John Francis Jackson v Iag New Zealand Ltd

• Jurisdiction: New Zealand
• Judge: McGrath,William Young,Glazebrook JJ
• Judgment Date: 25 February 2014
• Neutral Citation: [2014] NZSC 12
• Docket Number: SC 122/2013
• Court: Supreme Court
• Date: 25 February 2014

Between

John Francis Jackson

Applicant

and

Iag New Zealand Limited

Respondent

[2014] NZSC 12

Court:

McGrath, William Young and Glazebrook JJ

SC 122/2013

IN THE SUPREME COURT OF NEW ZEALAND

Application for leave to appeal the Court of Appeal's (CA) decision that a dishonesty exclusion clause in a professional indemnity insurance policy applied to the appellant — appellant was an insurance broker who had negligently assured homeowners that they were insured when he knew they were not — appellant suffered from depressive and physical illnesses at the time — CA, applying a mixed objective-subjective test for dishonesty, held that the appellant's admitted knowledge that the assurances he gave the homeowners were false (the subjective element) made his conduct objectively dishonest — whether the appellants illnesses negated the finding of dishonesty.

Counsel:

D A Webb and S E Goodwin for Applicant

G S A Macdonald and J M Hayes for Respondent

• A The application for leave to appeal is dismissed.

• B The applicant is to pay to the respondent costs of $2,500 plus all reasonable disbursements to be fixed if necessary by the Registrar.

JUDGMENT OF THE COURT

REASONS

Background

1 This case concerns a dishonesty exclusion in an IAG professional indemnity insurance policy. In order to apply, the exclusion required civil liability to another, a dishonest act or omission and a connection between the liability and the dishonesty.

2 Mr Jackson, an insurance broker, negligently failed to arrange insurance for Mr and Mrs Marchand (home and contents, motor vehicles and a medical practice).

3 On two occasions, (in July or August 2009 and in early 2010) Mr Jackson assured Mrs Marchand that they were insured, despite knowing that they were not. When Mrs Marchand made a claim in May 2010 for the loss of a pair of spectacles, Mr Jackson paid the claim himself. It was only after the first Christchurch earthquake that Mr Jackson attempted to arrange insurance cover.

4 There was evidence that Mr Jackson has a depressive illness. He also had heart disease and was suffering from the side effects of treatment for prostate cancer.

5 IAG applied for summary judgment against Mr Jackson, on the basis of the dishonesty exclusion, because of the conduct outlined at [3] above. This was declined in the High Court 1 but succeeded in the Court of Appeal. 2

6 Mr and Mrs Marchand had (before the judgment in the Court of Appeal) succeeded at trial against Mr Jackson with regard to their uninsured losses. 3

Court of Appeal decision

7 The Court of Appeal adopted a mixed objective-subjective test for dishonesty. The subjective element required the Court to consider Mr Jackson's knowledge, while the objective element required the application of that knowledge against normally accepted standards to establish whether Mr Jackson's conduct was objectively dishonest. The Court said: 4

Although dishonesty is a subjective mental state, the law uses an objective standard to measure it: the person's subjective...