This Australian judgment considered whether the insurer could correctly rely on a number of exclusions to a claim by its insured for cover under the liability section of the policy.
The policy used two composite formulations to connote the requisite relationship between the liability and the exclusion.
The first formulation excluded liability “arising from, or in connection with, directly or indirectly”, and the second, “arising directly or indirectly from or in any way connected with”.
The insurer bears the onus of proving the qualification or limitation of cover and argued that both limbs of each formulation were engaged.
The court said that the relational terms “arising out of” and “in connection with” are each ambulatory terms, the construction of which does not involve the resolution of ambiguity, but, rather, an analysis that takes into account the context and purpose.
On the terms used, the words “arising from” where the narrowest. They connate a causal relationship, albeit a less proximate relationship than would be connoted by the words “caused by”.
The court said that the addition of the second formulation of the words “directly or indirectly” makes clear that an indirect causal or consequential relationship will be sufficient to bring the two concepts into the requisite relationship for the exclusion to apply. The degree of proximity may be greater, but a causal connection is nevertheless still required.
The words “in connection with directly or indirectly” or “in any way connected with” posed a different construction question. The words “in connection with” and their cognates also deal with wide connections. A broad connection, not necessarily casual, is generally sufficient.
As a matter of construction, a degree of connection must be determined by the context.
The words “directly or indirectly” in the first formulation and the words “in any way” in the second formulation must, as a matter of construction, said the court have some work to do. They each widen the potential ambit of the relevant connection such that the requisite degree of proximity is greater than it otherwise would be. They cannot, however, said the court, extend the ambit beyond that which the language of the policy can bear. Ultimately that becomes an evaluative question.