Q. May we take it you never asked anybody from CGU for any explanation as to whether you were covered by water coming from Scour Lake?
A. That's correct"
[Transcript 19 March 2002 pp 73 - 74]
The Policy booklets in detail
201 A careful examination of the policy booklets is important:
· Page 1 is headed "Extract From Insurance Legislation" and worded precisely the same as the initial section on the reverse side of the front cover of the Proposal earlier outlined. In short it explains the duty of disclosure and the effect of nondisclosure. It also includes a heading "Important Notices" which relevantly differs from the similar section to be found on the reverse side of the front cover of the Proposal earlier outlined. This section commences inter alia by stating that the Policy does not provide cover "in relation to destruction, loss, damage or liability in respect of which [the insurer] is prohibited by law from providing insurance cover". No reference is made in this section to the Policy not covering expense, loss or damage caused by or in any way attributable to Flood. It will be recalled that that had been the wording of the 'Important Notice' section on the reverse side of the front cover of the Proposal.
· Page 2 comprises an index which outlines the structure of the booklet. The index has four headings:
Section No; - Title; - Item No; - Page No.
· Pages 3 - 6 are described in the Index as "Introduction to your Policy" and are not given a section number in the index. The pages deal with:
· Our Agreement
· General Definitions
· General Conditions
· General Exclusion
· Claims Procedure
· Pages 7 - 38 then set out the nine discrete 'sections'. Whilst the format is not identical across each of the sections one commonly finds each section commencing with Definitions as a heading and then a heading entitled "Cover". A third common heading appears to be "Limitations". There are then a number of disparate headings as appropriate to each section. A number of the sections are internally divided into 'parts'. In short the reader who travels through the whole of the booklet may very easily have difficulty in finding his/her way through the sundry details, sections and parts and subheadings.
· From time to time as one travels through the booklet one finds a rectangular section sketched in with a border which is in bold ["rectangular" or "boxed" sections]. These rectangular sections seem to be quite often a form of instruction or assistance. An example is the rectangular section within Section 6 which reads:
"Claims Procedure-Please refer to Items 5, 6 and 7 for details of Your obligations in the event of a claim"
Another example is the rectangular section within Section 8 which reads:
"The events that you have selected to insure are shown in the Schedule"
· Pages 7 - 15 are headed "Section 1 Farm Dwelling (s). The Section has a number of subsections, some of which are divided into a number of parts. Section 1 for example commences with Parts A and B -'Building and Contents-Definitions'. The Definitions section deals with Part A concerning "Buildings" and Part B concerning "Contents". There is then a Section entitled "Cover". Other Headings to be found include "Limitations", "Additional Benefits", "Excess (applicable to Building and Contents)", "Settlement of Claims". One then comes to Part C which is headed "Liability-Owner and Occupier" and includes the following "(Applies only when the insurance is effected under Parts A or B of this Section)". One then comes to "Exclusions-Part C". One then comes to Part D "Valuables" which then has headings dealing with "Definitions", "Cover", "Limitations" and "Settlement of Claims".
· Page 9 within Section 1 dealing with "Farm Dwellings" under the heading "Cover" reads as follows:
"Cover
The Buildings and Contents as shown in the Schedule are insured against destruction, loss and damage caused by any Accident or Misfortune except:
1. lightning or thunderbolt unless there is visible evidence of damage to the building.
2. destruction, loss or damage caused by:
(a) flood, storm surge, the action of the sea, tidal wave, high water or tsunami.
Flood means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it, but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or run-off of surface water from surrounding areas.
Fixed Apparatus, Fixed Tanks and Fixed Pipes means equipment, appliances or materials designed and constructed for a particular use involving liquid, receptacles or structures made of any material designed for holding liquid and so constructed to allow the liquid to be stored and removed in any required quantity, and hollow devices of any shape, made of any material, and so constructed to allow easy passage of liquid to another area. They include items such as taps, pumps, filters or the like containing moving parts, toilet pans, shower recesses, tiled floors with drainage holes, aquariums, pipes, storm water, sewerage seepage or open spoon drains, household roof or street guttering. They do not include bowls, vases or similar small receptacles, nor lakes, reservoirs or dams.
