CIC INSURANCE LTD v. BANKSTOWN FOOTBALL CLUB LTD

Judges: Brennan CJ, Dawson, Toohey and Gummow JJ

Gaudron J

Subject References:
Insurance
Industrial special risks insurance
General principles involving reinstatement policies
Construction of policy
Whether work carried out "with reasonable despatch"
Whether liability for subsequent damage prior to reinstatement rests with the insurer
Interpretation of Insurance Contracts Act 1984 (Cth)
Statutory policy
Whether statutory policy came into existence where insurer followed cancellation procedure laid down by Act
Interest on claim.

Legislative References:
Insurance Contracts Act 1984 (Cth) - ss 57; ss 58; ss 59; ss 60; Pt VII

CANBERRA

Judgment by:
Gaudron J

Subject to one matter, which does not affect the outcome of this appeal, I agree with the joint judgment of Brennan CJ, Dawson, Toohey and Gummow JJ.

In my view, the outcome of this appeal turns on proviso (iv) to the Reinstatement and Replacement Memorandum, not proviso (i). By proviso (i) the insured's rights are limited to recovering the indemnity value of the damaged property unless "[t]he work of rebuilding, replacing, repairing or restoring ... [is] commenced and carried out with reasonable despatch". What is "reasonable" for the purposes of the proviso necessarily depends on all the circumstances of the case.

It is not reasonable, in my view, to require an insured person to commence and carry out rebuilding and repairs in circumstances where the insurer is wrongfully denying liability under a policy of insurance of the kind involved in this case. Accordingly, in my view, proviso (i) does not operate in this case. I should add that my conclusion in this regard does not depend on the concession to that effect by counsel for the appellant during the course of argument.

As proviso (i) does not operate in this case, it is necessary to turn to proviso (iv) which relevantly provides:

"No payment beyond the amount which would have been payable under this Policy if this memorandum had not been incorporated herein shall be made until a sum equal to the cost of reinstatement shall have been actually incurred".

It is common ground that the insured did not incur any sum for the cost of reinstatement prior to the bringing of these proceedings. Thus, in these proceedings it can only recover pursuant to par (a) of the Basis of Settlement set out in s 1 of the Industrial Special Risks Insurance Policy. That paragraph allows for the recovery or reinstatement costs or for the indemnity value. However, it only allows for replacement costs in accordance with the Reinstatement and Replacement Memorandum which, by the terms of proviso (iv), does not apply. It follows, from that process of elimination, that the insured is only entitled to recover the indemnity value of the damaged property.

I agree with the orders proposed in the joint judgment.