Thiess Pty Ltd v ERC Frankona Reinsurance Limited
[2007] QSC 4
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Notable Unreported Decision
- Thiess Pty Ltd v ERC Frankona Reinsurance Limited[2007] QSC 4
- Add to List
Thiess Pty Ltd v ERC Frankona Reinsurance Limited[2007] QSC 4
Thiess Pty Ltd v ERC Frankona Reinsurance Limited[2007] QSC 4
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial | |
PROCEEDING: | Trial |
ORIGINATING COURT: | |
DELIVERED ON: | 11 January 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 18 December 2006 |
JUDGE: | Chesterman J |
ORDER: | 1.A declaration that the defendant is bound by general condition 17 of the contractor’s floater policy of insurance 548/CC0952299 to indemnify the plaintiff in the sum of $364,002.98; and 2.judgment for the plaintiff against the defendant for the sum of $364,002.98, together with interest at 9 per cent per annum from 3 June 2004. |
CATCHWORDS: | INSURANCE – GENERAL – POLICIES OF INSURANCE – CONSTRUCTION – plaintiff held a policy of insurance underwritten by three insurers – defendant insurer agreed to be bound by ‘notification to or from or agreements effected with’ leading insurer – plaintiff submitted, and leading insurer accepted and paid out, claim under the policy – construction – whether defendant bound by leading insurer’s acceptance of plaintiff’s claim – whether defendant liable to indemnify plaintiff in respect of its underwritten proportion Barlee Marine Corporation v Mountain [1987] 2 Lloyd’s Rep 152, considered Bonner v Cox [2006] 2 Lloyd’s Rep 152, considered Hurst v W J Lake & Co 16 P.2d 627, 1932 Irish Shipping Ltd v Commercial Union Assurance Co plc [1991] 2 QB 206, applied Lindsay v Smith [2002] 1 Qd R 610, cited LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74, considered Lubovsky v Snelling [1944] KB 44, considered Newton, Bellamy & Wolfe v State Government Insurance Office (Qld) [1986] 1 Qd R 431, applied Roar Marine Ltd v Bimeh Iran Insurance Co [1998] 1 Lloyd’s Rep 423, applied Shore v Wilson (1839) 8 ER 450, cited Smith v Wilson (1832) 110 ER 266, cited |
COUNSEL: | Mr A M Pomerenke for the plaintiff Mr J C Faulkner for the defendant |
SOLICITORS: | Corrs Chambers Westgarth for the plaintiff Moray & Agnew for the defendant |
[1] The plaintiff (formerly known as Thiess Contractors Pty Limited) was an insured under a contractor’s floater policy of insurance, 548/CC0952299, which was in force between 30 June 1999 and 30 June 2002. The policy was issued by three underwriters: AXA Global Risks (UK) Ltd (‘AXA’); the defendant; and GIO Insurance Ltd (‘GIO’). The policy provided that the underwriters’ proportions of the underwriting risk should be borne as to 45 per cent each by AXA and the defendant and 10 per cent by GIO. The policy indemnified the plaintiff (and associated companies) against losses arising out of the conduct of its business as a civil engineering contractor. The policy covered losses of defined types arising from the performance of most of the plaintiff’s construction contracts in most parts of the world. There were exceptions for some types of construction and for some locations.
[2] Clause 17 of the policy provided:
‘LEADING INSURER’S CLAUSE
It is understood and agreed by all Insurers hereon that notification to or from or agreements effected with the Leading Insurer, AXA Global Risks (UK) Ltd, in all matters relating to this Policy shall be binding on all Insurers except in respect of the relevant agreements required under Condition 5 applicable to Sections A and B.’
This compact litigation turns upon the meaning of the clause.