Note the Exclusion above.
Flood cover is NOT automatically included in this policy.
Special application may be made if you require such cover.
(b) subsidence, settling, shrinkage, heavage or any movement of earth (other than earthquake or consequent upon bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes).
(c) erosion.
(d) storm, rainwater or wind to all gates, fences and walls made of wood, brush, fibro or the like, shadecloth, swimming pool covers, solar covers or plastic liners.
(e) mildew, atmospheric or climatic conditions (other than storm).
(f) water entering the Buildings through an opening in the wall or roof made for the purpose of alterations, additions, renovations or repair.
(g) rust, corrosion, gradual depreciation, wear or tear.
(h) vermin or insects.
(i) any process of cleaning involving the use of chemicals other than domestic household chemicals.
(j) inherent defects, faulty workmanship, structural defects or faulty design.
(k) deliberate, intentional or malicious acts of tenants and/or their visitors."
· Page 20 is headed "Section 5 Farming Continuation Expenses"
· Pages 21, 22, 23, and 24 seem to collect some relevant provisions which relate to Sections 2,3,4 and 5. Hence one finds the heading at the top of page 21: "Defined Events-Sections 3,4 and 5" which extends up to and includes page 22. Page 23 is headed "Additional Benefits-sections 2,3,4 and 5". Page 24 is headed "Settlement of Claims-Sections 2,3,4 and 5"
· Importantly there are to be found on page 21 in 2 separate places, rectangular bordered or 'boxed in' portions. This page relevantly includes the following:
"Defined Events - Sections 3, 4 and 5
You are insured for destruction loss or damage caused by the following defined events but only to the extent detailed in the Table of Cover (Item 36) and in accordance with the appropriate Policy section.
1. Fire, Lightning or Thunderbolt.
2. Explosion.
3. Storm but not destruction, loss or damage:
(a) caused by storm surge, by the action of the sea, tidal wave, high water or by tsunami.
(b) caused by Flood which means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it, but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or surface water run-off from surrounding areas.
Note the Exclusion above.
Flood cover is NOT included in this policy.
Special application may be made if you require such cover.
(c) caused by subsidence, settling, shrinkage, heavage or any movement of earth unless caused by Earthquake or consequent upon bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes.
(d) due to erosion however caused.
(e) to all gates, fences and retaining walls and other walls which do not form part of the structure of Farm Buildings.
(f) from water seeping, percolating or otherwise penetrating into buildings as a result of structure defects, faulty design or faulty workmanship in their construction.
(g) caused by water entering buildings through an opening in the wall or roof made for the purpose of alterations, additional, renovations or repair.
(h) to property in the open air unless such property comprises or forms part of a permanent structure designed to function without the protection of walls or roofs.
4. Bursting, Leaking, Discharging or Overflowing of fixed apparatus, fixed tanks or fixed pipes used to hold or to carry liquid of any kind.
Fixed Apparatus, Fixed Tanks and Fixed Pipes means equipment, appliances, or materials designed and constructed for a particular use involving liquids, receptacles or structure made of any material designed for holding liquids and so constructed to allow the liquid to be stored and removed in any required quantity, and hollow devices of any shape, made of any material, and so constructed to allow easy passage of liquid to another area. Included are items such as taps, pumps, filters or the like containing moving parts, toilet pans, shower recesses, tiled floors with drainage holes, pipes, storm water sewerage seepage or open spoon drains, household roof or street guttering. Not included are bowls, vases or similar small receptacles.
This Policy does not cover any damage caused by or contributed to by leaking, discharge or overflowing of any lake, reservoir or dam.
5. Aircraft or other aerial devices or articles dropped from them, and sonic boom."
The pleading issue
202 The plaintiffs in their Reply pleaded inter alia as follows:
"Prior to entry into the Policy, the defendant did not sufficiently and clearly inform the plaintiffs in writing that the Policy would not provide them with insurance cover in respect of the happening of the event namely the destruction of, loss or damage to the Homestead and the Contents caused by "Flood" as defined by the Policy.
