Section 51 of the Insurance Contracts Act: Proving an insurer’s entitlements to rely on an exclusion clause


In Murray’s Transport NSW Pty Ltd v CGU Insurance Limited [2013] SASFC 100 (Murray’s Case), CGU was unsuccessful in resisting direct action by Mr Murray, the Plaintiff/Appellant pursuant to section 51 of the Insurance Contracts Act 1984 (Cth) (ICA).  CGU was unable to prove on the balance of probabilities that its insured driver’s act of colliding into an oncoming truck was an act of suicide and therefore, fell under a deliberate conduct exclusion (Exclusion) under CGU’s policy of insurance (Policy) with its Insured, Mr McFarlane.

On 16 June 2008, Mr McFarlane was killed after driving his Jaguar motor vehicle into Mr Murray’s oncoming truck. 
Mr Murray made a direct claim against CGU pursuant to section 51 of the ICA, which grants a direct cause of action to a third party (such as Mr Murray) against an insurer (such as CGU) if, amongst other matters, the policy responds to that liability.
There was no direct evidence as to whether Mr McFarlane drove into Mr Murray’s truck intentionally and accordingly, whether the Exclusion would have applied.  However, the trial judge inferred from the facts (ie: the Mr McFarlane was a bankrupt and fraudster operating a Ponzi scheme) that Mr McFarlane had intentionally caused the collision and accordingly, no cover was available under the Policy because of the Exclusion.  This defeated Mr Murray’s section 51 claim at first instance.
Mr Murray appealed the trial judge’s decision to the Full Court of the Supreme Court (FCSC).  The FCSC found in favour of Mr Murray, deciding that the Policy responded to the claim and that there was insufficient evidence to determine whether the collision was deliberate and fell within the Exclusion.  The FCSC found that to prove a case on the balance of probabilities, there must be more than competing inferences such that the choice between them is a mere matter of conjecture.
Murray’s Case reinforces the position that while the plaintiff carries the onus of proving circumstances fall within the scope of an insuring clause, the defendant insurer bears the onus of establishing the operation of exclusions.  The standard to which an insurer must establish the operation of an exclusion is to the balance of probabilities, but that will be difficult in circumstances where the only evidence available is competing inferences.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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