Reported Decision : (2006) 14 ANZ Insurance Cases 61-688 New South Wales Court of Appeal CITATION: Ingham v ACN 000 333 844 Ltd (In Liq) (formerly known as Australian Casualty & Life Ltd) & Ors [2006] NSWCA 63 HEARING DATE(S): 29 March 2006 JUDGMENT DATE: 3 April 2006 JUDGMENT OF: Handley JA at 1; Giles JA at 2; Santow JA at 16 DECISION: Leave to appeal refused, claimant ordered to pay the opponent's costs. CATCHWORDS: Insurance - income protection policy - special condition reduced benefits if disability caused or contributed to by "disease or disorder" of eye - whether disorder included result of being struck in eye by piece of wood - approach to construction - from parties' use of "disorder" and purpose of special condition, did include it. D Australian Casualty Co Ltd v Federico (1986) 160 CLR 513; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498; CASES CITED: Johnson v American Home Assurance Co (1998) 192 CLR 266; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; MLC Ltd v O'Neill [2001] NSWCA 161; Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541; Rouleston Clarke Pty Ltd (In Liq) v FAI General Insurance Co Ltd (2000) 11 ANZ Ins Cas 60-473. Jeffrey Tom Ingham - Claimant PARTIES: ACN 000 333 844 (In Liq) (formerly known as Australian Casualty & Life Ltd - Opponent John Buckton - First Third Party Academy Life Agents Pty Ltd - Second Third Party FILE NUMBER(S): CA 40306/05 J M Ireland QC & J F Burn - Claimant COUNSEL: M T McCulloch SC - Opponent D Kelly - First and Second Third Parties Stacks/Goudkamp - Claimant SOLICITORS: Cutler Hughes & Harris - Opponent Moray & Agnew - First and Second Third Parties LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 8480/02 LOWER COURT JUDICIAL OFFICER: P R Bell DCJ - 24 March 2005 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40306/05 DC 8480/02 HANDLEY JA GILES JA SANTOW JA Monday 3 April 2006 INGHAM v ACN 000 333 844 (IN LIQUIDATION) & ORS Judgment 1 HANDLEY JA: I agree with Giles JA. 2 GILES JA: In August 1998 Mr Jeffrey Ingham took out a policy of income protection insurance with Australian Casualty & Life Ltd ("the insurer"), now in liquidation. He was a builder by occupation, and in 1980 had been struck in the left eye by a piece of wood discharged from a wood router and had been left with impaired vision in that eye. The impairment was disclosed in his application for the insurance, and led to a special condition in the policy - "SPECIAL CONDITION It is hereby understood and agreed between the Company and the Insured that no benefit shall be payable for disability or loss caused or contributed to by any disease or disorder of the left eye, including blindness. It is hereby understood and agreed between the Company and the Insured that no benefit shall be payable for a benefit period in excess of 180 days for disability or loss caused or contributed [to] by any disease or disorder of the right eye." 3 On 9 January 2001 Mr Ingham was struck in the right eye by a piece of wood. The damage was such that there was a permanent loss of vision in the eye. A subsequent corneal graft to the left eye improved its vision, but the insurer accepted that Mr Ingham was "totally disabled" within the meaning of the policy. It contended, however, that the special condition applied so that the policy benefit was payable only for 180 days. 4 There were other issues at the trial, but Bell DCJ upheld that contention. In this application for leave to appeal it presented the issue as between Mr Ingham and the insurer. Was the disability caused or contributed to by any disease or disorder of the right eye? Mr Ingham submitted that it was not so caused, because what happened to his right eye was a traumatic injury from which his disability immediately arose and the disability was not caused or contributed to by a "disease or disorder" of the eye; and he said that if that were not so on the ordinary or natural meaning of the words, there was at least an ambiguity and the contra proferentem principle applied to bring a construction of the words in his favour. The insurer submitted that it was so caused, because when construed in its place in the policy as a whole "disorder" extended to a condition caused by traumatic injury and the disorder caused or contributed to the disability. 5 Leave to appeal was required because the claim for benefits to the date of the trial was for an amount less than $100,000, see s 102(2)(h) of the Supreme Court Act 1970. The application for leave to appeal was heard on full submissions, so that if leave were granted a further hearing would not be required. In favour of leave to appeal, the decision of the issue would bind the parties in the payment of benefits for the future in an amount potentially much greater than $100,000. However, in my opinion the judge correctly upheld the insurer's contention and the Court did not call upon counsel for the insurer. Rather than require the filing of a notice of appeal, the preferable course is to refuse leave to appeal but give fuller reasons than is normally the case to explain why that is so. 6 In construing the policy, the Court must seek to ascertain the objective intention of the parties from the words they have used, giving to the words of the policy their natural and ordinary meaning read in the light of the policy as a whole and having regard to the context in which the words appear and the nature and object of the policy: Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 527; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510; Johnson v American Home Assurance Co (1998) 192 CLR 266 at [19]. The contra proferentem principle applies "[a]s a rule of last resort and a principle for construction to remove ambiguities only when other more rational approaches fail": Rouleston Clarke Pty Ltd (In Liquidation) v FAI General Insurance Co Ltd (2000) 11 ANZ Ins Cas 61-473 at 75,417; see also McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [74]; MLC Ltd v O'Neill [2001] NSWCA 161 at [20], and Johnson v American Home Assurance Co at [19] referring to use of the principle "where each of the competing constructions is strongly supported by argumentation and where dictionaries and logic alone cannot readily carry the day for either party". 