In determining whether to conclude if a notification was sufficient to notify of facts which may give rise to a claim, the Federal Court concluded that a reasoned opinion given by an expert within their field of expertise is capable of constituting a 'fact'.
In issue
- The Federal Court was asked to determine a separate question concerning whether or not an insured had given notice to an insurer in the sense contemplated by s 40(3) of the Insurance Contracts Act 1984 (Cth) (ICA), within the relevant policy period, such that the insurers were not relieved of liability under that policy by reason only that the claims were made after the expiration of the policy period. (Spoiler alert: they had).
The background
LU Simon Builders (Insured) operated a construction and project management business, and held a professional indemnity policy with MS Amlin Corporate Member Group (MS Amlin), with two excess layers of insurance (Lloyds Syndicate 2087 and Chaucer Syndicates 1084) (collectively, Insurers) during the period 30 June 2014 to 30 June 2015.
Three sets of proceedings were commenced against the Insured in 2019 and 2020 in respect of alleged breaches of certain warranties by the Insured under its contract with a developer for the construction of a 36-storey building known as the Atlantis Towers (Atlantis claims). The Atlantis claims arose from the use of aluminium composite panel (ACP) cladding materials which were allegedly not suitable for purpose or compliant with the Building Code of Australia (BCA).
The insured’s broker, Elkington Bishop Molineaux (EBM) emailed two notifications to the Insurers, within the policy period, on 5 May 2015 and 14 May 2015 (Notifications). The 5 May email attached newspaper articles covering a residential building fire at the Lacrosse Apartments, which had also been constructed by the Insured. Combustible ACPs were reported to be a factor in the fire. The articles also hinted at an investigation into the Insured’s building practices on a broader basis with a view to identifying whether similar ACPs had been used on other developments.
Amongst other things, the 14 May email attached a copy of a Melbourne Fire Brigade (MFB) report which analysed the ACPs used, noted that no competitor product had been successful at being determined as ‘non-combustible’ but that some had been certified as conforming with specified requirements under the BCA – which the ACP used on the Lacrosse Apartments had not. The MFB report also made reference to the combustibility of ACPs in general, and expressly stated that the problem was not confined to the particular brand of ACP which had been used at Lacrosse Apartments.
Following a subsequent investigation, the Municipal Building Surveyor for the city of Melbourne (MBS) issued a building order requiring the Atlantis Towers to replace its ACPs by 14 December 2020. This in turn led to the Atlantis claims being made.
The decision at trial
His Honour Justice Jackman considered the decision of the Full Court of the Federal Court of Australia in P&S Kauter Investments Pty Ltd v Archwriting at Lloyd’s Ltd[1] in relation to the language used in s40(3) of the ICA in making his determination that the Notifications were sufficient to notify of facts that might give rise to the Atlantis claims.
Of particular note, Jackson J held that not only is a reasoned opinion given by an expert within his or her field of expertise capable of constituting a 'fact', with 'facts' being 'the objective matters that bear on the possibility of a claim being made', but that '[i]n circumstances where that opinion is given by a person in a position of public authority, such as the MFB or the MBS, the publication of that opinion may well be a most important fact that might itself give rise to a claim'.[2] This clarification of the Court’s reasoning expressly contradicts Lee J’s conclusions in Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd[3], in which his Honour rejected the proposition that expert opinion based on 'reasoned explanations and substantive evidence' may constitute a ‘fact’.
Implications for you
The ultimate finding by Jackson J is that the information contained within the Notifications did amount to notification of facts that might give rise to a claim, despite the reports giving rise to those facts also containing some matters of expert opinion, thereby bringing the Atlantis claims within the 2014/2015 policy coverage.
The differing opinion of two Federal Court judges is not ideal for either insurers or insureds. What is an insurer to do in the face of an expert opinion notified to it as a fact for the purposes of s40(3)? Whilst clearly appellate authority is required to put to rest the confusion the two differing judgments cause, the rationale underpinning Jackman J’s decision, more fully set out at paragraph [50] of the judgment, has some force. Time will tell which approach is adopted.
MS Amlin Corporate Member Limited v LU Simon Builders Pty Ltd [2023] FCA 581
[1] [2021] NSWCA 136
[2] MS Amlin Corporate Member Limited v LU Simon Builders Pty Ltd [2023] FCA 581 at [48]
[3] [2023] FCA 190 at [242]- [243]