Particulars
The defendant did not inform the plaintiffs in writing of the meaning or effect of the phrase "natural phenomenon which has some element of violence, suddenness or largeness about it";
The defendant did not inform the plaintiffs in writing that in the event that destruction, damage or loss was caused by Accident and Misfortune and Flood (as defined by the Policy) then cover would not be provided
In the premises, in the event that the Defendant establishes that the destruction, damage or loss to the Homestead and the Contents was caused by "Flood" as defined in the Policy, such that insurance cover would not otherwise be provided thereunder, then by operation of subsection 35 (1) of the Act the defendant may not refuse to pay the plaintiffs an amount sufficient to indemnify them for that property up to the respective limits stated in the schedule to the Policy."
203 During final address the plaintiffs' counsel, Mr Forster SC, sought to rely, as part of the plaintiffs' case that the plaintiffs were not informed of the operation of the Wayne Tank principle, upon the fact that the second boxed in section on page 21 of the policy had been included whereas no similarly worded boxed in section had been included on page 9. The submission further elaborated towards the conclusion of the oral address on 27 March was that, as I understood it, the particulars and the way in which the matter had been litigated had entitled the plaintiffs to rely upon the whole of the policy in the sense that the comparison between the two boxed in sections could be considered by the Court as part of the evidence indicating the absence of any or any clear information about the Wayne Tank principle.
204 Mr Taylor whilst accepting that the plaintiffs were clearly entitled to litigate the proposition that the defendant had not informed them at all of the operation of the Wayne Tank principle, contended that neither the pleading nor the particulars nor the manner in which the matter was litigated entitled the plaintiffs to rely upon the second boxed in section on page 21 in support of the proposition that the manner or wording or placement within the policy, of the boxed in sections to be found on pages 9 and 21, constituted misleading or confusing information which upon examination showed that the defendant could be seen to have failed to clearly inform the insured of the information in question. Mr Taylor submitted that had he been aware that the plaintiffs would rely in this fashion upon these boxed in sections, he would clearly have cross-examined Mr and Mrs Hams in relation to these sections and particularly, the boxed in section secondly appearing on page 21.
205 In my view the plaintiffs were entitled to rely, in the fashion for which they contend, upon the whole of the policy and its wording including the positioning and wording of the boxed in sections referred to above. There can be no doubt but that a central issue in the case always concerned the plaintiffs' allegation that they were not clearly informed in writing of the Wayne Tank principle. Those words do not, however, appear squarely in the Reply. However the way in which the case was opened, including the defendant's assertion in answer to the section 35 (2) case to the effect that the defendant had provided the insured with a copy of the policy wording: "[t]he provision of such [Policy] satisfies the requirements of section 35 (2)," [see also the written submissions of ASIC MFI 1], the way in which the case was litigated, as well as the terms of the Reply, as it seems to me, entitle the plaintiffs to put the matter in the fashion for which they contend. The second of the particulars does have a degree of lack of clarity. But the fundamental point is that the whole question of the extent to which, whether by furnishing the insured with a notice that "Flood" was not covered, or with a copy of the policy wording, the defendant had satisfied section 35 (2), was clearly litigated and it was squarely put to the insured in cross-examination they had been aware of the 'flood' exclusion. The boxed in section on page 9 was specifically adverted to in Mr Taylor's cross-examination [transcript 20 March page 124]. The policy documents were put into evidence. The fact that the insured had carefully read the Policy documents was elicited. It does not seem to me that it is not now open to the plaintiffs to rely upon any aspect of the policy document in support of their case that the provision of the policy did not satisfy the requirements of section 35(2) (which case is accepted as having been pleaded to the extent at least that they have always sought to prosecute a case that they had not been given any clear information in writing of matters including the Wayne Tank principle).
206 Therefore I approach the issue in the manner put in the alternative by Mr Taylor, namely that if the Court was to hold that the plaintiffs were entitled to so put at least one part of their case, the defendant relies upon the second of the boxed in sections on page 21 as clearly explaining the Wayne Tank principle.
207 For the reasons given below, the plaintiffs' case in this regard is rejected.