In Walsh v Yang [2023] NSWDC 307, the District Court of New South Wales held that an insurer was unable to rely on an exclusion clause to deny a claim because it did not “clearly inform” the insured about the exclusion pursuant to section 35 of the Insurance Contracts Act 1984 (Cth) (‘ICA’).
Background
On 24 March 2019, Mr Walsh, the plaintiff, slipped on wet tiled stairs in a granny flat at a property in Baulkham Hills. The plaintiff leased the granny flat from the defendants, Ms Yang and Mr Xu.
The plaintiff commenced proceedings against the defendants for negligently failing to make the tiles slip resistant when they knew, or should have known, that the tiles were slippery when wet.
The defendants had a home and contents insurance policy (‘Policy’) with Insurance Australia Limited (‘Insurer’). The defendants claimed under the Policy for indemnity in respect of the plaintiff’s proceedings against them.
The Insurer rejected the claim and relied on Policy exclusions relating to unlawful activities, building regulations and local authority regulations to deny indemnity to the defendants.
The defendants filed a cross-claim against the Insurer.
Section 35 of ICA
Pursuant to section 35(2) of the ICA, to rely on an exclusion clause in a policy an insurer must show that it has clearly informed an insured that they would not be covered for an excluded event.
In this case, consideration was given to the meaning of “clearly informed” within section 35 of the ICA.
The Court did not give exhaustive guidance on how the “clearly informed” threshold could be satisfied. The Court acknowledged comments previously made the Supreme Court of NSW that:
“in each case the content of the document and all of the circumstances of its provision would need to be considered in order to determine if the insurer had effectively informed the insured of the limitation”
Determination
The Court found that the Insurer could not rely on the exclusion clause(s) because the step taken to inform the defendants of the exclusions, which involved providing a copy of the Policy to the defendants when purchased it online, was insufficient to ensure that the defendants were “clearly informed” of the exclusions.
Judgment was awarded for the plaintiff against the defendants. The defendants were successful in their cross-claim against the Insurer.
The Insurer was ordered to pay the defendants’ costs of defending the proceedings and of the cross claim on an ordinary basis.
Implications
The fact that your insurer has provided you with a copy of their policy may not necessarily entitle them to deny your insurance claim based on an exclusion clause.
If your claim has been denied based on an exclusion clause, and you don’t consider you were clearly informed about the clause, contact the Insurance and Dispute Resolution team at Chamberlains Law Firm for a discussion.
If you have any questions or concerns please contact our Insurance Law Director Lachlan McBride on 02 6188 3600