The case revolved around a dispute between Rawson Homes and its insurer, Allianz Australia, following a severe hailstorm in 2017 that damaged the roofs of 122 homes it was constructing. It filed for a claim for the losses sustained from the hailstorm, which the insurer accepted.
After that, however, a dispute arose about the deductible payable under the policy when Rawson Homes claimed that only one deductible was payable because the damage resulted from a single event. By contrast, Allianz Australia argued that the policy covered each building contract separately, so a deductible applied to each house.
According to global law firm Clyde & Co, based on the construction of the policy, the Court of Appeal decided that one deductible was payable on each building contract rather than each “event,” upholding Allianz Australia's argument that 122 deductibles were payable rather than only one.
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The court admitted that the “application of deductible” clause might be confusing due to the absence of a definition of “claim” in the policy. Specifically, the clause refers to a claim for an amount payable for each event that gives rise to a claim, but it was unclear what a “claim” was in the context of the cover provided by the policy.
Therefore, it decided that the correct starting point for the construction of the policy was the insuring clause rather than the “application of deductible” clause.
Clyde & Co delved into the case, with Clyde & Co partner Matthew Smith explaining that “the insuring clause provided for ‘contract works against an indemnifiable event.’ Contract works [were] ‘the works described in each insured contract (our emphasis),’ and therefore, the deductible was payable in respect of losses arising from an indemnifiable event for each insured contract. As the cover provided for each insured contract, there was one claim for each damaged house, and one deductible was payable for each home damaged.”
Commenting on the case further, Smith said the court's decision highlights the complexity of interpreting insurance contracts with ambiguity. Therefore, arguments can differ in situations where competing interpretations have a degree of merit.
“The best solution is to try and ensure that policies are written with clear intention and that key terms are defined where possible. In this case, the parties may have avoided the dispute if the term ‘claim’ was accurately defined in the policy to clarify that it applied to each building contract,” he added.
