Professional Liability Guide

CHAPTER 9 – EXCLUSIONS

CHAPTER 9 – EXCLUSIONS

Just as each professional liability policy wording is unique, so too are the exclusions they contain.

It is an often-repeated doctrine in insurance disputes that the insured bears the onus of proving that the insuring clause is triggered, while an insurer must prove that an exclusion clause applies. In relation to the latter, the High Court in Wallaby Grip Ltd v QBE Insurance (Aust) Ltd stated, ‘It is well accepted that the insurer must prove that a loss falls within an exception ’. 519 While in practice it is typically not difficult to apply the doctrine, disputes may arise (and the burden may be reversed) if the exclusion can be treated as wholly qualifying the insuring promise. 520 Accordingly, while insurers typically have the burden of proving that an exclusion applies, it is ultimately a matter of construction of the insurer’s promise and the policy as a whole. ƒ prior known claims and prior known circumstances likely to give rise to a claim; ƒ insured versus insured; ƒ conduct; ƒ fines and penalties; and ƒ contractual/assumed liabilities. Prior known claims/circumstances As with other claims made and notified insurance policies, professional indemnity policies typically exclude known claims or prior circumstances that may give rise to a claim before inception of the policy. In isolation, such an exclusion simply entitles an insurer to decline cover where the insured knew or ought to have known of a claim or circumstances that might give rise to a claim prior to inception of the policy. Chapter 6 considered this question in detail in the context of notification of claims and circumstances, but it is worth repeating that in Attorney-General v AON New Zealand Ltd, the Court said the test was objective: ‘requiring notice when a reasonable person in the insured’s position would consider there was a reasonable possibility of a claim. Notice is not required if the possibility of a claim is remote or unlikely. However, providing there is a real or definite risk of a claim, notice is required even if the claim is not probable.’ 521 In CGU Insurance Limited v Porthouse, 522 the Court applied an objective test to the question of whether the insured was aware of circumstances that may lead to a claim – being whether a reasonable person in the insured’s professional position, and ignoring his personal idiosyncrasies, would have thought a claim might arise. 519 (2010) 240 CLR 444, 456. 520 McLennan v Insurance Australia Ltd (2014) 313 ALR 173. 521 Her Majesty’s Attorney-General suing in respect of the Ministry of Agriculture and Forestry v AON New Zealand Limited [2008] NZHC 479 [66]. 522 (2008) 235 CLR 103. Some of the more common exclusion clauses found in professional indemnity policies include: In practice, complications can arise – for example, in relation to the question of what constitutes a ‘ circumstance ’.

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