Policy terms: Where does the onus of proof lie?
The High Court last week confirmed that insurers bear the onus of proving the limit of indemnity under their policies .
Mr Stewart (Stewart) alleged that he was exposed to asbestos fibre causing the deadly lung condition, mesothelioma, during the course of his employment with Pilkington Bros (Australia) Limited (Pilkington) from 1964 to about 1967.
His widow sued QBE Insurance (Australia) Limited (QBE) as Pilkington’s workers compensation insurer. She also sued Wallaby Grip Limited as supplier of asbestos products.
The matter was heard at first instance in the Dust Diseases Tribunal of NSW (the DDT). No policy documents could be found. QBE admitted that there was a policy of insurance in place but disputed the policy limit of indemnity. QBE did not admit that the policy provided cover to Pilkington for more than $40,000.
The limit of indemnity asserted by QBE reflected the relevant statutory minimum set by the Workers Compensation Act 1926 (NSW) (the WCA). At the relevant time, the WCA required employers to hold a policy of insurance for an amount of at least $40,000 in respect of liability for injury to workers.
The courts below
Stewart argued in the DDT that the onus lay with QBE to prove the terms of the policy and there having been no evidence led regarding the indemnity limit, that cover was unlimited.
The DDT agreed with Stewart and held that the onus of proving the limit of the policy lay with the party asserting the limit. That is, QBE bore the onus of proving that cover under the policy was not unlimited.
QBE successfully appealed the DDT’s decision. The Court of Appeal  found that Stewart bore the onus of proving that cover under the policy was not capped at the statutory minimum of $40,000.
High Court decision
The High Court overturned the Court of Appeal’s decision and held that the onus of proving the limit of indemnity lay with QBE. It cited The ÒToreniaå  2 Lloyd’s Rep 210 in which Hobhouse J observed that the:
‘legal burden of proof arises from the principle: [h]e who alleges must prove’and the èÏincidence of the burden of proof can therefore be tested by answering the question: [w]hat does each party need to allege?’by reference to the contract of insuranceå.
The High Court held it was necessary for Stewart to establish that a contract of insurance under the WCA was in existence at the relevant time and that Pilkington was liable to him for his injuries. Stewart had discharged this burden.
QBE, however, had to do more than simply not admit that Pilkington was entitled to an indemnity greater than the $40,000 statutory minimum cover. QBE bore the onus of proving on the balance of probabilities the policy limit which it asserted. QBE had not met this onus.
The High Court’s decision confirms that an insurer seeking to assert a limit of indemnity under a policy of insurance must prove that limit. The Insured need only prove that cover under the policy is triggered.
The decision provides incentive for insurers to ensure comprehensive record keeping to enable them to adduce evidence to prove a policy limit. Where the insurer cannot produce a copy of the policy or evidence of the limit of indemnity, the policy will likely be held to offer unlimited indemnity provided that the plaintiff can establish that cover under the policy is triggered. This will have implications particularly for liability insurers of Òlong tailå toxic tort claims where the claims are often made many years after the period of insurance.
For more information contact Belinda Henningham on 9236 9913. Wallaby Grip Limited v QBE Insurance (Australia) Limited; Stewart v QBE Insurance (Australia) Limited  HCA 9  QBE Insurance (Australia) Ltd v Stewart  NSWCA 66
This publication is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this publication. Persons listed may not be admitted in all states and territories.