MBF Life Limited v Rowena Marchant [2006] NSWCA 363

Reported Decision : (2007) 14 ANZ Insurance Cases 90-128

New South Wales Court of Appeal

CITATION: MBF Life Limited v Rowena Marchant [2006] NSWCA 363 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 7 September 2006

JUDGMENT DATE: 15 December 2006

JUDGMENT OF: Handley JA at 1; Beazley JA at 2; Santow JA at 42

DECISION: The appeal is dismissed with costs.

CATCHWORDS: INSURANCE – accidental death insurance policy – whether death while undergoing chemotherapy treatment was an "accident" within the terms of the policy – whether chemotherapy treatment was an "event" – whether the life insured suffered physical injuries caused solely by violent, visible and external means - INSURANCE – insurance policy as a commercial contract – construction of insurance policy – interpretation according to language, commercial circumstances, and the objects of the policy – proximate cause of loss and damage

Australian Casualty Co Limited v Federico (1986) 160 CLR 513 Hamlyn v Crown Accidental Insurance Co [1893] 1 QB 750 Henley v Mutual Accident Association, 133 Ill 556 (1890) Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & 2 Ors [2005] NSWCA 66 MacGillivray on Insurance Law, N Legh-Jones et al (9th ed, 1997) CASES CITED: McCann v Switzerland Insurance Australia Limited & Ors (2000) 203 CLR 579; [2000] HCA 65 Mutual Accident Association of the Northwest v Tuggle 39 Ill App 509 (1891) National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86 Paul v Travelers' Ins Co, 112 NY 472 (1889) Personal Accident, Life and Other Insurances, E R Hardy Ivamy, 2nd ed, 1980 Winspear v The Accident Insurance Co Limited (1880) 6 QBD 42

PARTIES: MBF Life Limited (Appellant) Rowena Marchant (Respondent)

FILE NUMBER(S): CA 40641/05

COUNSEL: M McCulloch SC (Appellant) A J Meagher SC; H J Halligan (Respondent)

SOLICITORS: Clayton Utz (Appellant) Beilby Poulden Costello (Respondent)

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 212/2005

LOWER COURT JUDICIAL OFFICER: Garling DCJ

LOWER COURT DATE OF DECISION: 22 July 2005

- 14 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40641/05

HANDLEY JA BEAZLEY JA SANTOW JA

15 December 2006 MBF LIFE LIMITED v ROWENA MARCHANT Headnote Facts Mr and Mrs Marchant were covered by an accidental death insurance policy issued by the appellant. The appellant refused to pay an insurance claim made by Mrs Marchant following Mr Marchant's death, who died whilst undergoing chemotherapy treatment, on the basis that the circumstances of Mr Marchant's death did not constitute an "accident" within the terms of the policy. The policy defined an "accident" as an "event" occurring while the policy was in force, and where the life insured suffered physical injuries caused "solely by violent, visible and external means". The respondent brought proceedings against the respondent, and on 22 July 2005 the trial judge found that the death fell within the terms of the policy, as it was an accident "caused by violent, visible and external means". The appellant appealed against his Honour's findings.

Held per Beazley JA (Handley and Santow JJA agreeing):

(i) The principles that govern the construction of insurance policies are well settled. An insurance policy is a commercial contract and requires interpretation according to the language used, the commercial circumstances addressed by the policy, and the objects of the policy. McCann v Switzerland Insurance Australia Limited & Ors (2000) 203 CLR 579; [2000] HCA 65 (followed); Australian Casualty Co Limited v Federico (1986) 160 CLR 513 (referred to) (ii) Insurance law looks to the proximate cause of loss and damage. Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & 2 Ors [2005] NSWCA 66 (iii) The trial judge erred in adopting the meaning of "accident" as it was construed in Australian Casualty Co Limited v Federico, as the terms of the policy in that case were different and it is necessary to have regard to the terms of the policy to determine the meaning of the language used. Australian Casualty Co Limited v Federico (1986) 160 CLR 513 (distinguished) (iv) To focus on the word "event" in isolation from the other words of the policy is an erroneous approach to construction. It was necessary to identify a circumstance or a happening that caused the life insured to suffer physical injury. The event where the life insured suffered physical injury was the composition of circumstances whereby Mr Marchant was given a dose of chemotherapy and thereby suffered injury. Lasermax Engineering Pty Limited v QBE Insurance (followed) (v) The word "violence" in insurance policies means the contrary of 'without any violence at all' and merely expresses that the injury is due to other than purely natural causes, such as bodily weakness or disease. Here, the physical injuries were caused by external means, being the administration of chemotherapy, that was visible and that was violent in the way in which this phrase has been interpreted in the authorities. Hamlyn v Crown Accidental Insurance Co [1893] 1 QB 750 (followed); Personal Accident, Life and Other Insurances , E R Hardy Ivamy, 2nd ed, 1980 (referred to) (vi) The "physical injuries" suffered by Mr Marchant were those constituted by the hypersensitivity pneumonitis, and they were caused solely by the allergic reaction to the chemotherapy agent. The other "cause of death" listed in the death certificate was not so caused and was therefore an irrelevant event. The trial judge did not err in finding that the death was caused solely by the administration of chemotherapy agents.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40641/05

