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Peter Stockdale  
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Philip Ward  
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Brisbane
Justin McDonnell  
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Canberra
John Topfer  
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Stuart Valentine  (萬思陶)
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These proceedings arose out of the notorious Anzac Day 2006 rock fall at the Beaconsfield Gold mine in Tasmania, in which two miners were trapped below ground for five days and a third was killed. The court considered that a clause in the plaintiff’s Industrial Special Risks Policy (the Policy), purporting to extend cover for loss arising out of an order by a civil authority that activities at the mine cease, had to be interpreted in the context of the entire policy which only covered loss arising out of damage to the insured’s property.

Background

On the day of the rock fall, a Workcover Inspector had attended the mine and ordered that all mining activities at the site cease until further notice. Allstate Explorations (Allstate), a member of the joint venture that owned the mine, sought to claim under the Policy for losses arising from this business interruption. QBE denied cover on various grounds, but the main issue was the proper construction of clause 23 of the Policy.

Clause 23 relevantly provided that: the Insured was covered “against the risk of loss, destruction or damages arising from the actions of any civil authority during a conflagration or other catastrophe and for the purposes of preventing, minimising or retarding same and shall also include the closure of any Premises/operations by any civil authority due to the operation of a peril insured against.”

Allstate contended that the mine closure was an insured event which was “due to the operation of a peril insured against”. QBE claimed that clause 23 of the Policy was not engaged because there had been no property damage and the meaning and extent of clause 23 was to be read in context of the overall structural framework of the Policy.

Decision

The Victorian Court of Appeal noted that the Policy was to be given a business-like interpretation and that the Court should consider what reasonable people in the position of the parties would have understood the wording of clause 23 to mean by reference to the text of the Policy, the surrounding circumstances and object of the transaction. The words were to be interpreted in a common sense manner having regard to the whole text of the policy, so as to ensure that its components operated congruently.

The Court held that the correct interpretation of the Policy was that clause 23 was not engaged unless there was physical loss, destruction or damage to the Insured Property, placing weight on the fact that the Policy was divided into two sections; section 1 dealing with physical loss, destruction or damage to the Insured Property and section 2 dealing with loss arising from business interruption or interference due to physical loss, destruction or damage to the Insured Property. Therefore the fundamental structure of the policy was that of providing indemnity for two different kinds of losses, both of which depend on physical loss, destruction or damage to the Insured Property.

Allstate contended that clause 23 was intended to operate independently from the rest of the Policy as an additional source of indemnity. His Honour dismissed this argument on the basis that both sections 1 and 2 provided detailed and complex provisions referable to each insured event, such as provisions governing the basis of calculation for settlement of claims. Clause 23 contained no express provision for a basis of settlement and an intention by the parties that the basis of settlement should be supplied by the common law or by some unidentified modification of the provisions applicable to sections 1 and 2 was inconsistent with the otherwise specific and detailed provisions made in respect of claims settlement for each of sections 1 and 2. The absence of a claims settlement regime instead supported an inference that clause 23 was not intended to be a third and independent basis of claims.

Implications of decision

Pagone AJA commented that this case provided “an occasion to sound a caution to those adding clauses to pre-existing documents to ensure that their intentions take account of the structure into which additions are made to ensure, as much as possible, that ambiguities and uncertainties are avoided.”

When amending or adding clauses to insurance policies (particularly ‘boilerplate’ precedents), insurers, insureds and brokers should bear in mind the pre-existing content and structural framework of the document and ensure that any alteration fits comfortably within it. This will minimise the potential for ambiguities and anomalies that could later become the subject of dispute.