Maxwell v Highway Hauliers  HCA 33
On 10 September the High Court published its reasons for decision on the appeal by insurers against the Court of Appeal in Western Australia upholding the trial judge’s decision to the effect that the insured was entitled to indemnity.
The claims which were the subject of this litigation were made on their insurer by Highway Hauliers, a trucking business transporting freight to and from the eastern states. Their fleet insurance covered accidental damage to their trucks and trailers, two of which had been damaged in separate accidents in 2004 and 2005.
A requirement of the insurance policy was that the insured’s drivers should have achieved a minimum score and a driver test known as the “PAQS test”. In the instance of the losses however, the drivers had not undertaken the tests and therefore the policy condition could not be satisfied. Although there was no suggestion that driver incompetence caused the losses, the insurance claim was rejected on the basis of the absence of the necessary qualification.
Insurers sought to characterise the condition relating to the scope of the cover afforded by the policy and therefore outside the ambit of the test of prejudice under s54 of the Insurance Contracts Act 1984. That argument was rejected by Corboy J in the WA Supreme Court and his decision had been upheld by the Court of Appeal.
In the Court of Appeal, McClure P acknowledged the insurers’ argument by stating at (72) “It is important to recognise that s54(1) has no application to provisions of an insurance contract that are fixed from commencement, in the sense that they are unaffected by a subsequent act or omission of the insured or another person. That will often be the case in relation to property the subject of an ‘event based policy’”.
In rejecting the appellant’s argument the High Court held that as the respondent’s claims related to accidents which occurred during the period of insurance, it was sufficient to engage s54(1), that the effect of the contract of insurance was that the insurer may refuse to pay those claims by reason only of acts which occurred after entry into the contract. The operation of each vehicle by the untested driver was properly characterised as having been an “act” that occurred after entry into the contract of insurance and therefore susceptible to the application of s54(1), and (arguable) by corollary, not a condition whose operation was to limit the scope of the policy.
The effect of the decision is that the status quo is maintained. This particular argument directed towards containing the ambit of s54 was not successful, and perhaps properly so on the facts. The scope of the policy coverage however, remains an important issue to be considered in the context of indemnity questions arising out of breach of condition.
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