The schedule to the Policy states that cover in respect of the truck is $144,000 or market value whichever is the lesser, the Standard Excess for the purposes of Clause 4.1(a) is $1,440, the limit for liability to third parties for the purposes of Clause 2.1(a)(i) is $10M, and that "excesses and other conditions" apply as per "the broker's closing". The amounts of the "Age or Inexperienced driver's excesses" referred to in Clause 4.1(b) of the Policy were stated in the broker's closing at $800 in respect of drivers under 21, $600 in respect of drivers over 21 and under 25, and $600 in respect of drivers over 25 with less than 2 years' driving experience.
21 Mr Castle, who appears for QBE, submits that Mr Winstanley was not an "Undeclared Driver" for the purposes of Clause 4.1(c) so that the truck would have been covered by the Policy subject only to a penalty excess. An "Undeclared Driver", Mr Castle says, is a driver whose Driver's Declaration has not yet been received by QBE at the time of the accident or, if it has been received, has not yet been accepted. In contradistinction, he says, a driver whose Driver's Declaration has actually been received and rejected by QBE at the time of the accident is a "rejected driver". Mr Castle then says that a "rejected driver" is excluded from cover under the Policy because it was Mr Naghten's understanding, and Ms Leahey's as well, that the Policy did not apply to such a driver. I am unable to accept that submission, for the following reasons.
22 The Policy itself does not draw the distinction between an "Undeclared Driver" and a "rejected driver" which Mr Castle seeks to draw. The words "Undeclared Driver" are merely a heading inserted for convenient reference at the beginning of Clause 4.1(c). That heading cannot override the substantive provisions of the clause. The clause itself does not refer to a "rejected driver": it provides a penalty excess if the Driver's Declaration is not "received and accepted" . The clause does not apportion different consequences according to which of three separate and distinct circumstances may occur, namely, a Driver's Declaration is not received at all by the time of the accident, or it is received and accepted, or it is received but not accepted.
23 In my opinion, the phrase "not received and accepted" refers to only one circumstance, namely, that at the time of the accident there is no acceptance by QBE of the Driver's Declaration, regardless of whether that non-acceptance was because the Driver's Declaration had not been received or because it had been received but declined. The clause provides that if a Driver's Declaration is not accepted, for whatever reason, then there is only one consequence: the $1,000 excess applies unless the driver has a minimum of two years' relevant driving experience and has not been charged or convicted as provided.
24 This construction is, in my view, supported by the provisions of Clause 2.1(v) which provides cover where any person is driving the vehicle with the insured's permission provided that such cover is not otherwise excluded . That term must be read, together with Clause 4.1(c), as meaning that every permitted driver is covered, subject to any relevant excesses, unless one of the exclusions in Clause 6 applies. The only exclusion relevant for consideration is Clause 6.34 which expressly excludes cover where both of two conditions apply: first, QBE has not received and accepted a Driver's Declaration; and second, any of the specified circumstances have occurred in the five years prior to the accident. It follows as a corollary, in my view, that cover is not excluded if one of the conditions applies but not the other. As I have noted, QBE accepts this construction of Clause 6.34 and has conceded that it does not operate to exclude cover in the present case.
25 An insurance policy, usually being a contract of adhesion provided by the insurer to the insured in printed form on a 'take it or leave it' basis, is not to be construed so as to allow the insurer to escape liability by means of any ambiguity which the ingenuity of its lawyers may tease from the words of the policy. If liability is to be excluded in any particular circumstance, then that circumstance and the exclusion must be expressed in the policy so clearly "that he who runs can read" ; otherwise, the insurer is held to the indemnity: per Lord St Leonards in Anderson v Fitzgerald (1853) 4 HL Cas 484, at 510; 10 ER 551. Courts have long enunciated that principle: see, e.g., Fowkes v Manchester & London Assurance Association (1863) 3 B&S 917, at 925 per Cockburn CJ and at 929 per Blackburn J; 122 ER 343; Woolfall & Rimmer Ltd v Moyle [1942] 1 KB 66, at 73 per Lord Greene MR; Provincial Insurance Co Ltd v Morgan [1933] AC 240, at 250 and 255.
