Ali v Insurance Australia Limited

1. [1]

   WARD P: I agree with Mitchelmore JA.

2. [2]

   LEEMING JA: I agree with Mitchelmore JA.

3. [3]

   MITCHELMORE JA: This application for leave to appeal concerns the proper construction of a policy of home and contents insurance that the applicant, Mr Mukhtar Ali, took out with the respondent, Insurance Australia Limited, in June 2013.

4. [4]

   On 10 October 2013, the applicant made a claim under the policy, after an unknown person forced entry into his home at Bonnyrigg Heights on 9 October 2013, stole goods, and caused damage. On 20 May 2014, the respondent denied the claim.

5. [5]

   On 16 October 2019, the applicant commenced proceedings against the respondent in the District Court, seeking damages for failure to comply with the policy. By way of defence, the respondent relied on s 14 of the Limitation Act 1969 (NSW), which relevantly provides:

6. [6]

   The primary judge heard a separate question in relation to the application of s 14 of the Limitation Act. Resolution of the question turned upon “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)”: at [5]. On the construction of the policy that his Honour adopted, the defendant (now respondent) was liable on the occurrence of the claimed break-in: at [27]. It followed that the applicant’s cause of action was not maintainable due to the limitation period and the primary judge dismissed the proceedings on that basis.

7. [7]

   The draft Notice of Appeal contains two grounds of challenge to the primary judge’s decision. First, the applicant alleged that the primary judge’s conclusion that the cause of action arose upon the happening of the break-in rested on a misconstruction of the policy. Second, and in the alternative, the applicant alleged that the primary judge erred in following and applying the decision of this Court in Globe Church Incorporated v Allianz Australia Insurance Limited (2019) 99 NSWLR 470; [2019] NSWCA 27 (“Globe Church”). As part of that ground, the applicant sought leave to argue that Globe Church was wrongly decided.

8. [8]

   Both parties referred to the general principles governing the question of leave to appeal as set out in Secretary, Dept of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]; and Be Financial Pty Ltd v Das [2012] NSWCA 164 at [32]-[38]. Apart from outlining the applicable principles and, ultimately, submitting that the application should be refused, the respondent did not advance any submissions specifically on the question of leave. The applicant submitted that the issues in the appeal were confined and important, and that there was an arguable case of injustice in circumstances where the determination of the separate question led to the dismissal of the proceedings. I accept the applicant’s submissions and would grant leave to appeal, save to the extent that the applicant sought to challenge the correctness of the decision in Globe Church.

9. [9]

   Extensive submissions in writing were made concerning the correctness of Globe Church, with submissions proceeding on the basis that an insurance contract which indemnified the insured for damage to property gave rise to an obligation from the time damage was suffered. However, at the outset of the concurrent hearing of the application for leave and the appeal, the Court indicated that leave to challenge Globe Church would be refused. The application for leave to appeal involves the construction of a policy of insurance that was drafted in distinctly different terms from the policy considered in Globe Church. The differences are such that the decision in Globe Church is not determinative of the construction of the policy here in issue. As there was no reason to reconsider the decision, leave to do so was refused.

10. [10]

    A key point of difference between the policy at issue in Globe Church and the policy documentation in the present case is that the latter was written, as the primary judge described it, “in plain English” and prepared for retail purposes. The corollary was that “there are a number of high level statements explaining the terms of the policy as well as more specific statements concerning the way in which the policy is intended to work”: at [9]. Unfortunately for a policy of insurance that was directed at general consumers, the drafting features which his Honour identified are productive of an undue level of complexity in ascertaining the terms of the policy and determining their proper construction. A particular difficulty arises from the frequent use of the word “cover” throughout the documents that comprise the policy.

11. [11]

    I consider that the primary judge erred in determining that the respondent was liable under the policy from the occurrence of the claimed break-in. In this respect, his Honour erred in concluding that the word “cover” had a largely fixed meaning throughout the policy documentation that was interchangeable with the word “indemnify”. The appeal should be allowed.

The policy of insurance: legislative framework

1. [12]

   The policy in the present case comprised the following three documents:

   1. (1)

      the “2013-2014 Certificate of Insurance, Home Buildings and Contents Renewal” (“Certificate of Insurance”);

   2. (2)

      the “Home Insurance Buildings & Contents Product Disclosure Statement and Policy Booklet” (“the PDS”); and

   3. (3)

      the “Home Insurance Building & Contents Supplementary Product Disclosure Statement” (“Supplementary PDS”).

