18 May 2020


International Cases

The State of Western Australia v. Leicester

Australia

04.09.2018

Insurance

State is liable to indemnify losses incurred by Westpac as a result of the Fire

Present is an appeal against a decision concerning the determination of a preliminary issue in proceedings brought by the Respondent (Mr Leicester) against the Appellant (the State) in respect of damage to Mr Leicester's house and property as a consequence of a prescribed burn in the Margaret River region in November 2011. It was common ground that, Mr Leicester's claim was brought pursuant to rights of subrogation by Westpac General Insurance (Westpac). The preliminary issue was whether Westpac, by agreement, had previously released the State from such a claim. The judge found that, although the State had entered into an agreement with Westpac to release a number of other insured in relation to the fire, the agreement did not apply to Mr Leicester. The State appeals against that decision.

The undisputed finding is that an agreement was reached on 17th June, 2016 by oral acceptance of the offer conveyed by Mr Hubbard's letter of 10th June, 2016. That offer was to settle for the total sum of $250,000 on the terms, relevantly, of par 6 of Mr Hubbard's letter of 19th May, 2016. When par 6.1 of the letter of 19th May, 2016 is read as a whole, it appears that the settlement of Westpac's rights against 'any person … arising out of the Fire …', is intended to be a reference to any claims Westpac has not only against the State directly, but also against persons for whom the State might be or become liable. The focus here is to protect the State against the prospect of claims pursuant to which it might incur indirect liability.

The words 'arising out of the Fire', when read in contrast to 'the indemnification of its insured', are not, on their face, tautologous. They are wide enough to cover, in addition to any losses suffered by Westpac from its indemnification of the five insured (1) any losses incurred directly by Westpac as a result of the Fire, and (2) any losses connected with the five insured but unconnected with Westpac's indemnity of the insured. This would include any losses for breach of contract for failing to indemnify the insured to the full extent as required under the relevant policies.

State accepts that, there was a binding agreement reached on 17th June, 2016 upon the oral acceptance of the State's offer contained in Mr Hubbard's letter of 10th June, 2016. There was no variation to that binding agreement. The parties' solicitors had no authority to execute a formal settlement Agreement pursuant to para 6.4 of the letter of 19th May, 2016 as incorporated into the binding agreement reached on 17th June, 2016. Once the above matters are accepted, it is impossible for the terms of the agreement between the parties to be other than those contained in the agreement reached on 17th June, 2016. Appeal dismissed

Tags : Loss Indemnification Grant

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