HANDLEY JA BEAZLEY JA SANTOW JA

15 December 2006 MBF LIFE LIMITED v ROWENA MARCHANT Judgment 1 HANDLEY JA: I agree with Beazley JA. 2 BEAZLEY JA: The dispute underlying this appeal arose out of the proper construction of an Accidental Death Plan policy of insurance issued by NRMA Life Limited, now known as MBF Life Limited (the appellant). The policy covered both the late Geoffrey William Marchant and his now widow, Rowena Marchant (the respondent). Mr Marchant died on 18 August 2002, whilst undergoing chemotherapy treatment at Gosford Hospital. The appellant refused to pay an insurance claim made by the respondent on the basis that Mr Marchant's death fell outside the ambit of the policy, as the circumstances of his death did not constitute an "accident" within the terms of the policy. 3 On 22 July 2005, the trial judge, Garling DCJ, found that the death was an accident "caused by violent, visible and external means", within the terms of the policy. Following that finding consent orders were made awarding the respondent damages in the sum of $100,000, plus interest in a sum of approximately $15,000. 4 The appellant contends his Honour's conclusion was erroneous on a number of bases. First, it contends that his Honour failed to identify the relevant "event" for the purposes of the definition of "accident" within the terms of the policy. Secondly, the appellant contends that his Honour erred in finding that the deceased's death was caused by violent, visible and external means. Thirdly, the appellant contends that in any event, the appellant's death was not caused "solely" by the administration of the chemotherapy. Rather, there were two causes of death, one of which – the "Chronic airflow limitation secondary smoking" – was unconnected with the administration of the chemotherapy. It was also submitted that his Honour erred in the application of Australian Casualty Co Limited v Federico (1986) 160 CLR 513.

Terms of the policy 5 The policy was an Accidental Death Plan policy of insurance which provided for the payment of a death benefit in the circumstances provided in cl 1.1. That clause provided: " Death Benefit 1.1 We will pay a Death Benefit if the life insured: - is involved in an accident; and - as a direct result, dies immediately or within the next 90 days." 6 "Accident" for the purposes of cl 1.1 was defined in cl 1.2 as follows: "1.2 An accident is: - an event which occurs while your cover is in force; and - where the life insured suffers physical injuries caused solely by violent, visible and external means." (Blue 10) (Emphasis added) 7 It was further provided in cl 2.1 that benefits would not be paid if the accident was caused by or related to, among other things, "the use of drugs by the life insured, other than those prescribed by a doctor and taken as directed". 8 The parts of the definition of "accident" that are challenged in particular by the appellant are emphasised in the above extract: namely, whether what occurred was an "event", and whether the cause was "solely" of "violent, visible and external means".

