In a February 2024 Australian Supreme Court case the policy provided cover to the insured architect for “civil liability for compensation including the claimant’s legal costs and expenses arising from any Claim first made against the insured during the policy period.”
“Claim” was defined as:
“7.2.1 any writ, application, summons or other originating legal process, cross claim or counter claim issued against or served on the Insured claiming damages or other compensatory relief;
7.2.2 the positive assertion in writing of a legal entitlement to damages or other compensatory relief in connection with an alleged civil liability on the part of the insured, in terms evincing an intention to pursue such legal entitlement; …”
There was no writ or legal process.
The court said there were two elements of the definition which were determinative:
(1) whether there was a communication containing a positive assertion of a legal entitlement to damages or other compensatory relief against the architect;
(2) whether the terms of the written communication evinced an intention to pursue such a legal entitlement against the architect.
In this case neither of those criteria was fulfilled.
The relevant email sought information from the architect about the material specified for planning and asserted that the architect “had the responsibility of supervising the project” but went no further than to assert such responsibility. It did not say that because of such responsibility the third party was entitled to damages or relief against the architect. It contained no reference to the third party’s attorney being engaged to pursue a legal entitlement against the architect.
The relevant enquiry was not whether the particular email under consideration made a demand. If the definition of “Claim” wanted to refer to whether or not a demand was made it would have said so. It did not.
Reliance was placed in the alternative on the notification obligations under clause 4.1 of the policy which read:
“If during the Policy Period the Insured receives notice of any Claim that may be covered under this insurance the Insured will give notice to Us as soon as practicable and before the expiry of the Policy Period.”
The definition of “Claim” in that clause was the same definition that had application in the policy more generally including clauses 7.2 and 7.2.2 but the court said that because there was no “Claim” as defined in clause 7.2.2 there was no failure to notify as required by clause 4.1.
It was argued that because clause 4.1 used the phrase “notice of any claim” which was different to simply receiving a “Claim” as defined, that the word “notice of” must be given a meaning and that the email was “notice of a claim” because it foreshadowed legal action in respect of the architect’s responsibility for supervising the project. The court dismissed the argument on the basis that the email did not foreshadow legal action in respect of the architect. To the extent legal action was foreshadowed it was against other persons.
Notification of claim obligations under a policy is always dependent on the context of the express policy obligations and definitions and should be carefully considered by both insureds and insurers.
Fairbank Haven Pty Ltd v Merkon Constructions Pty Ltd [2024] VSC 32 – BarNet Jade – BarNet Jade