Successful exclusion clause: Swashplate Pty Ltd v Liberty Mutual Insurance Company

Swashplate Pty Ltd v Liberty Mutual Insurance Company T/as Liberty International Underwriters [2020] FCA 15

16 January 2020, Federal Court Of Australia – Allsop J

Relevant Policies

Swashplate Pty Ltd (Swashplate) acquired two helicopters located in the United States. At 2pm AEST on the 19th of May 2018, Swashplate’s agent at Austbrokers sent two placement slips to Liberty International Underwriters (Liberty). Insurance cover was then confirmed, the policy taking effect from 19 May 2018 and incorporated the 2009 Institute Cargo Clauses (A) (2009 ICC(A)). Clause 4.3 of the 2009 ICC(A) regarded packing or preparation of the subject matter, and cl 8.1 of the 2009 ICC(A) concerned the attachment of the policy and duration. Three conditions were also contained on the master slip that reflected a Helicopter Single Transit endorsement (HST endorsement) that was contained in the Liberty Policy, and included a “static cover” extension for a period of up to five days prior to loading.

What happened to the Helicopters?

Two containers were used to transport the helicopters, the container used to transport helicopter 56044 arrived in Picayune, Mississippi at 3pm, 18 May local time (6am AEST 19 May). Helicopter 56044 was then loaded into the container, which was then loaded onto a truck for transportation to New Orleans. The container used for the transportation of helicopter 56047 arrived in Picayune at 8am, 19 May local time (11pm AEST 19 May), where the helicopter was again loaded into the container for transportation. In both instances the temporary wheels were not chocked in their final stowage position, with insufficient or unsuitable strapped employed. This resulted in damage to the helicopters when they moved in their containers.

Indemnity was granted by Liberty in respect of helicopter 56047, but was denied in respect of helicopter 56044. Liberty adopted the view that the inadequacy of packing occurred before the policy attached to helicopter 56044, and that timing was crucial for the operation of one of the exclusions in the policy.

Determination of whether Swashplate was entitled to indemnity in respect of its claim for the cost of repairs to helicopter 56044 was undertaken as a separate question.

When did the Policy attach?
Swashplate’s Contention

In reliance on the static cover extension, Swashplate contended that the policy attached five days prior to the inception date. Swashplate submitted that extension varied the commencement or attachment of the policy, which would have otherwise have applied pursuant to cl 8.1 of the 2009 ICC(A). It was further submitted that if the static cover extension was not indicative of the time of commencement or attachment of the policy, the policy should not have been construed as a time policy, but instead as a voyage policy. It was then argued that even if the insurance was not to attach prior to 19 May 2018, due to the fact that the period of insurance on the placement slip covering 56044, being the operative place slip, was determinative, that reference was to AEST, not Picayune time. Swashplate further contended that the effect of the HST endorsement was to vary cl 4.3 of the 2009 ICC(A) such that cover was extended to loading and unloading as long as the cargo was professionally packed, stowed and carried and/or if the packing and stowage was overseen by a qualified aviation engineer.

Liberty’s Contention

Liberty’s submission was that the date of commencement should have been understood as the time and date of the place where the insured property was at the time the insurance was effected, being Picayune. Thus, the failure to chock or provide sufficient or suitable strapping occurred 18 May 2018, Picayune time, giving full contractual force to the “period of insurance” in the operative placement slip, and static cover extension. Liberty also placed reliance on cl 4.3 of the 2009 IC(A).

HELD: Indemnity did not extend to Helicopter 56044

Key points of the judgment:
  1. The deficiencies in the stowage of helicopter 56044 consisted of either inadequate strapping to tie down the helicopter in the container, or the failure to chock the helicopter in the container, and occurred between 3pm and 5pm on 18 May 2018 (Picayune time) – [38]
  2. The various contractual documents were to be read together, giving effect where possible to all provisions in a harmonious construction reflective of business common sense. The master slip, whilst not a contractual document, was an aspect of the surrounding circumstances that assisted in the interpretation of the contract of insurance. – [51]
  3. In looking to the terms of the operative placement slip and the incorporated wording, a reasonable business person would have sought to understand the meaning of effect of them in the context of the master slip, and the future undertakings which the master slip envisaged. – [52]
  • The cl 4.3 exclusion of the 2009 ICC(A) applied: the deficiencies in packing was carried out prior to the attachment of the insurance. – [69]
  • If it had been necessary to address cl 8.1 of the 2009 ICC(a), the insurance attached when the helicopter was moved for the purpose of loading. – [75]

 

Scroll to Top