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Summary
On 2 September 2014, the NSW Court
of Appeal upheld an appeal from the
decision of the District Court of NSW
that the applicant had not proven an
entitlement to cover under the policy of
insurance.
The decision reaffirms that if an insurer
relies on an exception contained within
an insuring clause to deny or refuse
a claim, the onus of proving that the
exception applies rests with the insurer
in the same way it does with a standard
exclusion.
The Dispute
Jaqueline McLennan (McLennan) was the owner of
a property at Orange in NSW (the premises) which
was damaged by fire on 27 December 2006 (the fire).
The building and contents were insured with Insurance
Australia Ltd t/as NRMA Insurance (IAL).
IAL alleged that McLennan or someone she knew had
started the fire. IAL refused McLennans claim and
asserted that McLennan had failed to satisfy all the
elements of the insuring clause of the Policy:
if your home or contents suffer loss or damage caused by
fire we will replace or repair your damaged contents
rebuild or repair that part of your home that was damaged
However, we will NOT cover loss or damage as a result of
fire started with the intention of causing damage by you or
someonewith your consent
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First Instance
The primary judge, Neilson DCJ, accepted IALs
submission that in order to make out an entitlement for
indemnity under the Policy. McLennan needed to not
only establish that her home was damaged by fire, but
that the fire had not been intentionally caused by either
herself or someone with her consent because McLennan
had the onus of proving that her loss fell within the
insuring clause.
His Honours decision was based on the premise that
the insuring clause constituted an exception clause and
therefore the onus of establishing an entitlement to cover
rested with McLennan.
His Honour found that McLennan had failed to discharge
that onus and ordered a verdict and judgment in favour
of IAL.
Appeal
McLennan appealed the District Court decision. The
issue on appeal was whether in fact she had the burden
of proving that her loss fell outside of the exception to
the insuring clause by establishing that the fire was not
deliberately started by her or someone else.
The Court observed that it is generally accepted that an
insurer must prove that a loss falls within an exception.1
However, the Court also acknowledged that a contract of
Nicholas Maiorana
Lawyer
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