2. [13]

   Both the Certificate of Insurance and the PDS confirmed that upon the applicant’s payment of the premium (or the first instalment thereof), those three documents constituted the contract between the applicant and the respondent.

3. [14]

   It was common ground between the parties that the PDS contained the terms of the policy. There is a legislative background against which that document is to be understood. The relevant provisions are contained in Chapter 7 of the Corporations Act 2001 (Cth). Section 760A provides that the main object of Chapter 7 is to promote, inter alia, “confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services”: s 760A(a). The financial products regulated in the Chapter include a “general insurance product”, which is defined in s 764A(1)(d) to mean “a contract of insurance” (with a number of exceptions that are not presently relevant).

4. [15]

   Section 1012B(3) of the Corporations Act requires a “regulated person” (defined in s 1011B to include, relevantly, the issuer of a financial product) to give a person a Product Disclosure Statement for a financial product if, inter alia, the regulated person offers to issue the financial product to the person and the financial product is, or is to be, issued to the person as a retail client. Section 1013C makes provision for the content of a Product Disclosure Statement. Relevantly for present purposes, s 1013C(1)(a)(i) stipulates that a Product Disclosure Statement must include the statements and information required by s 1013D, while s 1013C(3) stipulates that the information included in the Product Disclosure Statement “must be worded and presented in a clear, concise and effective manner”.

5. [16]

   Section 1013D(1) of the Corporations Act provides that a Product Disclosure Statement must include the statements for which the subsection makes provision, together with such of the information for which the subsection makes provision “as a person would reasonably require for the purposes of making a decision, as a retail client, whether to acquire the financial product”. The information described in s 1013D(1) includes, in paragraphs (b) and (f):

6. [17]

   Section 1013D(4) states that the regulations may provide that particular information is not required by a provision of s 1013D(1) (para (b)), or may provide a more detailed statement of the information that is required by a provision of s 1013D(1) (para (c)), either in a particular situation or generally. Regulation 7.9.15E of the Corporations Regulations 2001 (Cth) provides that, for the purposes of s 1013D(1)(f), a more detailed statement of the information required by that provision must be included in a Product Disclosure Statement that relates to a general insurance product, namely:

7. [18]

   The term “policy document” in relation to a contract of insurance is defined in s 11 of the Insurance Contracts Act 1984 (Cth) to mean:

8. [19]

   In this case, the terms and conditions of the policy were set out in the PDS, rather than in a separate schedule to a policy document. Although reg 7.9.15E(a) of the Corporations Regulations contemplated and sanctioned that course, the formulation of the PDS remained subject to the requirement in s 1013C(3) of the Corporations Act, that the information be worded and presented “in a clear, concise and effective manner”. Having regard to the language and style in which it is drafted, to which I will come, the PDS is not a model of concision or clarity. It is difficult to distinguish between the information that was intended to constitute the terms and conditions, and material intended by way of guidance. Additionally, in adopting a plain English approach, the PDS eschewed precise legal terms such as “indemnity” and instead used the word “cover” in a multitude of senses and parts of speech. While plain English drafting is undoubtedly in the interests of consumers, in the present case its attempted use did not produce the intended result.

The decision of the primary judge

1. [20]

   On 26 March 2021, the Judicial Registrar of the District Court ordered, by consent, that the following be determined as a separate question:

2. [21]

   The primary judge noted that the PDS was “written in plain English and prepared for retail, rather than commercial purposes”, and that there was a combination of high level and more specific statements in the document which needed to be read together: at [9]. At [10]-[16], his Honour identified a number of features of the PDS which he considered were relevant to the applicant’s argument. I will come to the terms of the PDS in more detail, but for present purposes it is sufficient to note that the passages that were of significance to his Honour included the following:

   1. (1)

      the following explanation of the “Insurance Cover”:

   2. (2)

      the following statement under the heading “Listed events”, with the words in bold emphasised by his Honour:

   3. (3)

      the statement, under the heading “Paying your premium”, that “In return for paying your premium, we provide the cover you have chosen”;

   4. (4)

      what his Honour described as “the critical paragraph”, in Section 3 of the document, which relevantly provided:

   5. (5)

      Section 6, which dealt with claims, explaining “what happens when you make a claim” and including, under the heading “What we pay for – Contents Insurance”, the following statement:

3. [22]

   In relation to the use of the word “cover” in the PDS, the primary judge referred to its ordinary meaning as “protection” (or “to protect” when used as a verb): at [18]. Of particular significance to his Honour was that “the ‘cover’ provided is separate from the concepts of claims and settlement of those claims”, giving particular emphasis to a passage in the PDS which explained that a person’s “claim or cover” (using his Honour’s emphasis) may be at risk if he or she did not meet his or her responsibilities: at [19].

