Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

Courts have considered that the words ‘directly or indirectly caused by’ (when used together) impose a lesser requirement of causal connection than a proximate cause imposes. The case of Mitor Investments Pty Ltd v General Accident Fire and Life Assurance Corporation Limited & Australian Insurance Brokers (WA) Pty Ltd 449 considered a policy that provided cover for fire and special perils and loss of profits caused by storm and/or tempest by flood; however, it excluded cover in respect of ‘ destruction or damage caused directly or indirectly by the sea’ . Mitor Investments related to damage to a hotel following a cyclone. The strong winds drove seawater into an inlet such that the water level rose above the bund and flooded the surrounding countryside and the hotel. It was held that the flood and the damage itself were indirectly caused by the sea. Burt CJ said: ‘if the word “indirectly” had not been used, that would seem to be a contradiction in terms requiring one to say that there were two direct causes of the damage. But the word “indirectly” cannot be ignored. That word cannot be identifying the sea as the proximate cause of the damage because one cannot have an indirect proximate cause and the only possible effect which can be given to those words – directly or indirectly – is that the maxim causa proxima non remota spectator is excluded and that a more remote link in the chain of causation is contemplated than the proximate and immediate cause.’ 450 This judgment in Mitor provides a helpful insight into the impact that the word ‘ indirectly ’ will have on the causative relationship, regardless of whether it precedes the words ‘ caused by ’. The decision of McColl JA in Lasermax indicates that the use of ‘ directly ’ before ‘ caused by ’ will not affect the proximate cause doctrine, while ‘ indirectly ’ will certainly permit a greater degree of remoteness. ‘Arising out of’ We have outlined earlier how the phrase ‘ arising out of ’ can be contrasted with ‘ caused by ’ (as was directly compared in the Dickinson case). Ultimately, the phrase ‘arising out of’ will capture more remote consequences relative to a potential insured event than will the phrase ‘ caused by ’. In Bayer Australia Ltd v Kemcon Pty Ltd, 451 the phrase ‘ arising out of ’ was considered to require only an indirect link between the liability of the insured to pay compensation and property damage. In Kemcon , the insuring clause provided indemnity ‘in accordance with the Operative Clause for and or arising out of ... Damage.’ The Court determined ‘ arising out of ’ and ‘ for ’ were not identical in scope, given the use of both terms/phrases in the insuring clause. The phrase ‘ arising out of’ only required an indirect link, while it appears that ‘ for ’ requires a more direct causal connection. In another instance, the phrase ‘ arising out of’ has been taken to mean ‘ originating or springing from ’. 452 Causal phrases such as ‘ arising out of ’ will operate with the same scope when used in an exclusion in an insurance policy as they will when contained in an insuring clause. In RAA-GIO Insurance Ltd v O’Halloran, 453 the South Australian Supreme Court (in adopting the usage of the phrase ‘ arising out of ’ from Dickinson ) stated that the interpretation by the High Court in Dickinson was equally applicable to the phrase when used in a policy exclusion.

449 [1984] WAR 365. 450 Ibid. 451 (1991) 6 ANZ Ins Cas 61-026. 452 Walton v National Employers Mutual General Insurance Association Ltd [1973] 2 NSWLR 73. 453 (2007) 98 SASR 123.

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