Background 9 The factual circumstances surrounding the death of Mr Marchant can be stated briefly. Mr Marchant was diagnosed with non-Hodgkins lymphoma for which he received his first round of chemotherapy treatment between 1998 and 1999, under the care of Dr Tiley. He was admitted to hospital on 2 August 2002, due to a relapse, at which time there was no history of allergy noted by the hospital. Mr Marchant was re-admitted to hospital on 13 August 2002 to receive a second round of chemotherapy treatment, which was administered intravenously by a cannula inserted into his arm, under the care of Dr Lindeman. 10 In correspondence to the appellant, Dr Lindeman outlined the deterioration of the condition of Mr Marchant following the treatment. On 14 August 2002, Mr Marchant began experiencing breathing difficulties, leading to a diagnosis of pneumonitis. By the next day, he had developed haemoptysis and was monitored and treated accordingly. His condition continued to deteriorate, and on 18 August 2002, it was recorded that he had developed neutropenic sepsis. Mr Marchant died at 10.40pm that evening. 11 The death certificate, certified by Dr Williams, recorded the cause of death as: "(I) a) Hypersensitivity pneumonitis, days b) Chemotherapy for non-Hodgkins lymphoma, days

(II) Chronic airflow limitation secondary smoking" 12 The trial judge accepted Dr Lindeman's record of events and opinion. In particular, the trial judge noted that it was the doctor's opinion that the choice of chemotherapy administered to treat Mr Marchant the second time around was "entirely appropriate", that "[a]n allergic response to this chemotherapy was unpredictable" and that the course taken following the chemotherapy was consistent with the diagnosis that was made, namely, of hypersensitivity reaction to one of the chemotherapy agents. The trial judge accepted Dr Lindeman's conclusion that: "… Mr Marchant's death was directly consequent on the intentional administration of chemotherapy appropriate to his clinical condition, and given with his consent. The course of events was unpredictable and there was no way of predicting this unfortunate chain of events." (Emphasis added) 13 Dr Lindeman was of the opinion that the deterioration in Mr Marchant's condition was compounded by the development, recorded on the day of his death, of neutropenic sepsis. The doctor stated that "[h]is chronic airflow limitation related to previous smoking was a likely contributory factor to the extent of his hypoxia". The trial judge did not refer to this part of Dr Lindeman's opinion, although his Honour made a general observation, after referring to the above extract (set out at [11] above) in Dr Lindeman's report, that "I accept Dr Lindeman's opinion and make findings in accordance with it". 14 After reviewing the caselaw, his Honour concluded that in the circumstances that occurred here, there was "an accident" in accordance with the statement of the High Court in Federico's case. He said that the deceased went into hospital for treatment and, although the treatment itself was appropriate, he "[had] a violent reaction to parts of the drugs and [died]". 15 His Honour next considered that the "accident" was caused by "violent, visible and external means". His Honour explained his conclusion in these terms: "There is inserted into the deceased's arm a needle. Through that needle and directly fed into the veins the drug [sic]. The drug causes the reaction, the deceased dies … the insertion of a needle [and] the breaking of the skin by the insertion of a needle I would have thought was covered by the term violent, it is visible and external." 16 It followed on his Honour's finding that all the requirements of the policy were met.

Proper approach to the construction of insurance policies 17 The principles that govern the construction of insurance policies are well settled and were not in dispute. In McCann v Switzerland Insurance Australia Limited & Ors (2000) 203 CLR 579; [2000] HCA 65 Gleeson CJ said at [22]: "A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation ( Hydarnes Steamship Co v Indemnity Mutual Marine Assurance Co [1895] 1 QB 500 at 504, per Lord Esher MR). Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure ( Lake v Simmons [1927] AC 487 at 509, per Viscount Sumner)." 18 In Federico Gibbs CJ at 520 pointed out that the provisions of an insurance policy would be interpreted liberally in favour of an assured "so far as the ordinary and natural meaning of the words used … permits this to be done". In Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & 2 Ors [2005] NSWCA 66, McColl JA (Ipp & Tobias JJA agreeing), reiterated that insurance law looks to the proximate cause of loss and damage. Thus, in a fire policy, where the insurer agreed to indemnify the insured "in respect of physical loss or damage to … contents … directly caused" by fire, McColl JA held that the policy was concerned with the proximate cause of the damage. In other words, the policy responded to what was the "real, efficient", ie, the proximate, cause of the damage: at [90]. 19 Against that background of principle, the question to be determined is whether his Honour erred in determining that Mr Marchant's death fell within the terms of the policy.