4. [23]

   The primary judge concluded that the word “cover”, in the sense of “protect”, was used in the PDS as “no more than a different word for ‘indemnify’”: at [20]. Although the policy in Globe Church was drafted in different terms and was intended for a different audience, his Honour noted the insuring clause in that case, which used both “indemnify” and “cover”. In his Honour’s opinion, this suggested that the words “have the same meaning”: at [20].

5. [24]

   The applicant emphasised that Section 6 of the PDS contained the following statement in relation to a claim that may be made on the occurrence of a “listed event”: “If we agree to cover your claim under Contents Insurance then we will… pay…”. The applicant submitted that this indicated that coverage of any claim involved two prior steps: the occurrence of the listed event, and the making of a claim. The primary judge accepted that the meaning of the word “cover” as used in this statement was “at odds” with the meaning of “protect” that he had earlier adopted, and here meant “meet”: at [22]. His Honour then reasoned as follows:

   1. (1)

      Emphasising the “critical passage” in Section 3 of the PDS that I have extracted above, the respondent’s agreement was to “cover” the home and contents of an insured in respect of a “listed event”: at [23]

   2. (2)

      That same passage distinguished between the “cover” provided and the settlement of claims, which is dealt with in Section 6: at [23].

   3. (3)

      The promise in the “critical passage” arose immediately on the occurrence of a listed event: at [24].

   4. (4)

      The way in which the promise was met was dealt with by the claims mechanism in Section 6: at [24].

6. [25]

   His Honour continued at [24]:

7. [26]

   His Honour again referred to Globe Church, noting that the determination of a claim was not held in that case to be a precondition to coverage, even though the indemnity was “subject to” various matters, including the making of a claim: at [25]. His Honour also relied on the explanation on page 10 of the PDS, that an insured may make a claim “if a listed event you are covered for takes place”, which highlighted the separation of the obligation to “cover” and the making of a claim: at [26]. His Honour stated:

8. [27]

   On his Honour’s construction of the PDS, it followed that the applicant’s cause of action arose on 9 October 2013, and his claim was statute barred. This result was consistent with the conclusion reached in relation to the policy in Globe Church.

General principles of construction

1. [28]

   The applicable principles were not in dispute and were summarised in HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 (“Wonkana”), which concerned policies of insurance for business interruption. Meagher JA and Ball J addressed the principles at [18]-[31], as did Hammerschlag J at [114]-[118]. As with any written contract, the task for the Court is to determine the intention of the parties as expressed in the words in which they have recorded their agreement: Wonkana at [18]. That task is to be approached objectively, ascertaining the meaning of words “by reference to what a reasonable person would have understood the language of the contract to convey”: at [19], citing Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].

2. [29]

   It is necessary to construe the language of a contract according to its natural and ordinary meaning, having regard to “the circumstances which the document addresses, and the objects which it is intended to secure”: Wonkana at [22]-[23]. Specifically in relation to policies of insurance, Meagher JA and Ball J stated that “[w]here the written contract evidences the terms on which a financial product or service is offered for acquisition, the meaning of its language is to be construed from the perspective of a reasonable person in the position of the offeree, in this case the prospective insured”: at [21]. Their Honours referred in this context to the judgment of the plurality in Australian Casualty Co Ltd v Federico (1986) 160 CLR 513; [1986] HCA 32, which concerned a sickness and accident policy. Noting that the policy in that case was “a standard document used by Australian Casualty in the course of its insurance business”, which was offered “to ordinary working people … who are unlikely to have the advantage of the advice of a commercial lawyer when they purchase [it]”, the plurality identified the starting point as being (at 525):

3. [30]

   The insurance policy at issue in Globe Church was an Industrial Special Risks Insurance Policy: at [2]. In circumstances where the insurer pleaded the Limitation Act in defence of Globe Church’s cause of action for breach of the policy, the issue was whether the policy contained a promise to indemnify, and, if so, whether the principal loss against which the insured was to be held harmless arose “on the occurrence of the property damage in question”: at [9]-[10], [122]. The clauses of the policy in issue included cl 2, which relevantly read:

4. [31]

