The Supreme Court has issued its judgment on a challenge, based on champerty principles, to the arrangements put in place by a litigation funder to fund an action against auditors and directors. In so doing it has introduced uncertainty to the law surrounding litigation funding, and potentially opened up new avenues by which such arrangements may be challenged in future.Read More
Several hundred leaky building owners are claiming that companies in the James Hardie group have breached their duty to warn, inform and/or to take reasonable steps to withdraw defective cladding products. Two holding companies, not involved in the manufacturing process, applied for summary judgment to strike out the claim, but the Court has found the building owners have an arguable case.Read More
AMI Insurance Limited v Legg  NZCA 321
What happens when there are two concurrent causes of loss- one falling within the insuring clause and the other expressly outside it? The appeal has confirmed that where two causes of loss are effective and interdependent, the Wayne Tank principle applies, and the entire claim is excluded.
The Leggs lived on a lifestyle block in Selwyn, Canterbury from which they ran a landscaping business. It was common practice for the Leggs to burn green waste and rubbish generated by the lifestyle block and the landscaping business.
In December 2012, the Leggs lit a fire heap on their property which burned without incident. However, several weeks after the fire appeared to have gone out, the remains of the heap unexpectedly reignited and caused extensive damage to neighbouring properties. Under rural fire legislation the Leggs were strictly liable to the fire service and district council for the costs of putting out the fire.
The Exclusion Clause
The Leggs’ lifestyle block was insured with AMI and their landscaping business insured with Lumley. The AMI policy had an exclusion clause which excluded cover for legal liability arising out of or “in connection with” business activities not directly connected with the Leggs’ farming. The re-ignited fire heap had included pine stumps and paper waste from the the Leggs’ landscaping business.
High Court Decision
Both Lumley and AMI denied cover under their respective policies. As noted in a previous InBrief article, in the High Court, Lumley unsuccessfully argued that the Leggs had failed to take “all reasonable precautions” to comply with the relevant regulations, which was a condition of the policy.
AMI argued that the above exclusion clause applied because the fire heap contained waste from the landscaping business. Therefore the liability was “in connection with” the excluded business activity. The judge was of the view that AMI had to establish the landscaping business as the proximate cause of the liability in order for the exclusion to apply. The judge considered that it wasn’t possible to identify which material set the fire alight, and that causation hadn’t been proved.
Both insurers were held liable to indemnify the insured, but only AMI appealed the High Court’s decision.
Court of Appeal Decision- What Does “In Connection With” Mean?
On Appeal, the Court rejected AMI’s argument that “in connection with” only meant “having to do with”, a phrase which required a somewhat loose connection. It was of the view that the words “in connection with” required a real and substantial connection between the legal liability and the excluded business activity. However, it didn’t think it necessary to go as far as to require that the liability was ‘caused by’ the excluded business activity, either. From the wording of the policy, proximate cause was clearly not the policy standard.
It was sufficient that the material from the landscaping business had contributed to the re-ignition by increasing the size of the fire, and adding stumps capable of forming large embers that could smoulder for a long time. The Court concluded that on the evidence the landscaping material was an effective cause of the fire.
The Effect of Having Two Concurrent Causes
The Court next considered the effect of having two concurrent causes of loss; one covered by the policy (the lifestyle block materials) and one expressly excluded (the landscaping business materials).
The case turned on whether the Wayne Tank principle applied. The principle is an aid to contractual interpretation and states that were a loss has two effective and interdependent causes, one within the policy and one excluded, the exclusion will prevail.
The rationale is that where an insuring clause and an exclusion clause are found together, one arrives at the parties’ intent by subtracting the latter from the former.
The High Court had declined to apply the Wayne Tank principle. However, the Court of Appeal disagreed and said that applying the principle was appropriate in this case. It considered that the causes were interdependent, as neither could be isolated as the sole cause of the fire. AMI had also proven on the balance of probabilities that the excluded business activity was an effective cause.
The effect of the decision was to reverse the High Court ruling. Consequently cover for the costs of putting out the fire was not available under the Leggs’ AMI policy.
