The fact that the peril insured against was brought into operation by an act on the part of the assured or of a person for whom he is or may be responsible does not necessarily take away the liability of the insurers for any loss that may be sustained in consequence. The effect of the act depends partly on its nature and partly on the special stipulations, if any, of the policy.
A NEGLIGENT ACTS
Negligence, whether on the part of the assured himself or of his employees, does not exempt the insurers from liability though the loss is caused thereby, for one of the objects of insurance is to protect the assured against the consequences of negligence.
In the words of Lord Denman CJ:
‘There is no doubt that one of the objects of insurance against fire is to guard against the negligence of servants and others; and, therefore, the simple fact of negligence has never been held to constitute a defence. But it is argued that there is a distinction between the negligence of servants or strangers, and that of the assured himself. We do not see any ground for such a distinction: and are of opinion that, in the absence of all fraud, the proximate cause of the loss only is to be looked to,’
In a case concerning marine insurance Parke B remarked:
‘But the assured makes no warranty to the underwriters…that the master or crew shall do their duty during the voyage; and their negligence or misconduct is no defence to an action on the policy, where the loss has been immediately occasioned by the perils insured against…nor can any distinction be made between the omission by the master and crew to do an act which ought to be done, or the doing an act which ought not, in the course of the navigation. It matters not whether a fire which causes a loss be lighted improperly or, after being properly lighted, be negligently attended; whether the loss of an anchor, which renders the vessel unseaworthy, be attributable to the omission to take proper care of it, or to the improper act of shipping it or cutting it away; nor could it make any difference whether any other part of the equipment were lost by mere neglect or thrown away or destroyed in the exercise of an improper discretion, by those on board. If there be any fault in the crew, whether of omission or commission, the assured is not to be responsible for its consequences.’
The effect of this decision is reproduced as far as marine insurance is concerned by the Marine Insurance Act 1906, s 55(2) (a) which states:
‘The insurer…unless the policy otherwise provides…is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew…’
It is unnecessary to consider the nature of the act constituting negligence, whether it is the doing of an act which ought not to have been done or the doing of a proper act in an improper manner. The degree of negligence does not appear to be material.
B. WILFUL ACTS
A willful act, whether of misfeasance or omission, which brings the peril insured against into operation, if amounting to misconduct, exempts the insurers from liability.
The ground of the exemption, however, is not so much the misconduct as the breach of good faith involved in making a claim in such circumstances. On the other hand, the policy is not avoided by a mere intention to commit a wrongful act which is never carried out, and the assured is not precluded from enforcing the policy if the peril subsequently comes into operation without any misconduct on his part.
It has also been held that it would be against public policy for the insured to succeed in any claim he might make on the insurers.
Thus, in Gray v Barr (Prudential Assurance Co Ltd Third Party):
The insured was covered under a ‘hearth and home’ policy in respect of all sums which he might become legally liable to pay as damages for bodily injury to any person caused by accident. His wife developed a liaison with another man, and the insured went to his house with a loaded shotgun and fired a shot into the ceiling to frighten him. A struggle ensued and the gun went off killing the other man. The insured admitted liability and claimed an indemnity from the insurers.
Held, the claim failed for the insured was guilty of deliberate violence and it would be against public policy to allow him to recover the sum insured.
The exemption from liability extends to the similar acts of third persons done with the privity or consent of the he assured. In absence of privity or consent, the assured if not guilty himself of misconduct, is not precluded from recovering.
If the act amounts to a crime, the insurers must, if they resist claim on this ground, satisfy the jury that the alleged crime was committed. The evidence brought forward must be sufficient to justify a conviction on the criminal charge. In the absence of clear proof that the act was criminal, the presumption against crime must prevail, and the assured will be entitled to recover. To preclude the assured from recovering, it must be shown that the crime was committed by him or with his privity or consent. If the assured is not in any way responsible for the crime, he may recover, though the loss was caused by the criminal act of a third person.
A willful act is excused where it is committed for the purpose of adverting a greater danger, or, perhaps, for the purpose of saving human life.
Where the policy covers two assured, who are not joint owners, in respect of their respective interest, the willful act by one of the assured does not prevent the other assured from bringing an action on the policy.
Thus, in Lombard Australia Ltd v NRMA Insurance Ltd:
A proposal was made by the hire-purchaser of a car which he was obtaining on hire-purchase terms from a finance company. The policy which was issued covered the car against ‘accidental loss’. The hire-purchaser committed suicide by deliberately driving the car into a tree. The finance company claimed under the policy.
Held that the claim succeeded. It was clear that the policy constituted a several promise to each of the assured. The deliberate action of the hire-purchaser in causing damage to the car did not prejudice the finance company’s claim that the loss was derived from accidental causes.
As far as marine insurance is concerned, the Marine Insurance Act 1906, s 55(2)(a) provides:
‘The insurer is not liable for any loss attributable to the willful misconduct of the assured…
C. EXPRESS STIPULATIONS IN THE POLICY
The conduct of the assured and of the persons for whom he is responsible may be dealt with by express stipulations in the policy. The stipulations in use may be classified as follows:
1. Stipulations which merely put into words what is already implied by law.
2. Stipulations which extend the exceptions implied by law.
3. Stipulations which diminish the exceptions implied by law.
1. Stipulations expressing what is already implied
This class includes stipulations which refer generally to willful misconduct, and stipulations specifying the acts which, having reference to the circumstances of the particular insurance, would probably be regarded, even in the absence of the stipulation, as willful misconduct, e g in the case of personal accident insurance, engaging in a duel. An express stipulation may also exclude the insurers’ liability if his death or disablement is caused by the insured’s own criminal act.
2. Stipulations extending the exceptions implied by law
Such stipulations may be sub-divided into:
a. Stipulations excepting acts which are ambiguous in their nature, e g in the case of personal accident insurance, willful exposure to obvious risk.
b. Stipulations excepting acts which, though not wrongful in themselves, are from their nature calculated to bring the peril into operation, e g in personal accident insurance, engaging in mountaineering or steeple-chasing.
c. Stipulations excepting acts of negligence; such stipulations may be framed in general terms or may specify the particular acts of negligence excepted.
d. Stipulations excepting acts of persons for whom the assured is responsible, e g members of his household or business staff; such stipulations are usually confined to acts of criminal misconduct.
3. Stipulations diminishing the exceptions implied by law
a. Stipulations which apply only on favour of an assignee for value, though the assured or persons claiming through him otherwise than for value
b. Stipulations of general application.