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[2020] QSC 382
This case considered whether an “excess policy” under which the destruction of a navy vessel in dry-dock was insured, was a marine insurance contract to which the Marine Insurance Act 1909 (Cth) applied. Answering that question required the application of disaggregation provisions in the Insurance Contracts Act 1984 (Cth), and then a consideration of how the risks insured under the disaggregated provisions were to be characterised. Bond J found that although the risks insured included risks while in dry-dock, those risks were “incidental to or a consequence of marine adventure”, such that the relevant provisions were properly regarded as constituting a marine insurance contract.
Bond J
18 December 2020
Background
The plaintiff and the Commonwealth entered into a contract pursuant to which the plaintiff agreed to design, manufacture and maintain Armidale Class Patrol Boats. [1]. In 2014, while in the possession of one of the plaintiff’s subcontractors, one of the vessels – the HMAS Bundaberg – was destroyed by fire. [2]. Under its contract with the Commonwealth, the plaintiff was required to “promptly replace [the vessel] or otherwise make good” the loss. [3]. Under a contract of insurance with the defendants, that liability was insured. [3].
This judgment considered the separate question of whether the relevant insurance contract under which indemnity was sought, was governed by the Insurance Contracts Act 1984 (Cth) (“ICA”) or by the Marine Insurance Act 1909 (Cth) (“MIA”). [9]. The resolution of that question would have a direct bearing on issues concerning the duty of disclosure, which was in dispute between the parties. [8]–[9].
Relevant statutory provisions
The MIA relevantly provides in s 7 that:
“A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in a manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure”.
Section 8 makes clear that a contract of marine insurance may insure against losses on land, so long as they “may be incidental to any sea voyage”. [13].
The ICA provides in section 8 that it extends to all “contracts of insurance”, subject to certain jurisdictional limits, and subject to certain exclusions set out in section 9. Relevantly, section 9 provides that the ICA does not apply “to or in relation to” contracts (or proposed contracts) “to which the Marine Insurance Act 1909 applies”. [22].
Further, the ICA contains provisions by which contracts of insurance may be “disaggregated” (ss 9(1A)–9(1C)), such that the “characterisation exercise must be performed at a level other than at the level of the contract as a whole”. [24]. This will occur where it may be said that a single contract of insurance contains groups of provisions, one of which could, if they comprised a single contract, be characterised as falling within an exclusion from the ICA, and one of which could not. In that circumstance, the ICA will apply to the first group of provisions, but not the second. [25].
Resolution by the Court
Bond J considered that, for the purposes of the disaggregation provisions, “the grouping of provisions must be consistent with the contractual intention, objectively ascertained, as to the nature of the insurance cover provided by the contract concerned and how it might be conceptually subdivided”. [106]. Here, it was appropriate that the group of provisions comprising an excess policy – pursuant to which indemnity was sought – be considered as the “relevant contract of insurance” for the purposes of answering the characterisation question required by s 7 of the MIA (i.e. whether it was a contract of marine insurance). [85]–[90], [110]–[111].
As to whether this relevant contract of insurance was a “contract of marine insurance”, his Honour drew on observations made about this characterisation task in Gibbs v Mercantile Mutual Insurance (Australia) Limited (2003) 214 CLR 604. [15]–[17]. For example, McHugh J had observed in that decision that:
“for the risk to be a marine risk for the purpose of the Act, it must be incidental to or consequent on a sea voyage. Thus, marine policies may cover risks involved in loading and unloading cargo, may cover the hazards of docks, ports, harbours and rivers, may cover even the risks associated with the building of a ship.”
Bond J emphasised that the focus “must be on the nature of the risks which were insured”. [117]. In this case, it was by reference to the plaintiff’s contracted activities with the Commonwealth, and its liability for those activities, that one could “understand and characterise the perils against which the defendants insured the plaintiff”. [119]. Notably, that contract contemplated the design, construction and ongoing maintenance of boats “engaged on a Marine adventure”. [120]. The risks insured against extended to risks encountered while in dry-dock, but those risks were to be regarded as “incidental to or a consequence of marine adventure”. [121]. In other words, by the relevant contract of insurance, “the defendants undertook to indemnify the plaintiff against losses which must be regarded as substantially incident to marine adventure”. [123].
Accordingly, his Honour’s answer to the separate question was that the relevant contract of insurance was to be regarded as a contract of marine insurance, to which the MIA, and not the ICA, applied. [123]–[124].
W Isdale