[3] On 31 March 2000 the plaintiff made a claim under the policy by sending a facsimile transmission to Lowndes Lambert (Australia) Pty Ltd in accordance with the policy, clauses 7 and 9 of which provided respectively:
‘7.CLAIMS PROCEDURE
For all losses immediate advice is to be given to any office of the Lowndes Lambert Group and the Insured is to defer proceeding with repairs until Insurers or the Loss Adjuster have made a preliminary survey.’
and
‘9.NOTICES
It is agreed that any notice(s) required by the Conditions of this Policy to be given to the Insurers may be given by the Insured to any office of the Lowndes Lambert Group …’
[4] The subject matter of the claim was described in these terms:
‘Thiess is constructing the Pacific Motorway concrete pavement using a 2 lane CMI Suburban Concrete paver. The Motorway pavement is 4 lanes wide, hence a 2 lane ‘flat’ run is constructed first followed by a 2 lane ‘crown’ run.
…
A length of approximately 4700m of flat run paving may exhibit voiding between the Y12 tie bar which is inserted at a nominal depth of 100mm, and the finished pavement surface.
…
… the onsite laboratory had been wrongly testing and reporting the densities of concrete cores …
The laboratory’s incorrect method of density testing enabled all cores to pass the specified density requirement …
This failure to report densities in the correct manner resulted in management being unaware of the failure in the concrete paving process.
…
The presence of voids in the production process represents a failure of either equipment and/or process to replicate the results achieved in the paving trials.’
[5] The loss adjuster appointed by the policy was Cunningham Australasia. An employee of Lowndes Lambert requested Cunningham Australasia to investigate the claim which it duly did. On 28 April 2000 Lowndes Lambert wrote to the plaintiff:
‘We confirm that your Insurer has been advised of the following claim:
OUR CLAIM NO | : | 33841 … |
CLASS | : | Contract Works – Floater |
POLICY NO | : | CC0952299DUE DATE: 30/06/00 |
EXCESS | : | $500000 |
DETAILS OF LOSS | : | Voids in concrete paving. |
DATE OF LOSS | : | 29/03/00 |
LOCATION | : | … Pacific Motorway … |
GROSS ESTIMATE | : | $3200000 |
… | ||
COMMENTS | : | Cunningham Australasia have been appointed to assess the damage. |
If you wish to discuss any aspect of your claim, please contact us. | ||
[6] On 28 March 2001 the plaintiff sent to Cunningham Australasia, as it had requested, a ‘completed and signed declaration of loss incorporating claims discharge’. That document provided that Mr Parker, on behalf of the plaintiff, declared that in the period covered by the policy:
‘… a LOSS occurred at PACIFIC MOTORWAY PROJECT PACKAGE 4 … occasioned by VOIDS IN CONCRETE PAVEMENT’
and that
‘the property … insured under [the policy] was DAMAGED’
and the plaintiff claimed $808,895.50.
The document concluded:
‘CLAIM DISCHARGE
Subject to and upon acceptance of the above claim I/We agree that payment of the sum of [$808,895.50] shall constitute full settlement and discharge of the claim set forth in the above declaration.’
[7] The amount claimed under the policy was the amount of the adjusted loss less the policy excess of $500,000.
[8] On 23 February 2004 Mr Brown, on behalf of AXA, emailed Mr Dawson, an employee of Marsh Ltd, the plaintiff’s insurance broker. He wrote:
‘I have reviewed the above case in conjunction with counsels advise (sic) as supplied by Moray Agnew. We confirm that we are prepared to deal with this loss under the policy and request that you raise the appropriate class sequence.
Could you please advise if you require any further information for co insurers.’
[9] What was meant by the term ‘class sequence’ is not immediately apparent. The term was explained by Mr Dawson in an affidavit in which he deposed that he has worked for 20 years as an insurance broker dealing with claims for commercial non-marine property and construction claims. He said:
•‘Class’ was an acronym for ‘claim advice and settlement system’.
•The system was an electronic facility used for many years by insurers including AXA and the defendant to manage the financial element of claim including settlement transactions between insurers and brokers.
• In the context of settlements a reference to a ‘class sequence’ was to an accounting entry which a broker can make on the ‘class’ facility, which an insurer can accept, so as to expedite payments between broker and insurer.
