Drunk drivers and concealed convictions: a win for the insurer

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd (No 4) [2010] FCA 482 (May 2010)

Mr O’Shanassy owned a legal practice, Sagacious Legal Pty Ltd. In 2004 Sagacious Legal took out a policy of insurance with Lumley General Insurance (Lumleys) (now Wesfarmers), to cover a Mercedes Benz. Mr O’Shanassy’s wife was the nominated driver.

One evening, Mrs O’Shanassy was driving the vehicle in the Southern Highlands of NSW. She had been drinking and witnesses said the car was speeding. The Mercedes left the road after a crest, hitting two trees and overturning. Mrs O’Shanassy was taken to hospital and the car was written-off. Sagacious Legal then made a claim on the Lumley policy for $173,000 being the indemnity value of the car. Lumleys declined the claim.

Lumleys successfully argued that the policy did not respond because:

• When applying for the policy, Mrs O’Shanassy failed to disclose her 1999 conviction for driving under the influence of alcohol and her subsequent licence disqualification.
• The claim was excluded under the policy since Mrs O’Shanassy:
  • was driving “under the influence of intoxicating liquor”; and
  • returned a blood alcohol reading (taken within 2 hours after the accident) which exceeded the NSW legal limit.

Whilst the proposal form, completed in 2004, only required Mrs O’Shanassy to notify the insurer of “offences/claims” within a three year period prior to application, an earlier question that asked about previous licence disqualifications did not specify a time limit and therefore had to be considered separately.  Accordingly, Justice Rares rejected Mrs O’Shanassy’s submission that she only had to disclose her 2002 offence and disqualification for driving under the influence of alcohol and not her disqualification in 1999.

Justice Rares considered previous authorities and agreed that to be “under the influence of any intoxicating liquor” any alcohol must “exercise a disturbing influence on the quiet, calm, intelligent exercise of the faculties”.

His Honour stated:

The determination is one of fact and degree based on the evidence, including, particularly, the observations of those who saw the person at or close to the critical time. In evaluating those observations, it will be important to bear in mind that the effect of the intoxicating liquor on the behaviour of the person will vary depending on when he or she last drank alcohol and how much he or she had consumed.

Justice Rares considered the accounts of various witnesses who were at the scene of the accident and thereafter. Many had said that they had smelt alcohol coming from the car and two beer bottles were inside. It was also evident that Mrs O’Shanassy was acting strangely towards her rescuers and engaging in bizarre conversations. These observations were all consistent with someone who was drunk and therefore ‘under the influence’ within the meaning of the policy.

Lumleys also relied on a third policy exclusion which allowed indemnity to be declined if the insured returned a blood alcohol reading over the legal limit where the blood sample was taken within two hours of the accident. The court held that this exclusion operated independently of considerations as to whether or not the insured was suffering the effect of drunkenness.  Despite this, evidence of a high blood alcohol concentration could be used to help determine whether the insured was ‘under the influence.’ Here, the sample showed that Mrs O’Shanassy was over the legal limit: this helped Justice Rares determine that she was also ‘under the influence of intoxicating liquor’.

This case provides a useful discussion of the phrase “being driven by … any person under the influence of intoxicating liquor” and indicates that an insured’s observable behaviour is relevant to any determination of this issue.