to determine the preliminary issue by my conclusion that clause 3.1 poses an insuperable obstacle to success by the applicant. Although the respondent did not rely specifically on that provision in its outline of submissions it did so in the course of the hearing.
- As the cover is for motor comprehensive insurance it is relevantly limited to “damage to your vehicle … caused by an accident”.
- “Accident” is defined in clause 3.1 as follows –
“An accident is an event that is unexpected and unintended from your point of view and that occurs during the insurance term.”
- It is common ground that the person shown on the policy certificate as the insured does not include the applicant. The applicant contends that, insofar as it is concerned, the loss or damage did not occur by “accident” as an event can be “an accident” only if it is “unexpected and unintended from your point of view” (emphasis supplied). Here, it is said, the burning of the car is plainly an accident because it was unexpected and unintended from the point of view of the applicant, even though it was expected and intended from the insured’s point of view.
- I cannot accept this construction. I consider it plain that, in the definition of accident, “your point of view” is a reference to the point of view of the insured. That follows as a matter of construction from clause 3.1, the definition of “accident” and the definition of “you”. “You” is the person shown as the insured on the policy certificate. Clause 3.1 relevantly provides –
“If … is shown on your policy certificate, we insure you against theft or damage to your vehicle …”. (emphasis added)
Plainly, “you” and “your” are references to the insured. As the definition of “accident” is in the same clause it would be most surprising if the word “your” in it meant someone other than the insured.
- Moreover, the role of the clause is to identify the scope of the cover. That cover, in the case of clause 3.1, is for “damage to your vehicle”, but only where such damage results from an accident.
- If there had been no definition of “accident” included in the policy, it could not have been argued by the insured that the deliberate damage to the vehicle caused by fire was not the result of an accident. Equally, it would not have been possible for the applicant to contend, credibly, that the damage, although deliberately caused by the insured, should be regarded as accidental for the purposes of clause 3.1. I cannot see that the definition changes this result. It focuses on the point of view of the insured who is the person who has taken out the policy, and thus makes irrelevant the knowledge or understanding of the respondent.
- These considerations have application to clause 8.1. The applicant asserts that the respondent’s claim is not precluded by clause 8.1 because the words “your policy covers you” necessitate the conclusion that the clause relates only to the cover provided to the insured. I find that argument unconvincing. As with clause 3.1, clause 8 identifies the extent of the cover provided under the policy. In the latter case, it identifies the cover as being extended only when the vehicle is being used in a prescribed manner.
- To reach a conclusion contrary to that expressed above would be to alter fundamentally the nature of the risks insured against under the policy. On the applicant’s argument, it would be covered by the policy even if, for example, the vehicle was used for business in circumstances in which business use was not permitted under the policy or where the vehicle was damaged when used for the specifically excluded purpose of giving tuition for remuneration. Also, the applicant would be entitled to cover for deliberate as opposed to accidental loss or damage. To my mind, such a result would be rather improbable and ought not be arrived at readily.
- The applicant seeks to avoid these difficulties by reliance on the reasons in V L Credits Pty Ltd v Switzerland General Insurance Co. In that case, the lessee and the mortgagee of premises insured the premises with the defendant. The plaintiff was the assignee of the interests of both the lessee and the mortgagee under the policy. For the purposes of the hearing, it was accepted that the premises should be regarded as having been destroyed by a deliberate act of the lessee. The construction argument centred on a clause which permitted the insurer to avoid the policy for fraudulent non-disclosure or misrepresentation and which reduced the insurer’s liability in the event of non-fraudulent misrepresentation or failure to disclose. It was held that, on the proper construction of the clause, the reference in it to a claim by an insured, where there was more than one insured, was a reference to the co-insured who made the claim.
- It may be seen from the foregoing summary of fact that the construction issue determined in that case has little to do with the construction of the subject policy. It did not concern an argument that the scope of the cover afforded by the policy (as distinguished from the application of a disqualifying event) differed depending on whether a claim under it was made by the insured or by a person with a notified insurable interest.
- The applicant also placed reliance on VL Credits for its argument that its claim was sustainable under s 48 of the Act. Particular support was sought to be derived from the following passage in the reasons –
“Sub-section (3) means, in my opinion, that if facts are proved against a person making a claim under s 48 which, had they been proved against the insured in the event that he made a claim and would have afforded a defence to the insured’s claim, they afford a like defence against the person making a claim under s 48. The person making a claim under s 48, not being a party to the contract of insurance, would ex hypothesi not be bound by all the terms of it. It is not really an answer to say that sub-s (2)(a) binds him in relation to his claim in respect of all the obligations which bound the insured. What sub-s(3) is designed to do, I think, is to ensure that the insurer is entitled to take advantage against a person who claims under s 48 of all the provisions of the contract in addition to those which might be brought in by sub-s(2)(a) and to prove against the claimant facts which would provide a defence had it been the insured making the claim and not a stranger to the contract.”
- Doubt was cast on the correctness of the above passage by Clarke JA, with whose reasons Meagher JA agreed, in C E Heath Casualty & General Insurance Ltd v Grey.
- The applicant’s principal difficulty though in relation to s 48 is that its right to recover under s 48(1) is a right to recover “in accordance with the contract”. Neither the insured nor any person whose interest is noted on the contract has a right to recover under it for non accidental loss and damage or for damage caused when the vehicle is being used other than in a prescribed manner.
- Clause 48(1) does not operate to extend the scope of cover provided by the policy and a person in the position of the applicant must take the policy as he finds it. In MacDonald v C E Heath Underwriting & Insurance (Australia) Limited, Priestly JA, with whose reasons the other members of the court agreed, expressed the relevant concept this way –
“Put slightly differently, s 48(1) seems to me to be dealing with cases where (i) cover is provided by a contract of general insurance to a party to that contract and (ii) that cover is extended by the contract to a person specified or referred to in the contract. In those circumstances the person has a right to recover in accordance with the indemnity provided to the contracting party.”
- I also accept the respondent’s argument that the applicant’s claim is defeated by clause 9.4 of the policy. On the statement of agreed facts the damage to the vehicle “arises directly or indirectly out of … your intentional acts or the intentional acts of a person in control of your vehicle …”. It may also be said that the damage arises “directly or indirectly out of … failure by you or a person in control of your vehicle with your permission, to take reasonable precautions for the safety and security of your vehicle”.
- If, on occasions, it is permissible to regard the applicant as coming within the meaning of “your”, “your vehicle” in clause 9.4 can be a reference only to the insured vehicle. The damage, as agreed facts make plain, was caused by “the intentional acts of a person in control of your vehicle” and/or by “failure by … a person in control of your vehicle with your permission, to take reasonable precautions for the safety and security of your vehicle”.
- The applicant, by necessary implication, left the vehicle in the control of the insured and any nominated driver and such a person intentionally damaged the vehicle. Cover is thus excluded even if the applicant’s contentions about the meaning of “your” are accepted.
- For the above reasons, the applicant’s construction fails. I will hear submissions on the appropriate form of order and costs.
- Published Case Name:
General Motors Acceptance Corp Aust v RACQ Ins Ltd
- Shortened Case Name:
General Motors Acceptance Corporation Australia v RACQ Insurance Ltd
 QSC 80
19 Feb 2003
- White Star Case:
No Litigation History