•The effect of an insurer’s acceptance of a transaction sequence on the class system is that the transaction will be allocated a unique identification number and monies will be transferred electronically to the broker within days.
•A request by an insurer to a broker to ‘raise the appropriate class sequence’ is a request to process the payment electronically by the class system.
[10] Mr Dawson’s evidence was objected to but it is clearly admissible. It has always been permissible to adduce evidence of the meaning of a technical term used in a contract, or a term which had a particular meaning to the parties which is not apparent to the ordinary reader. The leading cases are Shore v Wilson (1839) 8 ER 450 and Smith v Wilson (1832) 110 ER 266 which, together with other cases, were reviewed in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 in which reference is made to a judgment of the Supreme Court of Oregon, Hurst v W J Lake & Co 16 P.2d 627, 1932, in which it was said that the court when construing the language of the parties must ‘adopt their vernacular.’
[11] AXA’s e-mail of February 2004 was not a contract but it was a document of contractual effect and concerned the parties’ legal relationship pursuant to the contract of insurance between them. It is not possible to know what the parties meant by their communication without the assistance of Mr Dawson’s affidavit.
[12] On or about 18 April 2004 AXA paid the plaintiff $364,002.98 being its (45 per cent) proportion of the amount claimed by the plaintiff pursuant to the policy. About a month later GIO paid the plaintiff $80,889.55 being its (10 per cent) proportion of the plaintiff’s loss. In June 2004 the defendant refused to pay its proportion of the amount of the plaintiff’s claim. The plaintiff has brought this action for a declaration that the defendant is bound to pay its proportion of the loss in accordance with the policy and for judgment for the amount, together with interest.
[13] The plaintiff submits that the defendant is bound by AXA’s acceptance of its claim and that clause 17 of the policy obliges the defendant (as it did GIO) also to accept the claim and to pay its proportion of the loss. The defendant resists the plaintiff’s claim on the basis that clause 17 does not apply to claims made under the policy and their settlement by an insurer or, in the alternative, the clause does not bind the defendant to pay a claim that does not fall within the ambit of the cover offered by the policy.
[14] The commercial purpose of clauses such as condition 17 is clear enough. The presence of more than one subscribing underwriter to the policy means that the insured, here the plaintiff, has made three separate contracts of insurance, one with each of the insurers. The contracts are in identical terms save for the individual proportions of the risk each insurer took. What the parties to such an arrangement intended to achieve is that for all practical purposes there should be one contract which, if the circumstances so fell out, would lead to one claim rather than separate claims upon separate insurers. To avoid a multiplicity of communications and differences of opinion between insurers the leading insurer clause is meant to achieve unanimity of opinion and action in dealings between insured and insurers.
[15] The matter was explained by Sir John Megaw in Irish Shipping Ltd v Commercial Union Assurance Co plc [1991] 2 QB 206 at 230-1. The judge said:
‘If there were here 77 separate contracts of insurance, with different insurance companies incorporated in a variety of different countries, and if there were no legal constraint on the individual insurers, preventing them from following each his own chosen path in any dispute which might arise with the assured, the result, however tidy it might appear as a matter of legal theory, would seem to be potentially anarchic from the practical business point of view – certainly from the point of view of the assured, who would naturally regard himself as being the party to one single policy of insurance, not to 77 contracts. There are many paths which unconstrained and independent-minded insurance companies of varying nationalities might be disposed to tread; involving, conceivably, varying views and contentions as to the proper forum, the proper law, the situs of liability under its particular contract, the construction of the contractual terms, or question of fact affecting the existence or the quantum of liability. If only 10 per cent. of the separate contracting insurers saw fit to follow independent paths, the resulting situation would be, to put it at the lowest, seriously unsatisfactory both from the viewpoint of the international insurance market, and of the assured and of the non-diverging insurers.
In order to avoid such potential anarchy, a leading underwriter clause is commonly introduced. Its purpose is to impose a contractual restraint, binding each insurer as a result of his agreement, vis-à-vis the other insurers and vis-à-vis the assured, against, among other things, the taking of separate defences, or the assertion of separate claims, by individual insurers.’
