The NSW District Court found that proceedings brought in respect of a claim under a home and contents policy following a burglary were out of time.
In Issue
- Whether the plaintiff’s claim was barred by s.14 of the Limitation Act 1969 (NSW)
- Whether the defendant was liable under the policy on the occurrence of the claimed break in (9 October 2013) or only when it denied cover (20 May 2014).
The background
In June 2013 the plaintiff took out a home and contents insurance policy with the defendant in respect of his home at Bonnyrigg Heights. He claimed that on 9 October 2013 an unknown person or persons broke into his home, stole goods from it and caused damage to the house and contents.
The following day he made a claim under the insurance policy. The defendant denied cover on 14 May 2014. The plaintiff did not commence proceedings seeking damages for the defendant’s failure to comply with its obligations under the policy until 16 October 2019. The defendant argued amongst other things, that the proceedings were brought out of time and were barred by s 14 of the Limitation Act 1969 (NSW).
A Judicial Registrar subsequently ordered by consent that the issue be determined as a separate question.
The decision at trial
The court noted that if the limitation period begins to run from the occurrence of the claimed break in (9 October 2013) then the six year limitation period expired prior to the commencement of proceedings and the proceedings are time barred. If it begins to run from the date of denial of cover (May 2014)l, the proceedings were brought within time.
The court also observed that in Globe Church Incorporated v Allianz Australia Insurance Ltd [2019] NSWCA 27, the Court of Appeal held that, absent particular policy conditions, in the context of a property damage insurance policy the promise to provide cover is enlivened when the property damage is suffered.
In this case, the plaintiff argued that liability arose when the defendant made a decision not to accept the claim and denied cover. Three arguments were advanced in support: first, the policy was not one of indemnity but indemnification; secondly, in any event, the defendant’s obligation arose upon its decision to accept the claim; and thirdly, Globe Church was wrongly decided. As the court was bound to follow the decision of a superior court, it did not need to consider the third argument.
The plaintiff’s first argument turned on the use of the word “cover” in the policy, as opposed to “indemnify” which was the word used in the policy considered in Globe Church. The policy here, unlike that in Globe Church was written in plain English and designed for retail, rather than commercial purposes. After analysing the Product Disclosure Statement (PDS) in detail the court noted the plaintiff’s argument that the word “cover” in the context of this policy was simply a description of the bundle of contractual rights explained in the PDS. The court rejected this argument holding that it was inconsistent with the plain meaning of the PDS , firstly because the ordinary meaning of the noun “cover” is “protection” and as a verb it is “to protect”. Secondly, a number of important provisions showed that the defendant’s obligation was to “cover” home and contents in certain events. Also, when the contract documents were read as a whole, it was clear that the “cover” provided was separate from the concepts of claims and settlement of those claims. As a result, the word “cover” in this policy was no more than a different word for “indemnify”. This was consistent with the fact that the insuring clause in Globe Church used both “indemnify” and “cover” suggesting that the words have the same meaning.
The court also rejected the second argument that the defendant’s obligation arose upon its decision to accept the claim- the claims mechanism and the statement in the policy documents that the defendant would pay upon acceptance of a claim were no more than mechanisms by which the obligation to cover the insured would be met by the defendant.
Consequently, the court determined that the plaintiff’s cause of action arose, on his claim, on the date of the burglary on 9 October 2013 and the claim was statute barred.
Implications for you
This decision provides useful clarity as to when the limitation period will be found to commence running under a residential home and contents policy. Insurers can take comfort from the finding that, subject to the policy wording, the decision on indemnity is unlikely to be taken as the time for commencement of the limitation period within which proceedings must be commenced. It is important to bear in mind that this decision concerned the provisions of the NSW limitation period legislation, and each jurisdiction has specific provisions regarding extensions of time so outcomes may vary depending on the relevant jurisdiction.