The event 20 The appellant submitted that it was first necessary to define the "event" in order to determine whether that "event" was one from which the deceased suffered physical injuries that were caused "solely" by "violent, visible and external means." It was submitted that in this case his Honour failed to do so, but rather relied upon the meaning of "accident" as it had been construed in, for example, Federico. It was submitted that the terms of the policy in Federico were different and the construction given to the term "accident" in that case did not govern the construction of the term in this case. This submission must be accepted. Indeed, his Honour's approach in adopting the meaning of "accident" as construed in Federico's case was not embraced by the respondent. Both the appellant and the respondent accept that it is necessary to have regard to the terms of each policy to determine the meaning of the language used. To the extent that his Honour relied upon Federico, he erred. 21 The appellant submitted that there could be three possible events: "a) The intentional (non accidental) administration of chemotherapy through the cannula, with the insertion of the cannula not being part of the event

b) A second is the insertion of the cannula followed by the administration of the chemotherapy agents

c) A third alternative is the reaction within the body to the agents administered." 22 The appellant contended, as I have already indicated, that on its proper construction the relevant "event" for the purposes of the policy was "a)", was the administration of the chemotherapy agents after the means had been put in place for that to be done. The "means" of doing so was the insertion of a cannula. However, the insertion of the cannula was not, on the appellant's submission, the "event", as it did not give rise to any injury, apart from the breaking of the skin, by violent visible or external means and was no more than an act or "event" preparatory to the administration of chemotherapy. As I understand this submission, the appellant also contended that the insertion of the cannula was not part of the event. 23 It was said that the fact that the administration of chemotherapy was the "event" for the purposes of the policy was supported by the evidence of Dr Lindeman that Mr Marchant's death "was directly consequent on the administration of chemotherapy". 24 The respondent submitted however, that the word "event" was not used in isolation in the policy. Rather, it was part of the following phrase: "an accident is an event … where the life insured suffers physical injuries". It followed that when the word was read in context, the "event" was the suffering of physical injuries. It then had to be determined whether those injuries were caused by violent, visible and external means. 25 In my opinion, the respondent's construction is correct. To focus on the word "event" in isolation from the words of the policy is an erroneous approach to construction. Further, as was discussed in Lasermax Engineering Pty Limited v QBE Insurance, under the approach to construction that governs insurance law, the courts look to proximate cause. Here, it was necessary to identify a circumstance or a happening that caused the life insured to suffer physical injury. That was the administration of chemotherapy. However, it would be artificial to isolate the administration of chemotherapy from the manner in which such chemotherapy was administered. The event where the life insured suffered physical injury was the composition of circumstances whereby the deceased was given a dose of chemotherapy and thereby suffered injury. 26 However, the appellant's approach to this part of the construction of cl 1.2 confuses, in my opinion, the event and the means by which it was caused. This is apparent from the way in which it sought to construe that part of cl 1.2 which provides that the injury must have been caused solely: "by violent, visible and external means".