[16] The leading insurer clause in question in that case was in these terms:
‘All extensions, reductions or cancellation of risks or of conditions, all fixing of premiums, all settlements of claims or contestations whatsoever and in general all dispositions of whatsoever nature taken by the leading underwriter, will be binding upon all underwriters and carry with them the unanimous consent of all the underwriters of this contract.
All co-insuring underwriters hereby expressly authorise the leading company to sign policies or endorsements for their account and hereby undertake to consider documents so signed as having been signed by themselves.
The undersigned insurance companies declare themselves liable for their respective share for all decisions taken against the leading company.’
[17] It will be seen that that clause was more detailed than clause 17 and specifically identified the topics in respect of which the leading insurer could bind the others.
[18] The purpose and utility of ‘leading insurer’ clauses has also been discussed by Mance J in Roar Marine Ltd v Bimeh Iran Insurance Co [1998] 1 Lloyd’s Rep 423. The clause there in question was:
‘It is agreed with or without previous notice to follow leading British Underwriters in regard to agreements, alterations, extensions, additions, endorsements and cancellations and attaching and expiring dates, and also in regard to all decisions, surveys, the providing of bail and settlements in respect of claims and returns, but excluding ex gratia and without prejudice settlements.’
[19] Mance J said of the clause (at 427):
‘Its clear prima facie effect is to entrust to the leader all decisions, matters relating to survey … and claims settlements. The commercial reasons why both the insured and the following market should find advantage in such an arrangement are obvious. From insurers’ viewpoint, it is bound not only to save time and cost, but must also make such a co-insurance more marketable and attractive to those seeking insurance.’
[20] One of the insurers sought to avoid the consequence of the clause. It complained that the leading insurer had wrongly admitted liability for a claim which, in fact, fell outside the ambit of the policy. It sought to adduce evidence of a ‘market practice’ to show that the clause did not mean what it said. The practice was said to provide a factual matrix which would assist in the construction of the clause. Mance J rejected the evidence. His Lordship said (at 430):
‘The only matrix of any real relevance … is … to be found in the obvious commercial purpose of the clause in simplifying administration and claims settlement. The defendants’ construction undermines that purpose to a very fundamental extent. All a follower apparently has to do is to dispute the leader’s … assessment of the facts and the leader’s settlement ceases to be of relevance. The dispute must then be resolved or determined by agreement or litigation before the follower can be obliged to pay.’
[21] In dealing with the insurer’s claim that it could, independently of the lead insurer’s determination, decide for itself whether to accept the insured’s claim Mance J held that the clause bound the insurer to ‘follow the leader’ so that the insurer was bound by the lead insurer’s decision. He said (at 427):
‘The defendants now wish to say that the cause of the damage was … another cause not involving … any insured peril … They wish in short to re-investigate the factual cause. Their complaint that the plaintiffs settled a claim which was “outside the perils insured against” blurs the significance of their contention. The situation is not one where, on the view of the facts taken by and on behalf of the leader, there was in law no peril insured against or no insurance cover; it is unnecessary even to consider the correct analysis of such a situation. The defendants wish in reality to be treated as if they were the leader or as if there was no leader at all responsible for factual investigations and claims settlement. The plaintiffs submit that this is exactly what the “follow the leader” clause covers and precludes. On the face of it the plaintiffs are clearly right.’
[22] The judge also declined to imply into the clause a term that the lead insurer must have settled the insured’s claim in a proper and businesslike way. If the claim had not been settled in such a manner the breach in the implied term would mean that the settlement was not binding on the following insurers: they were bound only by a settlement that was proper and businesslike. In rejecting the implication Mance J said (at 430):
‘In the present context, there is mutuality of interest between insurers. Following insurers agree with the insured to be bound by settlements handled and made by their leading British co-insurer … The insured does not control the way in which the leading underwriters handle or settle the claim. Following underwriters accept both the advantages and any risks of the leading underwriters’ handling of settlements and of other matters affecting them. This is reinforced by the presence of two express exceptions to the following market’s duty to follow … There is no basis for further qualifying the operation of the … clause … The qualification would in reality undermine its purpose and operation.’
