Australian Casualty Co Ltd v Federico [1986] HCA 32;

Australian Casualty Co Ltd v Federico [1986] HCA 32; - HCA 1986 case summary — Zoe

[19]

6. The ordinary rules of interpretation apply to a policy of insurance. As in the case of any other commercial contract, a court may depart from the strictly literal meaning of a particular expression to place upon it an alternative construction which is more reasonable and more in accord with the probable intention of the parties if the words will bear that construction: McCowan v. Baine (1891) AC 401, at p 403; see also McGillivray & Parkington, op.cit., at pp 436, 437 (pars.1037, 1039) and Sutton, Insurance Law in Australia and New Zealand (1980), p.294, par.8.45. Further "the trend is, if anything, to adopt a liberal interpretation in favour of the assured, so far as the ordinary and natural meaning of the words used by the insurers permits this to be done": Halsbury, 4th ed., vol.25, par.594, note 1, cited in Mount Albert City Council v. New Zealand Municipalities Co-operative Insurance Co. Ltd. (1983) NZLR 190, at p 193. Notwithstanding this potential liberality of construction, with all respect I find it impossible to agree that the words "bodily injury ... caused by an accident" in the policy simply mean "accidental injury". The words "an accident" can by themselves be applied either to an event which happens fortuitously or to the consequences of such an event, but in the context of the policy in the present case they describe the cause of the bodily injury; the cause must be an accident, and it is not enough that the resulting bodily injury may be described as accidental. However, the words "caused by an accident" naturally refer to the proximate or direct cause of the injury, and not to a cause of the cause, or to the mere occasion of the injury. Thus, to take the example given in In re Scarr and General Accident Assurance Corporation, at p 394, if a man while walking stumbles and sprains his ankle, the injury is caused by an accident - the stumbling - and not by the deliberate act of walking. Or a person goes swimming, becomes exhausted and drowns - surely the death is caused by an accident: cf. Long v. Colonial Mutual Life Assurance Society Ltd., at p 530. Further, the words of the policy do not require that the cause should be one which it is possible to identify. If it can be inferred that some accident - some unintended and unforeseen (and perhaps unforeseeable) happening - must have occurred to cause the injury, the insured will be entitled to recover under the policy. That conclusion is completely in accord with Hamlyn v. Crown Accidental Insurance Co., where, as has been said, it was not made clear what unexpected movement caused the plaintiff's knee to be wrenched while he was voluntarily performing the series of acts necessary to enable him to pick up the marble. In Federation Insurance Ltd. v. R. Banks, at p 538, Kaye J. cited from the judgment in Long v. Colonial Mutual Life Assurance Society Limited, at p 541, where Kennedy J. said:

[41]

14. The accident or mishap which causes an injury may occur quite independently of any act of the person injured, e.g., as the result of an explosion of a boiler, the collapse of a building or the failure of the brakes of another's motor vehicle. On the other hand, it may be the result of the injured person's own mistake or miscalculation. In the latter case, it may involve an involuntary act of the injured person such as slipping and falling on a slippery floor or dropping a heavy object on one's foot. Or it may represent an unintended and unexpected characteristic or consequence of an intended act such as the application of unintentionally excessive force or the creation of an unintentionally excessive pressure or strain. A person who holds a fragile but sound object so tightly that he unintentionally breaks it, intends to apply force to the object to retain it in his grasp. He does not, however, intend or expect to apply greater force than an object of that kind in a sound condition can withstand and his application of excessive force is an unintended and unexpected mishap which causes the breakage. The breakage is, as a matter of ordinary language, caused by accident or mishap. Again, a person may create internal pressure within his own body by the exertion involved in lifting, pushing or pulling. In such a case, he intentionally does the acts involved in the lifting, pushing or pulling. If, however, by those acts, he creates internal pressure of a kind or to an extent which unintentionally and unexpectedly causes damage to his body, such as straining a muscle or bursting a blood vessel, the creation of internal pressure of that kind or to that extent is an unintended and unexpected mishap. If the muscle or blood vessel be already in an unsound condition, there may be room for argument about whether the straining of the muscle or the breaking of the blood vessel is properly to be seen as having been caused by the pre-existing condition rather than by the unintentional and unexpected excessiveness of the pressure created by the exertion. If it was in a sound condition, however, it will be plain that the damage to muscle or blood vessel was caused by the unintentional and unexpected excessiveness of the pressure. As a matter of ordinary language, the injury in such a case is caused by accident or mishap.