   Clause 3 of the policy in Globe Church, to which cl 2 referred, relevantly provided that “if Damage to Property Insured occurs in circumstances giving rise to Indemnity under Section 1 of this Policy, the Insurer will also pay” specified additional costs, where those costs were “necessarily and reasonably incurred”. Clause 4 addressed the basis on which claims were to be settled, while cl 14 set out the procedure for making claims. Clause 14.2.1 provided:

5. [32]

   Clause 14.2.6 also provided:

6. [33]

   The majority (Bathurst CJ, Beazley P and Ward JA) took the view that the policy was “plainly in its terms a policy of indemnity insurance”, with a number of clauses containing obligations to indemnify the insured: at [118]-[119]. Their Honours did not accept the competing construction for which Globe Church contended, namely, that the policy gave rise to an obligation to pay money within a reasonable time of demand. Globe Church had relied in that respect on the clauses dealing with claims provision and the basis of settlement: at [124]. However, their Honours considered that the notification provisions in cl 14 were not expressed as conditions precedent and were instead more naturally read as setting out the mechanism for making claims: at [125]-[126].

7. [34]

   The majority observed that the insured was obliged under cl 14 to provide notice of a claim forthwith, and that non-compliance with the requisite claims procedure may have had an impact on recovery under the indemnity provisions: at [125], [139]. However, making a claim was not required before there was a breach of the promise to make good the loss: at [126], [139]. Similarly, the basis of settlement clauses set out the agreed basis for calculating the way in which the promise to indemnify was to be discharged, but those clauses said nothing about when the cause of action, for failure to hold harmless against loss, had accrued: at [127]. The majority stated its conclusion at [209]:

8. [35]

   As I stated above, the correctness of that statement of principle does not arise for consideration because the preliminary, and decisive, question in the present case is whether the PDS contains a promise of that character.

9. [36]

   It is worth noting in this context that there is a distinction between a promise to indemnify and a promise to make a payment to compensate in respect of a loss. In Paterson v Pongrass Group Operations Pty Ltd [2011] NSWSC 1588, White J was considering a claim to enforce an indemnity given by the defendant (“PGO”) to the plaintiff against his liability to penalties (levied by the Commissioner of Taxation) that he incurred as a director of four subsidiaries of PGO. In denying the claim, PGO contended that it was not presently liable to pay any moneys under the indemnity because the plaintiff had not paid any part of the penalties. The plaintiff, on the other hand, contended that PGO was liable either to pay the Commissioner or to pay him the amount of the penalties, so that he was not exposed to the threat of a suit. The deed of indemnity stated, inter alia (at [31]):

10. [37]

    For the purposes of that clause, “loss” was defined to mean “any amount payable in respect of a claim against the Indemnified”, with a non-exhaustive list of examples of amounts that might be payable. Noting that in each case what is promised must depend on the terms of the contract (at [59]), White J emphasised the punctuation of the above extract in [63]:

11. [38]

    In his Honour’s opinion, the words of the first paragraph of the indemnity were wider (at [64]):

12. [39]

    White J’s conclusion at [65], that the draftsman had provided “both a promise to prevent Mr Paterson from suffering loss arising out of a described claim and a promise to compensate him in respect of any such loss” (emphasis added) highlights the existence of the distinction.

13. [40]

    The applicant in the present case sought to draw a further distinction within the concept of an indemnity. By reference to dictionary definitions of that word, the applicant noted that “indemnity” could mean “compensation for loss” as opposed to conventional indemnification. Accordingly, the applicant submitted, the use of the word “cover” was ambiguous, and even if it meant “indemnify”, that did not resolve the ambiguity as to its meaning.

14. [41]

    The applicant’s reliance on ambiguity calls for something to be said about the contra proferentem rule. In Wonkana, Meagher JA and Ball J described the rule as providing “that any ambiguity in a policy of insurance should be resolved by adopting the construction favourable to the insured”, which was justified on the basis “that the party drafting the words is in the best position to look after its own interests and has had the opportunity to do so by clear words”: at [30]. Although their Honours described the rule as “now generally regarded as a doctrine of last resort”, they stated that it continued to have a role to play in insurance and other standard form contracts for two reasons (at [31]):

15. [42]

    Their Honours’ observation in Wonkana echoed the observation that Kirby J had made in McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 (“McCann”) at [74]. Discussing the rule in LCA Marrickville Pty Ltd v Swiss International SE [2022] FCAFC 17; (2022) 401 ALR 204, Colvin and Derrington JJ (Moshinsky J agreeing) considered the description of last resort to be “apt”, in the sense that it applied where, after ascertaining the literal or grammatical meanings and evaluating them against the text, context, and purpose of the contract, “there remains ‘real doubt’ as to the correct construction”: at [102].