[23] As I mentioned clause 17 differs in form from the clauses which were the subject of discussion in the cases I have discussed but there is no reason to think that the object of clause 17 is any different to those others. They specified with some particularity the respects in which the lead insurer might bind the following insurers. By contrast the draftsman of clause 17 expressed the authority of the lead insurer in general terms. Relevantly ‘agreements effected with … AXA in all matters relating to this policy’ were to be binding on the other insurers. There was one exception: the agreements referred to in condition 5 of sections A and B of the policy. They allowed for an extension of cover both as to subject matter and time limit, but only if all insurers agreed to accept the extra risk. An agreement falling within condition 5 of sections A and B made with the lead insurer only would not bind the others. It should be said that the plaintiff’s claim does not arise out of any circumstance connected with condition 5 of sections A and B. They are irrelevant to the action.
[24] The existence of the exception in clause 17 has this relevance, that it shows that the generality of the language of the clause is not to be cut down by implications. The draftsman made it clear what class of agreement relating to the policy made by the lead insurer would not bind the others.
[25] The defendant submits that clause 17 does not expressly refer to claims settlements at all and that if the parties had intended that co-insurers should be bound to claim settlements made by the lead insurer the clause would have said so expressly.
[26] The submission might have some force if the clause had specified some subject matters with respect to which the lead insurer might bind the co-insurers and if claims settlements had not been included in the specified subject matter. The clause, as I have pointed out, does not take that form. It recites generally that the insurers are to be bound by notification given to or by the lead insurer and agreements effected by it ‘in all matters relating to the policy’.
[27] The defendant’s submission goes on:
‘… there is a demarcation in clause 17 between matters relating to the policy, its terms, conditions, mechanics and administration on the one hand and claims on the other. Clause 17 deals with the former being matters that would ordinarily require the agreement of all. Without being exhaustive, it would include …
(a)an assignment being binding on the insurers
(b)an agreement in respect to a particular contract be covered
(c)an agreement that a particular entity be added as a named insured
(d)the identity of the loss adjuster to be used
(e)an agreement as to when notice is to be given
(f)alterations to the terms and conditions regarding alteration of a material fact
(g)… alteration of the insured risk under the policy or an extension of the time for which cover is provided.’
[28] The submission does not explain why clause 17 does not, or cannot, apply to the settlement of claims made by an insured and addressed, as the policy itself requires, to the insurer’s nominated broker and adjuster. There is nothing in the brief expression of clause 17 which marks a distinction between those matters which may, and those matters which may not, be dealt with by the lead insurer on behalf of the co-insurers, save for the reference to condition 5, sections A and B.
[29] The defendant also complains that if claims and their settlements were not excluded from the operation of clause 17 a following insurer might be held liable to contribute to a loss which does not in fact fall within the ambit of the policy.
[30] This was the point made and rejected in Roar Marine. The predicament bemoaned by the defendant is a consequence of the agreement it made with the lead insurer and the insured. This is no reason for perturbation. In the event that a leading insurer improperly settles a claim by the insured, whether negligently or dishonestly, the co-insurer will have the remedy against it. As Hirst J pointed out in Barlee Marine Corporation v Mountain [1987] 1 Lloyd’s Rep 471 at 475:
‘Underlying the whole relationship between the leading underwriter and the following underwriters … is the former’s manifest duty of care’
although the Court of Appeal in Bonner v Cox [2006] 2 Lloyd’s Rep 152 at para 95 thought the question was still an ‘“open” one.’
Moreover a co-insurer can protect its position as against the leading insurer’s impropriety in handling claims by express agreement.
[31] The defendant next contends that if clause 17 ‘is broad enough to cover claims settlements it cannot … be broad enough to bind following insurers beyond the terms of their respective policies of insurance … had the parties intended this result it would have been a simple matter to state so expressly.’
