Iag New Zealand Ltd v John F Jackson

• Jurisdiction: New Zealand
• Judge: Miller J
• Judgment Date: 15 July 2013
• Neutral Citation: [2013] NZCA 302
• Docket Number: CA274/2012
• Court: Court of Appeal
• Date: 15 July 2013

Between

Iag New Zealand Limited

Appellant

and

John F Jackson

Respondent

[2013] NZCA 302

Court:

O'Regan P, Arnold Miller

CA274/2012

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against the High Court's refusal of summary judgment for exclusion of professional indemnity insurance due to a dishonest act or omission by the insured — respondent, insurance broker, failed to arrange insurance cover but falsely assured homeowners that the cover had been arranged — after the earthquake badly damaged the home they sued respondent for uninsured loss — respondent joined appellant, his professional indemnity insurer, as third party — appellant sought summary judgment in respect of the policy exclusion for liability in connection with dishonest conduct — whether the respondent acted dishonestly — whether there was sufficient connection between the respondent's dishonest acts and his civil liability to the homeowners.

Counsel:

GSA Macdonald and J M Hayes for Appellant (First Hearing)

BRD Burke and M K Crimp for Respondent (First Hearing)

M R Ring QC and J M Hayes for Appellant (Second Hearing)

BRD Burke for Respondent (Second Hearing)

• A The appeal is allowed. IAG will have summary judgment on its ninth affirmative defence to Mr Jackson's claim.

• B Costs are reserved with a timetable for submissions as noted in paragraph [33].

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Miller J)

Introduction

1 In May 2009 a Christchurch couple, Nicola and Jacques Marchand, engaged an insurance broker, John Jackson, to arrange insurance cover for their home and contents, their motor vehicles, and a medical practice.

2 Mr Jackson placed business interruption cover for the medical practice, but he arranged none of the other insurances. This was an oversight initially. But he assured the Marchands not once but several times that he had placed the cover with New Zealand Insurance, apparently intending on each occasion to do so immediately.

3 The truth was revealed after the earthquake of September 2010 badly damaged the Marchands' home. They sued Mr Jackson for their uninsured loss. He joined IAG, his professional indemnity insurer, as a third party. It moved for summary judgment, citing a policy exclusion for liability in connection with dishonest conduct, but failed in the High Court, Associate Judge Matthews reasoning that dishonesty must be decided on the facts at trial. 1 IAG brings this appeal against that judgment.

4 Since the judgment under appeal the Marchands have succeeded at trial against Mr Jackson. IAG did not participate. 2 Kós J was not required to decide why Mr Jackson acted as he did. The Judge did find on the evidence before him that the reasons remained a mystery but it seemed that pressures of business, in combination with some reversals in health, overwhelmed Mr Jackson. 3

What Mr Jackson did

5 The central facts are not in dispute. The Marchands approached Mr Jackson because they had been declined cover by their existing insurer after Mr Marchand was convicted of offences of dishonesty relating to his medical practice. 4

Mr Jackson had them complete a High Value Homes questionnaire for NZI, and on 1 July 2009 he secured a quote. He did not bind cover or refer the quote to the Marchands. Nor did he invoice them for the premium.

6 Mrs Marchand wondered why no account had been sent for a premium. She telephoned Mr Jackson about the end of July 2009 to check that the home, vehicles and contents were insured. He assured her that they were. She repeated her inquiry early in 2010, and he repeated his assurance. He knew when he offered them that these assurances were untrue. In May 2010 Mrs Marchand told Mr Jackson that she wanted to make a claim for $649.20 for a pair of spectacles. He had her complete an NZI claim form, but he did not send it to NZI. Rather, he paid the claim himself.

7 The first Canterbury earthquake struck on 4 September 2010. Only then did Mr Jackson try to arrange cover with NZI, submitting an application form which he had dated 30 August 2010. 5

What the evidence tells us about why Mr Jackson acted as he did

8 Mr Jackson made a written statement in the presence of IAG's solicitors. That document, prepared on 8 June 2011, underpins IAG's claim that his conduct was dishonest. It included the following account which, as the Associate Judge found, might well suggest negligence:

On receipt of NZI's house and contents quote I should have sent a hold covered request to NZI. I should also have sent the Marchands a proposal, policy wording and premium payment options. This should have been done in early July 2009 …

I thought that I had sent the relevant documents off to the Marchands. I admit that I cannot find any evidence of having done this.