16. [43]

    Writing separately in Wonkana, Hammerschlag J described the contra proferentem rule as having “some continuing but perhaps limited vitality”: at [118]. In making this passing observation, a number of the authorities that his Honour cited involved the construction of contracts in the nature of standard form contracts, including the reasons of Kirby J in McCann.

Construction of the PDS

1. [44]

   The first two pages of the PDS, before the Table of Contents, contained a diagram titled “Home Insurance at a glance – a quick summary”, which identified a number of features of the policy developed in the PDS:

2. [45]

   It is apparent from the content of the diagram that the word “cover” was deployed in various senses. That said, the word was used consistently to explain the scope and content of the insurance with which the PDS was concerned. So much is confirmed by a review of the Table of Contents, the headings in which include “Your insurance cover”, “Buildings and contents we insure”, “What you’re covered for”, and “Optional cover you can add to your policy”.

3. [46]

   Section 1, titled “Key details about your policy”, provided more detail around the framework in the diagram. The first subsection addressed “Who’s covered by the policy” (emphasis added), stating that the policy “covers” the insured and the family who normally lives with the insured at the insured’s home. In this context, and as the applicant submitted, “cover” is used descriptively, to convey who falls within the scope of the policy. In the following segment of text, under the heading “Your insurance cover”, the word “cover” is used interchangeably with (and, in the heading, in combination with), “insurance”. Thus, the PDS stated:

4. [47]

   It is pertinent here to observe, as did Senior Counsel for the applicant, that the meanings of “cover” in the Macquarie Dictionary include “to insure against risk: covered by a comprehensive policy” and “insurance – coverage”. The word “coverage” is defined separately to mean, inter alia, “the total extent of risk, or the total number of risks, as fire, accident etc covered in a policy of insurance”.

5. [48]

   The primary judge referred expressly to the passage from the PDS that I extracted above, but appears to have focused on the use of language and not considered the passage as a whole. Specifically, the passage highlighted that the nature and extent of insurance under the policy was subject to the choices that an insured made. Consistently with the legislative requirements, the PDS needed to address each of those choices notwithstanding that they would not all be applicable to an individual insured. Thus, for example:

   1. (1)

      Under the heading “Type of insurance”, the PDS identified what each of Building and Contents Insurance, Buildings Insurance and Contents Insurance “covers”.

   2. (2)

      Similarly, under “Level of cover”, the PDS stated that it provided “two levels of cover for your home” and referred the policyholder to the Certificate of Insurance for “the level of cover you have chosen”. The “Home” level was described as providing “our standard level of cover”, while “Home Plus” provided “a higher level of cover – so you get our standard cover plus more”. The accompanying Table 1.1 set out in more detail the differences between the Home and Home Plus levels, by reference to “Cover we give you”. That table listed the provisioning made for various events and/or things under the two available levels of cover (Home or Home Plus). In relation to “spoiled food and prescription medicine”, for example, up to $500 was available under the Home level of cover, while up to $2,000 was available under the Home Plus level.

   3. (3)

      Under the heading “Sum insured”, the PDS referred to the Certificate of Insurance as showing “the amount of insurance you have under your policy”, by reference to the “Buildings sum insured” and the “Contents sum insured”. These sums were explained, in turn, as “the amount of insurance you choose to cover” the home and/or its contents (emphasis added).

6. [49]

   The context is relevant when one comes to the next portion of text on the same page of the PDS. The respondent placed significant reliance on this text, in support of its contention before the primary judge that the policy was one of indemnification. In accepting that argument, the primary judge relied on the passage and its repetition in Section 3. Under the heading “Listed events”, the PDS stated:

7. [50]

   The respondent contended that the first sentence of the above extract, which is repeated in Section 3, evidenced a contractual promise to indemnify the applicant. It submitted that the word “when” in the first sentence was used in a temporal sense to signify that the respondent’s promise to “cover” (in the sense of “protect” or, more usually in this context, “indemnify”) commenced from the happening of the relevant “thing”. The respondent also relied on the framing of the making of a claim in the second paragraph in permissive terms: “You can make a claim if” (emphasis added). The permissive language was said to tell against the applicant’s submission that making a claim was a step along the way to the respondent incurring an obligation to indemnify. I have noted above that the primary judge accepted that argument.