7 We were referred to dictionary definitions of "disorder". The limitations of resort to dictionaries are explained in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 560-1 and House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498 at 504-5. From the Macquarie Dictionary, 3rd ed, one meaning is "a derangement of physical or mental health or functions". A derangement of physical function of the eye could be regarded as a disorder, what matters being the derangement and not its cause. Whether the special condition uses "disorder" in this way depends not on a dictionary, but on the meaning to be given to "disorder" in the policy construed in the manner earlier described. 8 As I have indicated, Mr Ingham completed an application for the insurance. The general conditions in the policy included that the contract of insurance was "made up of the Application form you completed, the Schedule, these general conditions, plus any Australian Casualty & Life policies attached to these general conditions". Accordingly, in construing the contract of insurance as a whole the application is part of the contract. 9 The application's use of "disorder" extended to a condition resulting from injury, including traumatic injury. In questions to be answered concerning the applicant's medical history there were many references to "blood disorder" and other disorders most naturally understood as resulting from a disease process. But the questions also asked about "Back pain, sciatica or other disorder of the back or spine including the neck (whiplash injury)", recognising that a disorder of the neck included the result of a whiplash injury. Questions seeking particulars of a number of conditions included asking as to "Back/Neck Disorder" what was its cause and as to "Knee/Elbow/Wrist/Shoulder" when the applicant first suffered from this "disorder": it is all but inconceivable that the questions did not comprehend disorders of those parts of the body resulting from traumatic injury. Indeed, the answer given by Mr Ingham to the last-mentioned question was that his left knee had first suffered in 1975 and the cause was a torn cartilage, illustrating the natural reading that the questions extended to a condition caused by traumatic injury. 10 In its use in the policy, therefore, "disorder" extended to a condition resulting from traumatic injury. Was it so used in the special condition? 11 The policy provided for payment of benefits in three circumstances. The first was if the insured was totally disabled, the description of which involved inability to earn income "because of an injury or sickness". "Injury" and "sickness" were respectively defined to mean "accidental bodily injury" and "sickness or disease which first manifests after the policy began", in the case of the latter with a quirk by which total disablement starting more than 30 days after the date of an injury was classified as a sickness. The second was if the insured was partially disabled after total disablement, partial disablement not being expressly linked with injury or sickness but plainly enough picking up the definitions material to total disablement. The third was if the insured suffered any of the "specific losses" in a table or any of the "fractures" in another table. The losses were total and permanent loss of use of arms and legs, a leg, a hand, and so on, and the fractures were fracture requiring a pin, traction, a plaster cast or other immobilising structure of a thigh shaft, a pelvis, a shoulder blade and so on, under contractual Tables of Maims. The specific losses table included as to eyes "entire sight in both eyes", "one hand and entire sight in one eye", "one foot and entire sight in one eye", and "entire sight in one eye". The specific losses and fractures brought a benefit "for the length of time set out for the relevant injury", and against each loss or fracture a period of months was stated. 12 The special condition used the words "disease or disorder". Operating in the policy as a whole, they qualified the benefit payable in each of the three circumstances of total disablement, partial disablement and specific loss. They therefore qualified the benefit payable in the event of inability to earn income because of injury and in the event of loss of (for example) the sight in one eye, which was itself described as an injury and was not limited to loss of sight by a disease process. 13 The point of the special condition was to limit the insurer's liability in the light of the disclosed 1980 injury to Mr Ingham's left eye. In the application it was not said that Mr Ingham had no vision in the left eye, but rather that it had been damaged, a cataract had been removed and there was "[b]lind spot in L eye". It would be odd if it was agreed that disability or loss caused or contributed to by something happening to the left eye excluded traumatic injury. Similarly, it would be odd if it was agreed that disability or loss caused or contributed to by something happening to the right eye excluded traumatic injury. 14 Mr Ingham submitted that his disability was caused by the immediate effect of being struck in the eye by the piece of wood, and that this was different from a disease or disorder as referred to in the special condition. I do not think the suggested difference is a real one. Being struck in the eye is in itself neutral. What causes disability is the condition resulting from being struck in the eye, if the Macquarie Dictionary definition be taken up the derangement of its physical function. From the parties' own dictionary in the use of "disorder" in the policy and from the operation of the words in the special condition in the policy as a whole, I am satisfied that Mr Ingham's disability was caused or contributed to by a disorder being the condition resulting from being struck in the eye by the piece of wood. My satisfaction is such that there is no occasion to fall back on the contra proferentem principle. 15 I propose that leave to appeal be refused and that Mr Ingham be ordered to pay the insurer's costs. 16 SANTOW JA: I agree with Giles JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.