Virginia Wethey, Senior Associate at Fee Langstone says that the decision affirms the supremacy of an excluded cause where it is one of two concurrent causes. This has the potential to lead to hard outcomes for insureds and highlights the importance of ensuring that insureds (and their brokers) put in place cover for all activities, personal and business, the insured carries on.
In post-earthquake Christchurch, it is not uncommon for a vendor of an earthquake-damaged property to sell the property without carrying out repairs and purport to assign to the purchaser the right to claim under the property’s material damage insurance policy. A recent High Court decision has provided welcome clarification as to whether such an assignment operates to assign a right to full replacement of the house, or just the indemnity value.Read More
This case is the first successful prosecution under the new Health and Safety at Work Act 2016. The decision had been eagerly awaited by many to see how the courts were going to approach prosecutions under the new Act. However the decision is disappointing as the judge declined to make any sentencing guidelines. What this case did make clear is that fines under the new Act have increased hugely, although the ability of small businesses to pay these large fines is another matter altogether.Read More
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Director of Public Prosecutions v Kilsaran Concrete Limited  IECA 112
A company which put the safety of its employees in jeopardy in the pursuit of increased efficiency and maximised profit has had an initial fine of €125,000 increased to €1,000,000 in the Irish Court of Appeal. This case demonstrates the increasing seriousness placed on health and safety offences in the workplace and a renewed focus on deterrence, both of which are reflective of New Zealand’s new health and safety legislation.Read More
Fee Langstone’s quiz team ‘Beyoncé Knowledge’ enjoyed another quiz night this month supporting the Auckland chapter of Dress for Success – an organisation that aims to provide women with the support and tools they need to gain employment and financial independence. The teams faced six rounds including famous women, food and drink and a dress-up round. Thank you to Auckland Women Lawyers’ Association and Chapman Tripp for putting on a great event.Read More
Sadat v Tower Insurance & EQC  NZHC 1150
This case is an unsuccessful claim by a family against Tower Insurance and the EQC for the rebuild of their family home following the September 2010 earthquake. Expert evidence proved the house had been structurally unsound before the earthquake and, as the family was unable to prove the earthquake caused any material damage to their house, their claim for a rebuild and EQC costs failed.Read More
"Insurance offers so many opportunities in just the one industry and creates a unique amalgamation of so many different areas from legal, to broking, to technology innovation, to communications, to actuaries."Read More
Double J Smallwoods Ltd v Gisborne District Council  NZHC 1284
This case considers the law of strict liability, nuisance and negligence in the context of an unknown third party starting a fire in uncut vegetation on Council land, which spread and caused extensive damage to a timber yard. It also shows the significant impact a finding of contributory negligence can have on the amount of damages awardedRead More
Matt Atkinson and Russell Stewart had a great night a the first game between the All Black and the British and Irish Lions for the 2017 tour. Geoff Palmer and Richard Agnew from PwC joined them for a fantastic night of rugby, food and team spirit as they cheered on the All Blacks. Good luck for July 1st All Blacks!Read More
Impact Funding Solutions Ltd v AIG Europe Insurance Ltd  UKSC 57
This case considers the interpretation of the trading debt exclusion in a solicitor’s professional indemnity policy. The UKSC made two useful findings. First, the majority held that the Trading Debt exclusion defined the cover provided by the policy and therefore should not be construed narrowly. Secondly, the majority held that the Trading Debt exclusion would apply to a claim arising out of a breach of contract to provide services to the solicitors, even if the claim arose from a breach of the solicitor’s duty to their clients.Read More
“An insurance claim only happens when something goes wrong, and there is often an interesting story about what went wrong. It is satisfying to investigate those stories and help solve any problems.”Read More
Lam v Mo  NZHC 997
This case considers the evidence required to prove either an express or implied retainer in the context of a lawyer-client relationship. In this instance the evidence did not establish the existence of a retainer, so a defendant lawyer had no obligations to the party alleging breachRead More
Fee Langstone's quiz team "Beyoncé Knowledge" had a fantastic evening at the Not The Boy's Club Quiz Night Extravaganza this month. The teams were lead through 5 rounds - identifying logos, science and nature, history, insurance and general knowledge. Thanks to the sponsors and to the Not the Boys Club for putting on a great event (and especially for the 16 metres of pizza!).Read More