In this Australian judgment previously dealt with here the court had to consider whether the insured’s claim to be indemnified for its liability for a slip and trip claim was excluded by reason of the building and local authority regulation exclusions which read:
“We do not cover
We will not pay for any loss, damage or liability arising directly or indirectly from or in any way connected with any of the following:
non-compliance with government regulations relating to buildings, [the “building regulation exclusion”] breach of any statutory obligations, government or local authority regulations or bylaws, or the cost of complying with any notices received prior to you making a claim under this policy, [the “local authority regulation exclusion]”
The evidence demonstrated and the insured admitted that the reconversion and occupancy of the relevant flat in which the plaintiff fell was without development consent and in breach of regulations.
The questions was whether the insured’s liability to the plaintiff was “in connection with, directly or indirectly” or “in any way connected with” the breach.
The evidence did not establish that development consent had it been sought would not have been granted. There was little evidence as to why, had consent been sought, it would not have been consented to, if that be the case.
At its highest, evidence in the relevant local authorities’ files referred to “concerns” as to light, ventilation, fire safety and gaps between the brick wall and roof. That fell short of any finding that the concerns constituted a breach of any regulation other than the bare fact that the reconversion and occupation were without consent.
There was no demonstrated connection between the fact of reconversion and occupation without consent and any elevation of risk or likelihood of a claim being made. If the relevant illegality, non-compliance with the regulation applying to buildings or statutory obligation, local government authority or bylaws was a failure to obtain consent, it was the failure to obtain consent that must be connected with the relevant exclusion. The insured submitted that the connection with the event creating liability must be with the illegality, not the mere fact of occupation.
The court said that the difficulty with that reasoning is that it posited the relevant counterfactual as occupation with consent when the more apposite counterfactual is that there was no occupation at all.
The court said that in its view the language of the exclusion was sufficiently broad to embrace the circumstances.
The plaintiff was residing in the secondary dwelling and was injured in the course of performing a domestic task associated with their place of residence. Therefore the court said that on balance the liability was “in any way connected with” or “in connection with directly or indirectly” the reconversion without consent.
The court accordingly found that both the building regulation exclusion and local authority exclusions would apply to the facts. The court said that each one applied, not by reason of an obvious or direct causal link, but by reason of broad connecting factors being the formulations “in any way connected with” and “in connection with directly or indirectly.”
The court however found that the insurer had failed to establish under the relevant insurance legislation that it had “clearly informed the insured in writing” of the exclusions and it was therefore not entitled to rely on those exclusions.