8. [51]

   I do not consider that “when” is used in a temporal sense in the first sentence. Considered from the perspective of a reasonable person in the position of offeree, the word does no more than indicate the events to which the policy of insurance will apply. Reading this section as a whole, including the last sentence, and the section that immediately follows it (which addresses “Other Cover”), the word “when” performs a conditional rather than temporal function, drawing the reader’s attention to the fact that the policy has no application unless a “listed event” occurs. In context, the reference to “cover” in relation to “when certain things happen”, which is repeated later in the PDS, is not obviously to be construed as a contractual promise to indemnify an insured from the time of occurrence of the listed event. Indeed, to construe it in that manner involves an overly technical reading of words, in a sentence that was intended for a non-technical audience.

9. [52]

   For similar reasons, I do not consider that “can” in the second paragraph is used in a permissive sense, to indicate that the respondent’s liability was already triggered and in no way contingent on the making of a claim. Remembering that this is a retail policy formulated in plain English, the second paragraph outlined the circumstances in which an insured could make a claim, namely, “if a listed event you are covered for takes place and causes loss or damage to your home or contents during the policy period”. The use of “can” in that context cannot reasonably be understood as permissive, with the respondent’s liability already having arisen.

10. [53]

    Next, after outlining the concept of “Optional cover” (by which an insured may add certain options to their policy “to increase your cover”), Section 1 addressed “What we pay for your home or contents”, stating:

11. [54]

    I will examine Section 6 in more detail below. However, it is important to note that the second bullet point, which I have emphasised, picked up the content of the earlier “Listed events” outline. Consistently with the view I have taken above, the bullet point is not directed to the timing of the insurer’s liability under the policy, but, rather, to whether the event causing the loss or damage was one for which the policy made provision.

12. [55]

    Finally, under the heading “Our agreement with you”, after setting out what the contract comprised, Section 1 of the PDS stated:

13. [56]

    Again, “cover” is liberally used in the above extract in a number of senses but generally as a proxy for “insurance”, save for one instance where it is used to refer to the scope of the policy: “the period your policy covers”. Neither use says anything about the operation of the policy in terms of the time at which liability arose.

14. [57]

    As I noted above, of critical significance to the issues on the appeal are Section 3 of the PDS, which was headed “What you’re covered for” and repeated some of the content in Section 1, and Section 6, headed “Claims and what we pay”. Starting with Section 3, as its title suggests it addressed the circumstances in which the application of the policy of insurance was triggered, by reference to certain events. The summary on the cover page stated:

15. [58]

    The PDS proceeded to address the above bullet points in turn. The critical passage for the primary judge was under the heading “The events we cover”, which repeated the sentences from Section 1 that I have addressed above. The passage from Section 3 bears repeating:

16. [59]

    The respondent submitted that the first sentence of this passage was the operative provision which denoted its obligation. It submitted that, where it was used in that section, there was nothing else that “cover” could mean except to indemnify the policyholder. It further submitted that its construction was consonant with the observations of the majority in Globe Church, who held that “cover” was synonymous with “indemnify” in the context of an insurance policy.

17. [60]

    The surrounding context is important. Adjacent to the critical passage was Table 3.1. Headed “Listed events”, the table set out the listed events and their availability by reference to the type of insurance, namely, Buildings Insurance and Contents Insurance (indicated by a tick or cross). The PDS proceeded to catalogue each of the events listed in Table 3.1, with a brief description of the event followed by what was “Covered” and (if applicable) “Not covered”, sometimes with separate references to Buildings Insurance and Contents Insurance. By way of example, for the event “Water and oil leaks” is the following:

18. [61]

    Having regard to how “Covered” and “Not covered” are used in the catalogue of listed events, the use of “cover” in the statement on which the respondent places primary reliance – “We cover you when certain things happen” – does not constitute a clear contractual promise to the effect that the respondent is liable under the policy to indemnify an insured upon the occurrence of a listed event. The word “cover” instead performed the function of delineating the particular events to which the policy of insurance applied, consistently with the heading of Section 3, “What you’re covered for” (emphasis added). As the applicant submitted, the use of “cover” in the critical passage was descriptive. This is supported by the next paragraph, which described Section 3 as telling the insured “what events you’re covered for and any specific exclusions and conditions that apply to that event”.