[44]

17. In relation to this argument, the Court was referred to a large number of decisions in this country, the United Kingdom, New Zealand, Canada and the United States of America. The wording of the critical requirement involved in those cases varied considerably. In some cases, it was a requirement, in Workmen's Compensation legislation, that the injury be "by accident" (see, e.g., Fenton v. Thorley & Co., Limited (1903) AC 443; Clover, Clayton & Co., Limited v. Hughes (1910) AC 242). In some, it was the requirement in an insurance policy that the injury or damage be "accidental" (see, e.g., Mount Albert City Council v. New Zealand Municipalities Co-operative Insurance Co. Ltd. (1983) NZLR 190). In others, it was the notoriously obscure requirement (see Lord Cozens-Hardy M.R. in In re United London and Scottish Insurance Company, Limited. Brown's Claim. (1915) 2 Ch 167, at p 170) that the injury be the result of or caused by "violent, accidental, external and visible means" (see, e.g., Clidero v. Scottish Accident Insurance Co., Limited (1892) 19 R. (Ct. of Sess.) 355; Hamlyn v. Crown Accidental Insurance Company, Limited (1893) 1 QB 750; In re Scarr and General Accident Assurance Corporation, Limited (1905) 1 KB 387; Steinke v. Australian Provincial Assurance Association Ltd. (1944) St.R.Qd. 7; Dennis v. City Mutual Life Assurance Society Ltd. [1979] VicRp 9; (1979) VR 75; Cotton v. Phoenix Assurance Company of Australia Ltd. (1982) 2 ANZ Insurance Cases 60-522; National & General Insurance Co. Ltd. v. Chick (1984) 2 NSWLR 86; Federation Insurance Ltd. v. R. Banks [1984] VicRp 42; (1984) VR 525). In others, the requirement was framed in words similar to, or the same as, the requirement of the policy in the present case (see, e.g., Martin v. The Travellers' Insurance Company (1859) 1 F & F 505 (175 ER 828); Columbia Cellulose Co. Ltd. v. Continental Casualty Co. (1963) 40 DLR (2d) 297; affirmed (1964) 42 DLR (2d) 401; Smith v. British Pacific Life Insurance Co. (1965) SCR 434; A.F. & G. Robinson v. Evans Bros. Pty. Ltd. [1969] VicRp 110; (1969) VR 885; Lipertis v. Australian Casualty Co. Pty. Ltd. (1983) 2 VR 280). The judgments in the abovementioned cases and in other cases to which the Court was referred or which are cited in the standard textbooks on insurance law, contain helpful and instructive discussions about the scope of the particular requirement that was relevant for the purposes of the particular case. Some of those cases provide support for Australian Casualty's argument (see, in particular, In re Scarr and General Accident Assurance Corporation, Limited; Columbia Cellulose Co. Ltd. v. Continental Casualty Co; Smith v. British Pacific Life Insurance Co.; the judgments of Kaye J. in Dennis v. City Mutual Life Assurance Society Ltd. and in Federation Insurance Ltd. v. R. Banks). Others militate against that argument and, in our view, support the conclusion reached hereunder (see Martin v. The Travellers' Insurance Company; Hamlyn v. Crown Accidental Insurance Company Limited, at pp 753, 754; Fenton v. Thorley & Co, Limited, at pp 448-450, 452, 453; Clover, Clayton & Co., Limited v. Hughes, at pp 246, 249, 255-256; A.F. & G. Robinson v. Evans Bros.; the judgments of Starke J. and Brooking J. in Federation Insurance Ltd. v. R. Banks; United States Mutual Accident Association v. Barry [1889] USSC 168; (1889) 131 US 100, at pp 121-122 (33 Law Ed 60, at p 67)). It is, however, unnecessary that we embark upon a detailed analysis of the decisions or judgments in those cases. It suffices that we acknowledge the assistance which we have derived from them and turn at once to a consideration of what we see as being, for present purposes, the critical step in Australian Casualty's argument.

