DMC/INS/03/09
QBE Insurance Limited v MGM Plumbing Pty Limited
Supreme Court of Queensland; B W Ambrose J; [2003] QSC 27; 19 February 2003
INSURANCE: Public Liability: Products liability: Construction of policy: application for declarations: consideration of use of words "occurrence" and "event" in policy: whether single excess payable for series of incidents resulting in damage or excess payable for each incident of damage
Summary
This case involving leaking bathrooms involved the construction of words such as "event", "occurrence" and "series of occurrences" appearing in insurance policies. In this case, the court held that the unworkmanlike application of waterproof membranes constituted an "event" on each occasion that it occurred.

Facts
MGM Plumbing Pty Limited (MGM) sub-contracted with a building contractor, Glenwood Homes Pty Limited (Glenwood), to install waterproof membranes in the bathrooms of around 47 homes being built or renovated in the Townsville area. It is not stated whether each installation was performed pursuant to one sub-contract arrangement or a series of them.

The membranes were defective, causing water to escape to other areas of the houses, which Glenwood was called upon to rectify at a cost of more than A$77,000. Glenwood brought proceedings against MGM in the Supreme Court of Queensland seeking recovery of the repair costs on the basis that MGM had negligently installed the membranes. MGM claimed indemnity from its insurer under a broad form commercial package policy. The Insurer, QBE, applied to the court for a declaration as to whether MGM was obliged to bear the policy excess of $300 with respect to each of the installations in question or whether it was only obligated to bear only one excess in respect of all the installations alleged to be defective.

The policy defined "Occurrence" as "an event including continuous or repeated exposure to substantially the same general conditions, which results in... Property Damage and neither expected nor intended to happen by You". The policy also provided that "All... Property Damage arising out of continuous or repeated exposure to substantially the same conditions shall be construed as arising out of one Occurrence" and that the insured would be "liable to pay [the excess amount] for every Occurrence..." for which the insured lodged a claim under the policy.

Judgment
In considering the issue, Ambrose J discussed at some length the decision of the High Court of Australia (and, in particular, that of Stephen J) in Distillers Co (Bio-Chemicals) (Aust) Pty Limited v Ajax Insurance Co Limited (1973-1974) 130 CLR 1. That case involved a number of claims concerning birth defects said to have been caused by thalidomide. The High Court was required to construe a public liability policy clause which operated to limit compensation payable to claimants in respect of, or arising out of, any one occurrence or all occurrences of a series attributable to one source or original cause. The High Court held that for the purpose of the clause, the occurrence(s) was the mishap or mishaps resulting in victims suffering death or injury or illness, rather than the outcome itself. That is, the loss or damage are a result of the occurrence(s).

Stephen J observed that there is a series of occurrences, rather than a single occurrence in respect of which, or arising out of which, compensation may become payable, only where the links in a chain of causes can be traced back far enough to identify an event common to each claimant. In Distillers the common event was deemed too remote to fall within the meaning of "occurrence". Consequently, the insurer had to rely on the section of the clause which extended its operation to several occurrences which formed a series having one source.

Ambrose J also referred to Windsurf Pty Limited v HIH Casualty & General Insurance Limited (1995) 10 ANZ Ins Cas 61-447). His Honour regarded that decision as authority for the proposition that an event was "something that happened at a particular time, at a particular place, in a particular way... an occurrence or an incident". It was held that the use of the word "event" would "ordinarily invite one to focus on the proximate or immediate incident leading to the injury". The policy considered in Windsurf contained a definition of "occurrence" which was in similar terms to that contained in MGM’s broad form liability policy.

His Honour said that the "continuous or repeated exposure to substantially the same conditions" did not apply. He said that the clause was directed to cases where a building operation caused damage to several properties by such matters as vibrations or noxious substances.

Ambrose J held that it was the unworkmanlike application of the membrane on each of the occasions that it was installed which was the "event" or "occurrence" against liability for which MGM was entitled to be indemnified by the insurer, such that MGM would be obliged to pay an excess in relation to each occasion.

Comment
Central to decisions of this kind are the factual circumstances surrounding the incident or incidents in question. These circumstances will determine whether the definition of "occurrence" as something which "happened at a particular time and a particular place and in a particular way" applies. If, for example, a sub-contracting arrangement involves work done on the same site and in a continuous manner, it could be construed that poor workmanship was a single occurrence or a series of occurrences. In this circumstance, it is conceivable that either definition (i.e. single occurrence or series of occurrences) would apply, depending on the particular factual matrix and the wording of the policy in question. In the present case, had the policy extended to also cover MGM against damage from all occurrences of a series attributable to one source, it would also have been covered against a sequence of events of a similar kind following each other temporally. However, because the relevant clause policy did not, in this case, extend to provide for a series of occurrences, the separate unworkmanlike applications of the membrane could not be considered together as "occurrences" and MGM was obliged to pay an excess in relation to each application.