…

The Marchand file should have gone into my Review Cases file, but I found out later that it had not been filed there.

Because the Marchand file had not been correctly filed or actioned I did not do anything to secure insurance cover for the Marchand's house, contents and car between July 2009 and September 2010. I did not accept the NZI

quote or send a hold covered request to NZI. I did not send any documents to the Marchands or NZI. The policy should have been issued and a premium account sent out. But this was not done. This was a failure on my part. NZI did not issue a policy schedule.

9 Mr Jackson went on, however, to say that while he knew he had not placed cover he always meant to do so:

Nicola Marchand telephoned me twice saying she was concerned that she had not received a tax invoice for the premium or a policy in relation to their house, contents and car insurance. The first call was in late July or early August 2009. She asked me whether they were covered. Nicola called me again a few months later. It would have been early in 2010. Again she asked for confirmation that they had insurance cover. On each occasion I assured her that they had insurance cover with NZI for their house, contents and car, even though this was not the case. Each time Nicky called I thought to myself that I must get the papers sent out to her and get that cover in place and sorted. But I never did.

…

… On reflection I realise that I saw the Marchand file as problematic and to be followed up. But I did not do so. The file did not get the action it required of me.

… I paid the claim myself because I knew that I hadn't placed the insurance. I did not tell Nicola that I paid the claim personally but I believe the optometrist informed her that I paid some money.

10 Mr Jackson concluded by saying that he could not explain why he had acted as he did:

In hindsight I had a number of opportunities to get house, contents and car insurance cover in place for the Marchands. I should have obtained that cover in July 2009. I had further opportunities to remedy the situation when Nicola rang me on at least two occasions and expressed her concern about the fact that she had not received a policy or a bill for the premium and also when the glasses claim was made in May 2010. I cannot explain why I did not take action to put the NZI insurance cover in place but have always felt uneasy about the timing of making application and the moral risk of Dr Jacques Marchand.

11 In his first affidavit in opposition to the summary judgment application, Mr Jackson attributed his failure to place cover to inadvertence and repeated oversights:

… I failed to follow up due to inadvertence. Because Mr and Mrs Marchand's file had been incorrectly filed, I overlooked formally binding the cover with NZI. As outlined in my Statement, Mrs Marchand telephoned me a couple of times. I believe the first time was in early August 2009 and the second time in early 2010. I assured Mrs Marchand that she was covered. I thought on both occasions that I must get on and formally bind cover but on each occasion it got overlooked by me and I forgot about it.

I was not particularly worried about not formally binding Mr and Mrs Marchand's insurance as I believed that they would obtain automatic acceptance as NZI had previously indicated acceptance.

12 In a third affidavit, Mr Jackson recounted serious health problems that he has endured since 2007 and explained that he now suffers a very poor memory. A consultant psychiatrist, Alistair MacLeod, also swore an affidavit in which he addressed the question whether Mr Jackson suffers a depressive illness which may have precipitated “memory lapses and discrepancies”. He found it highly likely that a combination of heart disease, the side-effects of treatment for prostate cancer, stress and possible major depression would distract Mr Jackson and interfere with his performance at work.

The exclusion in the professional indemnity policy

13 IAG has advanced several defences to Mr Jackson's claim. We need not survey them. It is not in dispute that Mr Jackson's liability to the Marchands was prima facie covered under the professional indemnity policy, which covered civil liabilities arising in the conduct of professional services. The only relevant part of the policy for our purposes is Exclusion E, which provided that Mr Jackson was:

… not insured for civil liability in connection with any dishonest, fraudulent, criminal or malicious acts or omissions by you….

14 It will be seen that the exclusion required a civil liability to another, a dishonest act or omission, and a connection between the two. (IAG does not say that Mr Jackson's acts or omissions were fraudulent, criminal or malicious.) Two questions arise; what “dishonest” means in this setting, and what connection must be shown between the insured's dishonest conduct and his civil liability.

Summary judgment

15 IAG moved under r 12.2 of the High Court Rules, which governs a defendant's (or in this case, third party's) application for summary judgment. IAG must show that none of Mr Jackson's causes of action can succeed. 6 The...