[32] This point is really the same as the first and is met by the same answers as well as the commercial purpose of clause 17. It is to give business efficacy to the contract of insurance that the co-insurers agree to be bound by the leading insurer. The purpose of the clause is to create, in effect, one policy of insurance rather than separate ones with individual insurers. To achieve that efficiency, and the business it will generate, the following insurers agree to ‘follow the leader’. By clause 17 they gave the lead insurer, AXA, authority to act on their behalf in dealings with the insured and agreed to be bound by the agreements made by AXA in that regard. They gave up the right to decide for themselves whether, e.g. a claim should be accepted, and for how much.
[33] The defendant’s submissions require reading into the clause words of limitation that the parties did not employ. They exclude from the operation of the clause a class of dealings which the parties did not think it necessary to mention.
[34] There is no warrant for reading into clause 17 words which are not there and which would cut down the generality of its effect which was surely intentional. The defendant’s submission would severely curtail the effect and effectiveness of clause 17. The defendant does not point to any provision of the policy which is inconsistent with the generality of expression found in clause 17 and which might require it to be curtailed to make sense of the policy as a whole, or to any other circumstance which would suggest that the plain words of the clause should not be allowed to mean what they say.
[35] The question in the case thus comes then to whether AXA’s acceptance of the plaintiff’s claim was an ‘agreement effected with … AXA … in [a] matter relating to the policy’. If it was, the agreement was binding upon the defendant.
[36] There can be no doubt that the plaintiff’s claim to be indemnified against its loss pursuant to the terms of the policy related to the policy. Something more essential to a policy of insurance than a claim for indemnity under it cannot be imagined. The same can be said of the insurer’s payment by way of indemnity pursuant to the policy. It is clear, then, that the claim and the payment by AXA and GIO were matters relating to the policy. The outstanding question is whether AXA’s acceptance of the claim amounted to an agreement effected by AXA.
[37] The point to be decided is whether the plaintiff’s claim, communicated to the insurers’ brokers and approved by the appointed loss adjusters accepted by AXA as evidenced by its e-mail of February 2004 and payment constitutes an agreement.
[38] In my opinion an insurer’s acceptance of an insured’s claim necessarily connotes agreement. The acceptance is equivalent to a communication:
‘The loss for which you claim indemnity under the policy is one covered by the policy, none of the terms of which preclude acceptance of the claim and payment by way of indemnity for the loss. The insurer accepts the claim and will pay [or promises to pay] the amount of the loss approved by the adjuster.’
This is the language of agreement. Put more briefly, to accept a claim is to agree that the claim is valid and to promise, or impliedly promise, to pay it.
[39] Claims made under policies of insurance are potentially complicated. By way of introduction to such claims Professor Ivamy said, in General Principles of Insurance Law (2nd ed) at 327-329:
‘Should a loss take place under the policy, the assured may decide to make a claim … but he is only entitled to do so if the policy if a valid and subsisting one.
Thus, the parties may not be ad idem or the offer of the proposer may not have been accepted by the insurer. There may have been non-disclosure or misrepresentation … entitling the insurer to avoid liability … The premium may not have been paid in a case where the policy states that it is not to come into force until this has been done. The policy must not have been avoided through an alteration by the assured in a material particular, nor must it have expired before the loss takes place. There must have been no breach of a condition entitling the insurers to avoid liability.
… There can be no claim unless there is a loss caused by the peril insured against.
…
Further, the loss must not fall within an exception, nor must it have come about as a result of the conduct of the assured …
There are various requirements usually found in policies as to the method of making a claim and the time within which it must be made.
Further, the claim will not succeed unless the insurers admit it or the assured succeeds in discharging the burden of proving the loss has taken place and that his claim is justified.’
