A recent High Court decision has cleared the air in relation to a contentious section of the Insurance Contracts Act 1984(Cth). In September, the High Court delivered its decision in Maxwell v Highway Hauliers Pty Ltd  HCA 33, dismissing an appeal against the decision of the West Australian Court of Appeal, overturning the decision in Johnson v Triple C Furniture & Electrical  QCA 282.
In this case two fleet trucks were involved in accidents and neither driver was at fault. The insurer refused to indemnify them, arguing that the policy did not cover these drivers because the drivers did not meet the relevant PAQ5 profile score nor provide the insurer with a driver’s declaration following the accident in accordance with the policy.
Highway Haulier relied on section 54 of the Insurance Contracts Act 1984(Cth), which protects against insurance cover being frustrated by insurers using drafting devices to deny liability even where a breach of a policy term had nothing to do with the loss and did not prejudice the insurer’s interests – such as in t h is case.
The insurer used Johnson v Triple C Furniture & Electrical  QCA 282 to argue that section 54(1) of the Insurance Contracts Act 1984(Cth) only applied to clauses that created exceptions to coverage under the insurance policy rather than to qualifications to the scope of the cover.
The High Court found in favour of Highway Hauliers, deciding to look at the acts or omissions of the insured, rather than the legal character or term of the policy that entitles refusal to pay the claim.
The insurer was in breach of its insurance contract because:
- The fact that each vehicle was being operated at the time of the accident by an untested driver was an act that occurred after the contract of insurance was entered into; and
- Highway Hauliers did not make certain each vehicle was operated by a tested driver was an omission that also occurred during the period of insurance.
Section 54(2) allows the insurer to refuse to pay the claim if there was contribution to the loss by the insured due to the omission. Every case is different and the application of section 54(2) depends substantially on the factual scenario. If you have a friend in similar circumstances they should seek legal advice