The court sequel to a man slipping on wet tiled stairs has highlighted the need for insurers to be clear with insureds about policy exclusions, especially those taken out online. 

On March 24, 2019, Colin Walsh slipped and fell on stairs at the rear of a residential property in Baulkham Hills, Sydney. 

He lived in a granny flat leased from Honmei Yang. He claimed she was negligent for failing to make the tiles slip resistant when she knew, or ought to have known, that the tiles were slippery when wet. 

Ms Yang and a second defendant Danny Xu took out a home and contents policy on February 19, 2019, with IAG. 

The insurer unsuccessfully denied indemnity under the policy, leading to a cross-claim by the defendants. 

The NSW District Court heard evidence over three days in November last year that the defendants owed a duty to exercise reasonable care to prevent foreseeable injury to the plaintiff. 

Mr Walsh was awarded $101,457.50 and Ms Yang and Mr Xu claimed indemnity under the policy. 

But IAG claimed that liability is excluded under the policy due to any or all of six enumerated exclusions, which defeat the insured’s claim for indemnity and any direct claim made by the plaintiff under the Third-Party Claims Act.  

The insured and the plaintiff said that, as a matter of construction, the exclusions do not apply. The exclusions included unlawful activity, building regulation and local authority regulation exclusions.  

Alternatively, the insured said that under s 35(1) of the Insurance Contract Act (ICA) the insurer can’t refuse to pay the claim as the policy is a prescribed contract and the event giving rise to the claim is a prescribed event within the meaning of s 35(1) of the ICA. 

When Ms Yang applied for cover she answered a number of questions on the insurer’s website.  

In reply to the question of how the home would be used, Ms Yang said the home would not be used for “business purposes”. 

The position of persons residing at the property who were not ordinarily part of the policy holders’ household was not expressly addressed other than a question as to whether five or more unrelated people lived in the home, the court heard. 

The court found that “the insurer has not made out its claim that the exclusions in the Policy apply such that it is entitled to decline cover”. 

Law firm Colin Biggers & Paisley Lawyers reviewed the Walsh v Yang August 14 ruling, saying it emphasised that an insurer must remain vigilant when issuing policies of insurance online to ensure their insureds disclose all relevant information that may have implications on the exclusion clauses within the policy. An insurer can only rely on an exclusion where they have clearly informed their insured of it. 

“Whilst the building regulation and local authority regulation exclusions were both found to apply in the circumstances, the steps taken by the insurer to inform the defendants of the exclusions, by providing them with a copy of the policy, were deemed not sufficient to satisfy subsection 35(2) of the ICA. The insurer failed to make out its claim that the exclusions applied and that it is entitled to decline cover,” Colin Biggers & Paisley said.