Case note contributed by Melinda Keating, lawyer at Ebsworth
& Ebsworth Lawyers, Sydney. Ebsworth & Ebsworth Lawyers are
International Contributors for Australia.
Bakerland was a joint owner of Coogee Palace Aquarium. Bakerland’s
insurance policy provided cover for loss and damage and the removal of debris in
the event of destruction or damage to the property.
Coogee Palace Aquarium was constructed in the 1880s. Over the next century the
building deteriorated to a derelict state, despite which a permanent
conservation order was made in May 1982. During a fierce storm in June 1984, the
central roof, which included a dome structure, collapsed and was destroyed.
Bakerland sought indemnity from the insurer for the property damage and the cost
of removing the debris. The amount of A$130,000 was claimed as an agreed value
or the amount necessary to provide indemnity against the loss. A further
A$12,000 was claimed for removal of debris.
The trial judge held that the contract of insurance was not for an agreed
value. Further, he held that no loss was established on an indemnity value basis
concerning the damage caused to the building, such that Bakerland could not
recover the A$130,000 or any part of it. Bakerland could not recover for removal
of debris because demolition and rubbish removal would have been required as
part of any intended redevelopment.
On appeal, Giles JA (Heydon JA and Grove J concurring) recognised that the
contract of insurance was one of indemnity under which the insured was to be
fully indemnified, but not more than fully indemnified. The Court considered
that the building could not be separated from the land and the policy did not
look to the building alone. Indemnity to the insured meant that the value of the
land and building before and after the dome’s collapse had to be assessed to
see how much worse off the insured was due to the storm damage.
The court found that the value of the property had increased from A$260,000
before the storm, to A$2,000,000 after the storm. The demolition of the dome
meant that the heritage listing was likely to be removed which would ensure that
redevelopment of the site could occur. On this basis, as the insured had
benefited from the storm, the Court found no loss to indemnify.
However the Court, in rejecting the trial judge’s finding, considered that
Bakerland was entitled to recover the costs of removal of the debris as this was
a necessary step to ensure that the site was safe and secure.
This case is a reminder that, while a property may be insured against loss
or damage arising from certain events, the insured party must have actually
suffered a loss as a result of the event in order to recover under the policy.
If an insured party is placed in a better position as a result of the event, it
follows that the policy will not respond.