19. [62]

    For the reasons I have already set out, the use of “when” and the contingent manner in which the making of a claim was formulated do not call for a contrary conclusion. In so far as the primary judge separately relied on the phrase “claim or cover” in the penultimate sentence of the critical passage, their use was likely intended to refer to different things. However, it does not follow that “cover” had the meaning for which the respondent contended, namely, “indemnity”. Properly understood, the sentence directed the reader’s attention to the existence of responsibilities on their part, which were set out under the heading “Your responsibilities” on page 55, which is in Section 6. That page of the PDS dealt with the insured’s responsibilities not only upon the occurrence of listed events, but also in relation to what is referred to as “liability cover”. The latter is described in the PDS as protecting the insured or their family for claims that may be made against the insured or their family for an incident which causes death or bodily injury to someone else, or loss or damage to someone else’s property. The reference to “claim or cover” is understandable in that context.

20. [63]

    It is relevant to consider the surrounding sections of the PDS. Section 2 was titled “Buildings and contents we insure”, and identified, by reference to types of buildings and types of contents, what the respondent “insure[d]” and did not “insure”. In relation to contents, the respondent explained “Where we insure your contents”, noting that “[o]ne of the things that affects what we pay for your contents is where your contents are when the loss or damage takes place”. Section 2 also contained a two-page section dealing with “General Contents”. That section drew to the insured’s attention that the respondent provided a “certain level of cover” for General Contents. However, the insured could “add options to your policy to increase the amount we insure your contents for and the locations where we insure your contents”, as well as options “to increase the events we cover under your Contents Insurance Policy”.

21. [64]

    The option to increase the events “covered” under the policy was addressed in further detail in Section 4, which was titled “Optional cover you can add to your policy” and was described as outlining the options available “to increase your cover for your home or contents”. Relevantly, the PDS stated, by way of general explanation:

22. [65]

    Noting that this section appears after Section 3, it is of some significance that Table 3.1 was described as setting out the listed events for which the respondent “covers” the home and contents, with Section 4 conferring on the insured the option to “increase the events we cover”, just as the amount that was paid could be increased. The use of “when” in the first sentence under the heading “Increasing the events we cover” provides some support for it being used in a conditional and not temporal sense in the similarly-worded sentence in Section 3.

23. [66]

    Turning, then, to Section 6, it was headed “Claims and what we pay”. The applicant submitted that it was this part of the PDS that contained the operative promise that was relevant to the accrual of his cause of action. Section 6 commenced with the following introductory summary:

24. [67]

    Under the first heading, “What happens when you make a claim”, the PDS stated:

25. [68]

    During oral argument, the applicant sought to characterise the words “we will” as conveying a mandatory requirement for the respondent to carry out the actions in the two subsequent bullet points. It is not necessary to characterise this sentence in that manner, but I do note that, as a matter of context, the invitation to “help” on the previous page was accompanied by a telephone number. In circumstances where it was envisaged that claims be made by phone, the flagging of questions being asked over the phone is unsurprising. The prospect that the respondent would also provide advice as to payment of any excess at this time was also unremarkable having regard to the context. Viewed in this way, the two bullet points were descriptive of the likely process that would follow the making of a claim, rather than themselves constituting an obligation on the respondent to deal with claims in precisely that manner.

26. [69]

    The part of Section 6 which dealt with “Working out what we pay for your claim” took the form of a flow chart. Relevantly, Step 4 referred to “The incident”, with the relevant queries being, “is it a listed event?”, “is it covered under ‘other cover’?”, and “is it covered under any optional cover you have?”. The nature of those questions was consistent with the focus of Section 3 on identifying the events or things causing the loss or damage which were the subject of “cover” under the policy.

27. [70]

    Section 6 moved next to “What we pay”, dealing separately with Buildings Insurance and then Contents Insurance. Using Contents Insurance as the example, under the heading “What we pay for – Contents Insurance” is what the applicant submitted was the operative promise, namely:

28. [71]

    Implicit in the conditional clause in the first line was a choice to be made by the respondent, either to cover the insured’s claim or not cover it. The applicant submitted that the time for performance arose at the point of making that decision. Senior Counsel for the applicant put the argument in this way:

29. [72]

    The PDS went on to address what was to be paid, starting with Buildings Insurance and moving to Contents Insurance. Again, using Contents Insurance as the example, consistently with the form in which “what we pay” was expressed, the policy stated:

30. [73]

    The balance of this section was consistent with the “Basis of claims” material in Section 4, stating:

31. [74]

    The detail with which Section 6 of the PDS informed the insured about making a claim, and the steps that would follow thereafter, including the respondent’s options for payment if it agreed to cover the claim, supports the construction of the PDS for which the applicant contended, that the relevant promise for the purposes of his cause of action was to compensate a claimant for their loss following the process for which Section 6 made provision. The cause of action arose on the respondent’s decision to accept or decline the claim.

