By Anthony Lo Surdo SC and Dr David J. Townsend -
Key decisions
- Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788
[2021] FCAFC 121 - Caffitaly System S.p.A. v One Collective Group Pty Ltd [2021] FCAFC 118
INSURANCE
Insurance Contracts Act 1984 (Cth), s 28(3) – where insurer agreed to indemnify despite non-disclosure of prior defects – consideration of the doctrine of election
Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2021] FCAFC 121 (9 July 2021) (McKerracher, Derrington and Colvin JJ)
Background: The respondent (‘Delor’), is the body corporate for apartment buildings located in Far North Queensland. Prior to a policy of insurance for public liability and property damage to the buildings having been taken out by Delor with the appellant (‘Allianz’), issues had arisen in relation to the soffit sheeting on the eaves of the apartment buildings with some sheeting having fallen away from the frame, and a quotation had been obtained to remove the soffit sheeting, install battens and fix new sheeting. Delor had also received a report from a consulting engineer that the construction of the roof framing along the eaves did not meet Australian standards and the spacing supports for the soffit lining did not comply with the manufacturer’s recommendations for installation. Before any works could be undertaken to repair defects concerning the soffit sheeting, there was substantial roof damage to the buildings during a tropical cyclone and Delor notified Allianz of a claim under the policy of insurance shortly after the cyclone.
In an email dated 9 May 2017, Allianz notified Delor that prior to the policy being effected it had not been advised of defects to the property despite these being clearly known to Delor. The email then stated: ‘Despite the non-disclosure which is present, [Allianz] is pleased to confirm that we will honour the claim and provide indemnity to the Body Corporate, in line with other relevant policy terms, conditions and exclusions’. For over a year thereafter, the parties proceeded on the basis that Allianz had agreed to indemnify. During the course of adjusting for the loss, latent problems with the roof trusses and related issues with the construction of the buildings had been exposed.
By letter dated 28 May 2018, Allianz proposed a mechanism for the settlement of the claim by Delor which included an ultimatum that was expressed in the following terms under the heading ‘Reservation of Rights’: ‘If the Body Corporate does not agree to proceed as set out above within 21 days [Allianz’s] offer in relation to indemnity will lapse and [it] will pay $nil pursuant to section 28 of the Insurance Contracts Act 1984 on the basis of the Body Corporate’s non-disclosure as referred to in the [May 2017 Email] and misrepresentation regarding the defective soffit panels…’
As to the non-disclosure claim, there was no suggestion that the relevant material was not provided to Allianz before the May 2017 Email. Therefore, from before the time of the May 2017 Email, Allianz was aware of the matters that had not been disclosed prior to the issue of the policy of insurance for over a year.
