By - 25 Jun 2012
Many insurance policies contain exclusion clauses which seem
wide-reaching enough to bar many claims. However, a recent High
Court decision underlines the need to carefully examine the effect
of those clauses.
In Marchand v Jackson the High Court examined a claim
against an insurance company under a professional indemnity
insurance policy. The claim was brought by Mr Jackson, who was
seeking coverage in relation to a claim brought against him by the
owners of a house damaged in the Christchurch earthquake. The
owners had engaged Mr Jackson to insure the home and its contents,
but Mr Jackson had failed to do so.
The insurance company tried to bring Mr Jackson's claim to an
end at an early stage, arguing that cover was excluded by the terms
of the policy. The policy excluded cover for dishonest, criminal,
fraudulent or malicious acts. It also excluded claims for events
that Mr Jackson knew about, or ought to have known about, prior to
the policy's inception date.
The High Court was not satisfied that Mr Jackson had been
dishonest, but rather concluded that he had unintentionally omitted
to obtain insurance for the homeowners. This was so even though he
had fallen well below the required standard when dealing with the
homeowners.
The High Court was also not satisfied that the second exclusion
clause applied. Mr Jackson knew, before the inception date of the
policy, that the homeowners thought he had arranged insurance cover
when he had not done so. However, due to health reasons Mr Jackson
had forgotten about this when he renewed his insurance cover and
therefore had not advised the insurance company. The Court decided
that, since it could possibly be proven at trial that Mr Jackson's
non-disclosure of the homeowner's situation had not been
deliberate, it would not be appropriate to bring his claim against
his insurer to an end at an early stage.
The Court's decision means that the insurance company may yet
have to compensate the home owners for the losses they have
suffered due to Mr Jackson's failure to arrange insurance
cover.
This case illustrates the Courts' tendency not to determine
questions of interpretation of clauses in insurance policies at a
preliminary stage, due to the need for a full assessment of the
relevant facts. Whether insurance cover is available will likely
depend on the facts of each case.
Contact
Lisa Gerrard