Written by Meerna Sawaqed and Meleseini Penitani
Barrie Toepfer Earthmoving and Land Management Pty Ltd v CGU Insurance Ltd [2016] NSWCA 67
Case Summary
Two employees of Barrie Toepfer Earthmoving and Land Management Pty Ltd (“Barrie Toepfer”) were transporting an excavator weighing 16 tonnes on a prime mover towing a low loader. The driver, George Luck, drove the vehicle under the Hexham Bridge near Newcastle, when the excavator arm struck the overhead section of the bridge, causing significant damage.
Prior to the collision, Mr Luck was stopped at a Road and Traffic Authority (“RTA”) weigh station. An RTA inspector advised him that the weight distribution of the excavator was in breach of the RTA regulations. The RTA inspector instructed Mr Luck to reposition the excavator to rectify the breach, however, this increased the height of the excavator by almost 1 metre.
The Hexham Bridge had a low clearance of 4.8 metres and Mr Luck did not consider that he would exceed the minimum clearance and that there was a risk the excavator would collide with the bridge.
Proceedings
The RTA commenced proceedings against Barrie Toepfer, seeking the cost of repairing the damage to the bridge in the sum of $12.8 million. Barrie Toepfer sought indemnity from its insurers, CGU Insurance Pty Ltd, NTI Limited and Vero Insurance Limited under a commercial motor vehicle policy. The insurers sought to deny indemnity on the grounds that Barrie Toepfer had failed to comply with the reasonable care condition contained within the policy, and breached an exclusion clause in the policy, namely:
Reasonable Care
- “You and any person acting on your behalf must exercise reasonable care and precautions to prevent loss or damage to the Motor Vehicle and comply with all statutory obligations…”
Exclusion Clause
- “We will not pay for… Loss or damage or liability caused by… Recklessness by You or any person acting on Your part or by reckless failure to comply with any statutory obligations…”
First Instance
The trial judge in the Supreme Court of NSW found in favour of RTA in that although Mr Luck did not actually know that the excavator would collide with the bridge, he had actual knowledge of the danger, and with that, Mr Luck “made a deliberate decision to court the danger”. It was held that Mr Luck was “reckless”, and that Barrie Toepfer had breached the reasonable care condition contained in the policy, which also invoked the exclusion clause.
Accordingly, the trial judge held that the insurers were entitled to refuse indemnity of Barrie Toepfer.
Appeal
Barrie Toepfer appealed the decision to the NSW Supreme Court of Appeal on the following grounds:
- Whether Barrie Toepfer bore the onus of proving it had complied with the reasonable care condition.
- Whether Mr Luck was “reckless” as per the exclusion clause and was in breach of the reasonable care condition.
Mr Luck and his colleague stated that they had repositioned the excavator at the direction of the RTA inspector moments before the collision occurred. As such, Mr Luck did not think there would be an issue with the height given they had proceeded as per the RTA’s request.
The Court of Appeal found the following:
- Where a person does recognise a danger, they should not deliberately court it by taking measures that are inadequate to avert it.
- It seems highly unlikely that Mr Luck would not have slowed on his approach to the bridge if he believed there was a risk that the load would hit it.
- The notion of ‘courting danger’ involves the taking of measures which are known to be an inadequate response to the recognised danger, or not taking any measures at all when it is appreciated that the taking of some measure is required.
- An insurer bears the onus of proving that the insured had not taken such reasonable measures having regard to the danger.
Ultimately, the Court of Appeal held that Mr Luck believed it was safe to drive under the bridge, he did so without slowing down, and the insurers therefore failed to establish that Mr Luck had not taken reasonable steps to avoid the risk that the excavator may collide with the bridge, and that Mr Luck had not acted recklessly.
Implications for Insurers
Negligence: Section 5 of the Civil Liability Act 2002 (NSW), defines negligence as the failure to exercise reasonable care and skill.
Recklessness: Section 5.4 (1) of the Commonwealth Criminal Code, states that a person is reckless with respect to a circumstance if:
- He is or she is aware of a substantial risk that the circumstance exists or will exist; and
- Having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
The exclusion clause that the insurers sought to rely on in Barrie Toepfer specifically referenced recklessness as the attribute necessary to invoke the exclusion clause. The Court of Appeal’s reasoning demonstrates that, while the driver had been negligent, he had not in fact been reckless. For a finding of recklessness, insurers should be mindful that it is insufficient that the risk simply be foreseeable. The insured must have recognised the risk, and with knowledge that the risk exists, proceeded to blatantly disregard the risk.
The decision in Barrie Toepfer also demonstrates that, when relying upon an exclusion clause of recklessness, there is a high standard for insurers to discharge the onus of proving that an insured’s conduct amounted to a failure to take reasonable care, and a reckless failure to comply with statutory obligations. Insurers should make sure that they are able to establish the conduct of the insured was sufficient to amount to reckless conduct in order to successfully rely upon an exclusion provision as a basis to deny indemnity.
In summary, insurers will be unable to rely on an exclusion clause for recklessness and refuse to indemnify an insured without establishing that the insured had actual knowledge of the danger and deliberately avoided taking measures to overcome the danger.
If you have any questions in regards to this article, please contact any member of the Ligeti Partners team on 03 9947 4500.
