Reaffirmation Of Limitation Law In Property Damage Claims

The New South Wales Court of Appeal recently handed down a judgment that considered whether time runs from the date of damage to property insured, or alternatively the date of declinature, under an Industrial Special Risks Insurance Policy (ISR Policy).

In summary, the Court of Appeal held that time runs from the date of damage to the property insured, which in this case meant that the insured's claim was statute barred. The decision was however split 3:2, suggesting that the issue could be ripe for further judicial consideration.

Background

The case of Globe Church Incorporated v Allianz Australia Insurance Ltd1 concerned alleged property damage to a church in Gateshead, New South Wales. One of the issues in the matter concerned whether the claim was statute barred. The dispute was referred to the Court of Appeal for determination of the following separate questions:

In respect of any of the alleged property damage, which (if any) of the insured's claims accrued at the time of the alleged damage for the purpose of Section 14(1) of the Limitation Act 1969 (NSW) (Limitation Act); and In light of the answer to that question, which (if any) of the insured's claims in the proceeding were maintainable? The relevant timeline of the insurance claim for the purpose of the separate questions was:

The alleged property damage occurred between June 2007 and March 2008. The claim on the ISR Policy was first advanced in 2009. Liability was declined by the insurers in 2011. The plaintiff commenced proceedings in late 2016. Section 14(1) of the Limitation Act provides for a six year limitation period for breach of contract, and the six year period begins to run on the date that the "cause of action first accrues". Accordingly, if the insured's cause of action accrued when the property damage occurred, its claim was statute barred. Conversely, if the cause of action accrued when insurers declined the claim, then the claim was not statute barred.

The Submissions

The insured submitted that a distinction should be made between the promise of an insurer to indemnify and the breach of that promise; and that only when the insurer failed to do what was required of it could a cause of action for damages for breach of contract accrue. As a result, the insured submitted that its claims were not statute barred because the time in which to bring the claims did not begin to run until the insurer breached its obligations to pay by declining liability in 2011.

The...

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