[45]

18. Even if one accepts the proposition that the requirement of the policy in the present case that the injury be "caused by an accident" is not satisfied unless accident and injury can be identified as distinct cause and effect, it does not necessarily follow that the injury sustained by Mr. Federico would fail to satisfy the requirement. If one is to observe the type of verbal precision upon which the insurer's argument insists, one cannot simply say that Mr. Federico's injury was caused by his action in levelling the mixture of sand and cement. The cause of his injury was the intense and excessive pressure through the disc system which caused the prolapse of the disc and the consequential intrusion of disc material into the spinal column. While Mr. Federico's action in levelling the mixture was intentional, the incidental creation of that internal pressure to an extent greater than his disc system could bear without serious damage was both unintentional and unexpected: it was an accidental incident or consequence of the intended act (cf. Mahoney J.A. in National & General Insurance Co. Ltd. v. Chick, at p 111). Regardless of whether one views the cause of Mr. Federico's injury narrowly as the creation of the internal pressure or more broadly as the acts involved in using the straight edge with the unintended and unexpected incident of excessive internal pressure, it would, in our view, be a distortion of ordinary language to say that Mr. Federico's injury was not caused by an accident. In that regard, the falsity of the argument that the cause of the injury could not be seen as an accident because Mr. Federico intended to perform the acts involved in levelling the mixture of sand and cement lies in the failure to take account of the element of mishap or misadventure involved in the unexpected and unintended circumstance that the internal pressure created as an incident of those acts was greater than his body could bear without serious injury. Indeed, Australian Casualty's argument is answered by the following comments of Lord Robertson in Fenton v. Thorley & Co., Limited (at p 452) with which we agree:

[48]

20. There are two further matters to which brief reference should be made. The first is that it may, in some cases, be necessary to define with greater precision what is involved in the notion that a mishap be unintended and unexpected. An obvious example of a case where more precise definition of those notions would be required is where the risk of the mishap was foreseen or courted even though it was thought unlikely that it would occur. It is not suggested, however, that the present is such a case. The second matter is that it has not been necessary to consider, for the purposes of the present case, the meaning of the requirement that an injury be caused by (or be the result of) "violent, accidental, external and visible means" or the extent to which an ordinary person purchasing insurance coverage in this country is disadvantaged by such regrettable verbal obscurity in a policy proffered by an insurance company as providing proper and adequate cover against disability through "injury". It should, however, be noted that some of the statements to be found in cases concerned with that requirement to the effect that where an insured is injured in consequence of some action on his own part, he must show either that he made some actual movement which he did not intend or that something unexpected happened external to himself which interfered with his voluntary action, are clearly to be explained by reference to the combined effect of the requirements of "external" and "accidental" and not merely by reference to the requirement that the means be "accidental" (see, e.g., Clidero v. Scottish Accident Insurance Co., Limited, at pp 360 (the Lord President), and 363 (Lord M'Laren) but cf. p 362 (Lord Adam); Steinke v. Australian Provincial Assurance Association Ltd., at p 11). To the extent that such statements cannot be explained by reference to some such combination of requirements but are properly to be seen as relating only to the requirement of "accidental" means or cause, it should be apparent from what has been said above that we respectfully disagree with them.

At a glance

Court

Decision date

Before

Source

Judgment (68 paragraphs)

Australian Casualty Co Ltd v Federico [1986] HCA 32; (1986) 160 CLR 513 (19 June 1986)

Parties

Cases Cited (5)