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Highway Hauliers appeal win sparks legal comment

Effort to deny insurance payment leads to costs and compensation totalling hundreds of thousands of dollars

June 6, 2013

Insurers will have to think harder before they refuse to pay operators on technicalities, a spread of legal firms contend.

Law firms have lined up to comment on the WA Appeal Court victory of Western Australian trucking firm Highway Hauliers in a denial of insurance matter.

Highway Hauliers eventually won legal costs, truck repair costs of $12,335 and $287,472 and $145,000 in compensation for lost business.

It had been agreed by both the company and Lloyd’s of London insurance underwriters that company drivers had failed to gain a People & Quality Solutions (PAQS) rating of at least 35 points, as obliged under an insurance contract, but that this omission had not been the cause of damage to two vehicles in 2004 and 2005.

Appeal judges findings delivered last month showed that if the omission being the only reason to deny payment, this was not enough for insurers to absolve them of their responsibility.

Despite the reversal of what legal commentators view as similar facts and findings in a Queensland Appeal Court aviation case, they appear consistent in seeing the WA decision as reinforcing the risk insurers face when denying liability to pay, under section 54 of the federal Insurance Contracts Act of 1984.

Interested lawyers believe the difference between a pilot not completing a mandatory flight review when required and truck drivers not gaining the PAQS score as stipulated in an insurance contract makes section 54 a difficult proposition.

They echo Clyde & Co lawyers who point out that the WA Appeal judges found that “the PAQS endorsement did not define the scope of the cover and that the scope of the cover was defined by reference to vehicles and not by reference to the attributes of the driver”.

They also agree with the view of law firm Gadens that: “Much will turn on the individual facts and circumstances of each case but regard should be had to the conduct of the insured and the basis upon which the insurer refuses to pay the claim.

“The consequential loss award is also a stark reminder of the additional costs (potentially not subject to policy limits or reinsurance cover) arising from overturned indemnity decisions.”

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