Violent, visible and external means 27 The appellant submitted that the policy condition that there be physical injury caused, relevantly, by "violent, visible and external means" was not satisfied. It was submitted that the physical injury was not caused by any external means. It was said the event, being the administration of the chemotherapy agent, did not cause injury by any external means. Rather, the injury was caused wholly internally. It was submitted that it was necessary to look at the relevant event as commencing after the chemotherapy agents had been administered into the body. 28 The appellant further submitted that the injuries were not caused by the administration of chemotherapy agents, as those agents did not themselves give rise to physical injuries, but, rather, that it was the later reaction of the body to those agents which gave rise to the physical injuries. 29 The appellant submitted that the accident could only be considered to have been caused by "violent, visible and external means" if the insertion of the cannula was said to be the "means". However, the insertion of the cannula on the appellant's argument was merely the means by which the relevant event, namely the administration of the chemotherapy, was facilitated. It was submitted that as the chemotherapy acted internally within the body, it was not external, nor was it violent or visible. It was further submitted that the policy specification that the means be violent, visible and external had to occur simultaneously. 30 The respondent submitted that the phrase "violent, visible and external means" was not a single phrase. Rather, the words "violent, visible and external" were each adjectival, describing the means by which the physical injuries were caused. Thus, the means by which the physical injury was caused had to be external. It had to be visible and it had to be violent. However the "violence" did not have to be either external or visible. The violence could occur as a result of the body's reaction to a chemical agent. 31 The respondent further submitted that the word "means" in the phrase "violent, visible and external means" refers to the cause of the injury and that the word "means" had to be approached in a commonsense way by asking what was the cause: see National & General Insurance Co Ltd v Chick [1984] 2 NSWLR 86 at 97-99. In Chick's case, Samuels JA, in dealing with a clause in a policy in the following terms, "bodily injury caused solely and directly by violent, accidental, external and visible means", said at 97 of the word "means" in that context: "… it seems to me that the cause of an injury does not differ from the means by which it was caused, since the word " means " may be defined as a way to an end or that which is concerned in bringing about a result; or, in other words, as a cause." 32 Counsel for the respondent in his written submissions, as amplified in oral argument, explained the evolution of the phrase "violent" as well as "violent, visible and external means" as it has been used in insurance policies since approximately the eighteenth century. It is not necessary to refer to that history in detail. It is sufficient for present purposes to indicate that, as was pointed out (at 29) in Personal Accident, Life and Other Insurances, E R Hardy Ivamy, 2nd ed, 1980, it has been established that the word "violence" in insurance policies means "the contrary of 'without any violence at all' and merely expresses that the injury is due to other than purely natural causes, such as bodily weakness or disease": see Hamlyn v Crown Accidental Insurance Co [1893] 1 QB 750. It followed, on the respondent's submission, that the word "violent" when used in the phrase "violent … means" meant generating a violent reaction. 33 In MacGillivray on Insurance Law, N Legh-Jones et al (9th ed, 1997), the authors at p701 also give consideration to the meaning of "violent means" as used in insurance policies. After referring to Hamlyn they state: "… the phrase seems to include almost any external cause of injury such as drowning [see Trew v Railway Passengers' Assurance Co (1861) 6 H & N 839]; or the inhalation of gas." (Footnotes omitted) 34 The authors footnote two American decisions, the first being Henley v Mutual Accident Association, 133 Ill 556 (1890) (Mutual Accident Association of the Northwest v Tuggle 39 Ill App 509 (1891) on appeal), noting that it was held there that death by poison acting on the intestines was death by "violent means". In the second, Paul v Travelers' Ins Co, 112 NY 472 (1889), it was held that arresting the action of the lungs so that suffocation resulted was also within the phrase "violent means". 35 In Winspear v The Accident Insurance Co Limited (1880) 6 QBD 42 the Court held, in relation to a policy which provided for insurance cover in the case of "any personal injury caused by accidental, external and visible means", that injury by drowning was covered, relying upon the earlier decision in Trew. 36 It follows, in my opinion, that the physical injuries were caused by an external means, namely the administration of chemotherapy; that that was visible; and that it was violent in the way in which this phrase has been interpreted in the authorities.

Solely 37 The appellant submitted that in circumstances where the death was said to be caused in part by the chronic airflow limitation secondary to smoking, as recorded in the death certificate, the trial judge erred in finding that the death was caused solely by the administration of chemotherapy agents. 38 The respondent submitted that that approach failed to have regard to the terms of the policy. The benefit payable under the policy was provided for in cl 1.1, which provided: "We will pay a Death Benefit if the life insured:

- is involved in an accident; and - as a direct result, dies immediately or within the next 90 days." 39 Clause 1.2 then defines "accident" in the terms already set out. The respondent submitted, therefore, that it was the injuries which must be caused "solely" by the relevant "violent, visible and external means". In this case, the "physical injuries" suffered by Mr Marchant were those constituted by the hypersensitivity pneumonitis. There is no issue that those injuries were caused solely by the allergic reaction to the chemotherapy agent. The other "cause of death" listed in the death certificate, namely, "chronic airflow limitation secondary smoking" was not so caused. That, therefore, was an irrelevant event for the purposes of the cover for which the insurance policy provided, namely, a death benefit where the life insured was involved in an accident and "as a direct result" of that accident, died within the next 90 days. 40 In my opinion, this submission is correct and does not need any additional exposition by the Court. It follows, therefore, that the death benefit was payable under the policy. 41 I would propose that the appeal be dismissed with costs. 42 SANTOW JA: I agree with Beazley JA. **********

15/12/2006 - Incorrect solicitors named on cover sheet - Paragraph(s) cover sheet

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