[40] Some of these difficulties may have been modified by the operation of the Insurance Contracts Act 1984 (Cth) but the point remains that an insurer’s acceptance of its insured’s claim does away with the potential uncertainties and their capacity to generate costs which the insurer may have to bear, if the claim is litigated, and replaces them with the insurer’s intimation (or promise) that it will pay the claim. There is, in accepting a claim, an element of compromise, or of admission that the insured is entitled as a matter of contractual right to the indemnity contained in the policy. The consideration is the benefit to the insurer that it will not be liable to pay the insured’s, and its own, costs of an action, and the detriment to the insured of forbearing to sue for the proceeds of the policy.
[41] The acceptance of the claim is in form and substance an agreement. Moreover it will normally amount to a contract, legally binding on the parties. In Newton, Bellamy & Wolfe v State Government Insurance Office (Qld) [1986] 1 Qd R 431 the defendant was the compulsory motor vehicle insurer of a driver who caused the death of the third plaintiff’s parents. The solicitors for the estate and the child corresponded with the insurer which eventually wrote to say ‘It is confirmed that liability is not an issue’. The parties could not agree upon the appropriate amount of damages and a writ was issued but after the expiration of the limitation period. The insurer pleaded the statute but it was held, at first instance and on appeal, that its intimation was an agreement to pay damages, to be agreed or assessed by the court, and there was to be implied into the agreement a term that the insurer would not rely upon the time bar prescribed by the Limitation of Actions Act 1974.
[42] Andrews ACJ and Derrington J said (at 437):
‘… the matter may be resolved on the basis that an agreement was reached between the parties.
The question thus is whether what is said between them contains an implied undertaking not to plead the statute …
Acceptance of liability is more than a bare admission of liability.
In any event the arrangement here is supported by consideration. The insurer by accepting liability offers the other party an inducement and impliedly requests him to forebear from taking action with avoidance of costs of formal proceedings at the expense of the insured’.
McPherson J said (at 444-445):
‘… Here it is not at all difficult to discern in the correspondence at least an implied request by the SGIO that the plaintiffs refrain from suing pending an investigation by the former of the circumstances of the accident. It was in consideration of this forbearance, which was both a detriment to the promisee and a benefit to the promisor, that in the end the SGIO agreed to accept liability …
… An agreement by a person to “accept” liability seems to me to amount simply to an agreement by that person that he is liable, which in the context means that he is liable for such of the plaintiff’s damages arising out of the incident as are either agreed or, in default of agreement, assessed by the court. Once the conclusion is reached that such an agreement has been made, and that is intended to be enforceable, the difficulty … disappears.’
[43] Newton was reaffirmed and followed in Lindsay v Smith [2002] 1 Qd R 610 at 615-617. In an earlier, similar case, Lubovsky v Snelling [1944] KB 44 both Scott LJ and Goddard LJ regarded a formal admission of liability by a motor vehicle insurer whose policy indemnified a negligent driver who had injured the plaintiff as an ‘agreement’. Goddard LJ said (at 47):
‘There was clearly an agreement made by the representative of the defendant’s insurance company with the plaintiff’s solicitor that liability was admitted, but that the amount of the damages was to be fixed and apportioned by the court.’
[44] These cases were decided in the slightly different context of the acceptance by a liability insurer of a claim against its insured who negligently caused injury. The present context is of an insurer who admits the claim of its own insured. There is, I think, no significant difference between the two. In the former the insurer’s admission of liability to the injured claimant is an acceptance of its insured’s claim for indemnity under the policy against the claim made against the insured. The legal analysis in that context provided by the cases is equally applicable to the second context.
[45] AXA’s acceptance of the plaintiff’s claim was an agreement effected by it in a matter relating to the plaintiff’s policy. The defendant is, pursuant to clause 17, bound by the agreement made by AXA. It, too, must pay its agreed proportion of the claim.
[46] I declare that the defendant is bound by general condition 17 of the contractor’s floater policy of insurance 548/CC0952299 to indemnify the plaintiff in the sum of $364,002.98.
[47] I give judgment for the plaintiff against the defendant for the said sum of $364,002.98 together with interest at 9 per cent per annum from 3 June 2004.