32. [75]

    The respondent submitted that Section 6 was “purely mechanical” and did not lay out a prescriptive set of steps that the respondent was obliged to take under the policy. It relied in this respect on the reasoning in Globe Church, in which the majority held that the hold harmless obligation in cl 2 arose immediately upon the occurrence of the event causing damage, notwithstanding that it was expressly subject to the clause which governed the making of a claim. True it is that the PDS did not condition Section 3 by reference to Section 6, with the critical passage directing the reader to Section 6 as to “how we settle claims”. However, the fact that the critical passage in Section 3 does not support the construction for which the respondent contended undermines the premise on which it called Globe Church in aid. Further, there is nothing to suggest, contrary to the respondent’s submissions, that the insured was entitled to sue for breach of contract immediately upon the occurrence of a listed event, and much to suggest that this was not the case.

33. [76]

    In this respect there was force in the applicant’s submission that the construction for which he contended was consistent with the objects of the policy, which included making payments in respect of losses arising from listed events in conformity with the Insurance Contracts Act and the cost-effective resolution of disputes about claims in accordance with the dispute resolution mechanism in the policy. By contrast, the primary judge’s construction of the policy would enable a policyholder to bypass the dispute resolution procedures contemplated in the policy and seek relief in court proceedings, even in circumstances where there may be no dispute as between the insured and the insurer.

34. [77]

    In circumstances where the policy did not contain any use of the term “indemnity” and having regard to the multitudinous use of “cover” to which I have referred above, I accept the applicant’s submission that the primary judge’s conclusion that “cover” was interchangeable with “indemnity” was erroneous. Consistently with the observations of Meagher JA and Ball J in Wonkana, it was unlikely that a reasonable non-expert in insurance law would understand “cover” to mean “indemnify”, still less that “indemnify” would have a special legal meaning.

35. [78]

    The contra proferentem rule has a role to play in this context. The respondent had a choice as to the wording of the PDS, and in particular to use the word “indemnity” in a manner that put beyond doubt that the nature of the indemnity was to hold the insured harmless. In circumstances where the respondent did not use that wording, it could not, as the applicant submitted, escape an unfavourable outcome by relying on the plain English nature of the drafting. The respondent’s reliance on the uncommercial outcome of the construction I have adopted, where the running of the limitation period would be in the hands of the insured, is a relevant consideration but not a decisive one. On the construction for which the respondent contended, the running of the limitation would be in its hands; that construction would give rise to the equally uncommercial possibility to which I have referred above.

36. [79]

    The applicant’s second ground of appeal was that even if the policy were construed as containing a hold harmless “indemnity”, on its proper construction that indemnity was conditional. In circumstances where I have concluded that the policy should not be so construed, it is unnecessary for me to consider that ground.

Conclusion

1. [80]

   As a result of the primary judge’s answer to the separate question, the proceedings were dismissed. Given the different view to which I have come, the dismissal should be reversed.

2. [81]

   I would propose the following orders:

   1. (1)

      Grant leave to appeal.

   2. (2)

      Order that the applicant file a notice of appeal in accordance with the draft Notice of Appeal within 7 days.

   3. (3)

      Appeal allowed.

   4. (4)

      Answer the separate question, ordered by consent in the District Court on 25 March 2021: “The plaintiff’s claim in these proceedings is not barred by s 14 of the Limitation Act 1969 (NSW) as raised in Prayer 4 of the Further Amended Statement of Claim and paragraph 28 of the Defence to the Amended Statement of Claim, or any further or amended pleadings in relation to this question.”

   5. (5)

      Set aside the order of the District Court dated 22 September 2021, dismissing the applicant’s claim and awarding costs to the respondent and in lieu thereof order that paragraph 29 of the Defence to the Further Amended Statement of Claim be struck out under rule 14.28 of the Uniform Civil Procedure Rules 2005 (NSW).

   6. (6)

      Remit the proceedings to the District Court for determination.

   7. (7)

      The respondent pay the appellant’s costs of the appeal and the costs below of the determination of the separate question.