Alliance won a High Court appeal in a dispute triggered by an insurer’s denial of damage to an apartment caused by Cyclone Debbie.
The court heard the initial liability in May 2017 was “vague” in its scope and, after incurring nearly $200,000 in expenses, the following May the insurer clarified that Delor View Apartments must pay an estimated total of $918,709.90 in repairs and replacements. Other works.
If the conditions are not agreed, the insurer said the compensation will be reduced due to non-disclosure. Delor Vue rejected the offer and took legal action, saying Allianz was bound by the 2017 commitment and waived its right to reject the defense.
The Federal Full Court had previously found in favor of the apartment complex in a split decision, but a High Court majority decision handed down this week upheld the Alliance’s appeal.
“There are limited circumstances in contract law in which non-exempt rights cannot be withdrawn,” Chief Justice Susan Kiefel and Justices James Edelman, Simon Stewart and Jacqueline Gleeson said in the ruling.
“In this case, none of those limiting circumstances exist where the corporate entity has not established that it suffered no harm by relying on the insurer’s representation.”
Allianz did not breach its duty of good faith while “acting lawfully and in good faith,” the ruling said, adding that it clarified the extent of its offer while agreeing to waive non-disclosure rights.
The court was told that the Delor View Apartments in Cannonvale, near Airlie Beach, had 11 buildings and six flats each. Before entering the policy, Delor Vue knew the buildings had serious non-structural defects, with soffits and eaves poorly constructed and glued.
After the hurricane, it agreed to pay compensation for parts of the damage, albeit undisclosed, including interior water damage and repairs to fascia and gutters and roof sheets in certain circumstances.
Then Alliance found more defects in the construction of the roof, the trusses and the way they were attached to the building.
“As all the work was required to be commissioned simultaneously, Alliance and Delor Vue should have agreed on the sequence of work and the costs incurred by each, but a dispute arose over those matters,” the ruling said.
Delor Vue’s solicitors wrote to Allianz on May 3, 2018, saying the insurer had failed to communicate its position on compensation “with any clarity”, resulting in delays in the progress of the claim and repairs. Other allegations were also made.
Allianz responded on May 28, reiterating Delor Vue’s nondisclosure and proposing what it described as a “settlement,” and that its loss adjusters calculated Allianz’s repair costs from the hurricane damage at $918,709.90, while Delor Vue’s repair costs or replacement of existing defects totaled $3,579,432.72. The letter said the compensation offer would “lapse” if not accepted.
At that point, Allianz paid Delor Vue a total of $192,471.74 for building repairs, compensation to unit owners for loss of rent, replacement accommodation costs and professional fees.
A majority of the High Court ruling made the continued operation of the waiver conditional on the acceptance of conditions to resolve the dispute between the parties as the only sense in which the Alliance could be said to have “revoked” its waiver on May 28. , within a reasonable time.
Between May 2017 and May 2018, Delor Vue showed no foreseeable harm due to the loss of the opportunity to engage in repair work and there was a “clear benefit” from the money Alliance spent.
The decision says the 2018 letter did not breach the duty of utmost good faith by providing “more detailed and precise content” to the offer outlined a year earlier. Allianz pointed to an opinion in the Full Court that the offer “to pay a large gratuity for a non-existent liability” was accepted with a limited time frame.
In a dissenting view, Superior Court Judge Stephen Kjellar said Alliance’s May 2018 reassertion of its statutory right to reject insurance was “unreasonable, indeed capricious,” after the insurer had unequivocally announced a year earlier that it no longer believed in that right.
“Whether or not a fully informed and unmistakably communicated choice constitutes a legally enforceable waiver, the legally enforceable contractual requirement is that the Alliance must act in very good faith toward Delor Vue,” he said. “Alliance has no right to go back on its word.” It has no right to blow hot and cold.
Get the result Here.