EDWARDS DUNLOP and CO LTD v CE HEATH UNDERWRITING and INSURANCE (AUSTRALIA) PTY LTD [1991] NSWCA 87

EDWARDS DUNLOP and CO LTD v CE HEATH UNDERWRITING and INSURANCE (AUSTRALIA) PTY LTD

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CLARKE, MEAGHER JJA and Hope AJA 26 March 1991, 17 May 1991

[1991] NSWCA 87

Term of Industrial Special Risks policy — indemnity available only for losses which occurred during currency of policy and which were discovered during term of policy or within 12 months of termination — construction of Fidelity Policy — Trial judge finds the defendant not liable to indemnify the plaintiff definition of policy period — was period confined to period mentioned in original policy, and in succeeding years to period covered by renewal?

In 1983 the plaintiff, Edwards Dunlop and Co Ltd, takes out Industrial Special Risks policy from the defendant, C E Heath Underwriting Insurance (Australia) Pty Ltd which undertakes to insure it against, amongst other things, the risk of loss arising from the dishonesty of employees for 11 months. Policy is renewed for 1 year and thereupon replaced by Fidelity policy which ran for 1 year. This policy was renewed until 1989. In 1988 the plaintiff discovers losses sustained through dishonest acts of employee, Beck, extending from 1982 to 1988. The defendant agrees to indemnify the plaintiff in respect of losses occurring after April 1987 only.

HELD (by Clarke JA, Hope AJA) (1) The policy failed to deal expressly with the contingency of renewal. (2) Upon each renewal the policy period was extended in accordance with the length of the renewal. In order to qualify for coverage under the policy the insured must establish that the events from which the loss flowed occurred, and the loss was discovered, during the currency of the policy (including the original terms and each renewal), or, in the case of discovery within 12 months thereafter. (3) The provisions dealing with limitation of liability are consistent with the conclusion that the parties intended that the policy remain in force when ever a renewal remained current, and that the original term, and the term of each renewal were regarded as separate periods of insurance for the purposes of ascertaining the appropriate limitation of liability.