26 That principle is merely an application of the established doctrine that policies of insurance are to be construed "contra proferentem" : the Courts set their face against an insurer who, having drafted the terms of the policy which are imposed on the insured and having received premiums under that policy, possibly for years, then insists on construing an ambiguity in the terms in such a way as to deny liability. There are many strong judicial statements to this effect: see e.g. per Farwell LJ in In re Etherington & Lancashire & Yorkshire Accident Insurance Co [1909] 1 KB 591, at 600; Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14, at 22 per Isaacs J; Halford v Price (1960) 105 CLR 23, at 34 per Fullagar J.
27 That ambiguity in an insurance policy cannot operate to disadvantage the insured is a principle which is just as much to be applied by the Courts today as it ever was; perhaps more so when, by means of lavish advertising campaigns, insurance companies seek to foster in the minds of the public a comfortable belief that insurance will protect one from practically all of the vicissitudes of life. Insurance companies and their legal advisers must remind themselves of this long-established and clear principle of law before denying a claim on the basis of an exclusion which is not clear and express and before contesting that claim in the Courts. They must remind themselves that a contract of insurance contains an implied term requiring the insurer to act towards the insured with the utmost good faith in respect to any matter arising under it: s.13 of the Insurance Contracts Act 1984 (Cth) ("ICA").
28 If insurance companies and their advisers do not bear these principles in mind, if they come to Court seeking to construe an exclusion out of ambiguous words or by recourse to implied terms, they may well face not only an adverse judgment almost out of hand, but also an indemnity costs order. This is so because it is notorious how dependent upon insurance many people are in order to protect them from the financial disaster that all kinds of insurable misfortunes can bring. If an insurance company denies liability on the basis of ambiguous wording or implied terms in the policy, necessitating a Court case to resolve the issue, the lives and wellbeing of those insured may be destroyed before the case is concluded, particularly if they are of modest means: a victory for the insured may, in the end, provide Pyrrhic indeed in human terms.
29 The Courts do not remain indifferent to reprehensible behaviour on the part of a party to litigation, whether that behaviour occurs in the genesis of the dispute or in the conduct of the litigation. The Court may express its disapproval of such behaviour in the form of an indemnity costs order. Insurers and their advisers need to weigh this consequence carefully before they rely upon ambiguous words or implied terms in an insurance policy in an attempt to exclude cover and deny liability.
30 I turn now to Mr Castle's submission that Mr Naghten and Ms Leahey understood the Policy to exclude cover in the case of a "rejected driver". Mr Castle did not explain how their understanding was relevant to the construction of the words of the Policy, and I am unable to see any basis upon which it could be relevant. It is, perhaps, superfluous to add that Mr Naghten admitted that prior to rejecting Hammer's claim he had read the terms of QBE's Policy "only in a cursory way" , that he had not read it at all before advising QBE to reject Hammer's claim, and that he had advised rejection of the claim simply because Mr Winstanley had less than two years' relevant driving experience, although that was not a circumstance within any of the exclusion clauses in the Policy. Mr Naghten said that, as far as he was concerned, the fact that Mr Winstanley had less than two years' relevant driving experience was enough to exclude liability "regardless of what the Policy said" . When Mr Naghten was asked in cross examination for his understanding of how Clause 4 of the Policy worked, he displayed an obvious unfamiliarity with the clause. It seemed highly probable to me that he had never read the Policy or the clause with any degree of attention at all before he went into the witness box.
31 For these reasons, I am of the opinion that on the true construction of Clause 4.1(c), cover is not excluded under that clause where, as in the present case, a Driver's Declaration has been received and declined by QBE. The effect of QBE's rejection of Mr Winstanley's Driver's Declaration is that under Clause 4.1(a) Hammer must pay the standard excess of $1,440 as well as an increase in the standard excess of 100% because the truck was a rigid-body vehicle with a gross vehicle mass exceeding 12,000 kg and Mr Winstanley was 24 years of age at the time of the accident. Under Clause 4.1(c), Hammer must also pay a further $1,000 excess because Mr Winstanley's Driver's Declaration had not been accepted by QBE. In total, Hammer must pay excesses amounting to $3,880.
Whether an implied term