PNG Law Reports 1995
[1995] PNGLR 401
N1251
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
KEREKAL FARMING AND TRADING PTY LTD TRADING AS UKE TRANSPORT PTY LTD
V
QUEENSLAND INSURANCE (PNG) LIMITED
Mount Hagen
Woods J
25 May 1994
22 July 1994
CONTRACT - Insurance - Proposal form - Non disclosure - Whether material. - Proposal form a lay document.
DAMAGES - Loss of profits - Need for financial statements.
Facts
Plaintiff sued the insurer of its vehicle for the repair costs of the vehicle sustained in an accident on the highway. The defendant repudiated liability on grounds of non disclosure/wrong information in answer to questions in the proposal form.
Held
The proposal document is not a legal document and the standard of care in filling it is that expected of a man in the street.
Counsel
P. Dowa, for the plaintiff.
A. Kandakasi, for the defendant.
22 July 1994
WOODS J: The plaintiff is claiming for the damages caused to a motor vehicle owned by him and insured with the defendant. The motor vehicle, a Hino Truck Prime Mover Registration No AGJ 523, was damaged as a result of an accident near Henganofi along the Okuk Highway on the 18 January 1993. The plaintiff claims that the vehicle was insured against any loss and damage by Policy No 221K8769 0026384/000 with the defendant cmpany. The plaintiff duly notified the defendant of the loss and damage but they have repudiated their liability and refused to meet the repair costs or any sum for the damage.
The defendant in its defence states that the plaintiff failed to make truthful statements and answers in the proposal signed by the plaintiff on 3 November 1992 and therefore this invalidates the policy of insurance.
The defendant further denies liability by alleging that in contravention of the policy the vehicle was in an unsound condition mechanically a fact which the driver or owner knew or ought to have known.
There are two alleged non-disclosures on the policy proposal form. The first is alleged to be in answer to paragraph 8 “what motor vehicles accidents have you had and what claims have you made on a motor vehicle insurer”? The defendant states that the plaintiff failed to answer that the plaintiff had made a claim against a motor vehicle insurer, namely the Southern Pacific Insurance Company (PNG) Limited and untruthfully answered that a claim had been made against an insurer for K20,000 when in fact it had been made for K29,051.40.
The alleged accident on 8 August 1991 refers to an incident where another Hino Truck owned by the plaintiff which was loaded with a front end loader struck the canopy of the Shell Service Station at Mendi, causing damages estimated at K13,750. The Manager of the plaintiff company does not deny that incident involving a company truck on 8 August but states that there was no claim lodged for damages and anyway it did not involve any negligence on the part of the driver and no damage was done to the truck. Apparently the service station did not press any claim against anybody as they pulled the canopy down and rebuilt it to a different and larger design. There is no evidence of any claim being lodged by the plaintiff or settled against the plaintiff or its truck for that incident.
So has there been material non-disclosure in respect of this incident? We are considering here a document called a “proposal for motor vehicle insurance.” This document is clearly not in the nature of a legally drafted and stamped and registered agreement or contract, it is no more than a series of questions and answers that a man on the street is expected to answer without any legal advice which the Company will peruse and assess and then on such perusal will consider whether a policy will issue. A look at the way the document is set out suggests that it only expects a minimum of detail from the proposer as the space provided alongside question 8 is only sufficient for about 8 or 10 words. A man in the street is quite entitled to assume that an incident of the nature of the Mendi Service Station incident was not a motor vehicle accident, it not being an accident occurring on the Highway involving some manner of driving nor a collision with another vehicle and further, as no claim was lodged, a person in the street is entitled to assume it was of no relevance. Contra to that a man with legal training and qualifications may see that there could be more in that question as an insurance company may wish to know about any type of incident which a proposer has been involved with, but lawyers are trained to look beyond the simple questions and analyse the full implications of the prior history of a proposer for insurance. But a non-legal person cannot be expected to be so astute or shall I say suspicious of innocent questions. They are entitled to take questions at face value. And proposal forms are presented to be filled in by people with an education ranging from nil.
As proposal forms are to be completed and answered by the ordinary man in the street without any legal training, and, possibly even any formal education, I find that because of the circumstances of the Mendi incident there has been no material non-disclosure such that the policy of insurance issued should be avoided.
The second part of this claim of non-disclosure refers to a claim for K20,000 which was in reality a claim for K29,000. With respect to the figures it appears that the claim ended up being K23,051 against the Insurance Company as the plaintiff met the rest as the excess. So does a reference to K20,000 instead of the correct figure of K23,000 mean there has been material non-disclosure. Firstly I repeat what I have said above as to the status of a proposal form, namely it is a document designed to be filled in by a man in the street without any education. The space beside question 8 only leaves enough space for about 8 or 10 words, and the question only asks what claims have you made. The plaintiff answered that there had been a claim and it stated in a few words what caused the accident, it put a round figure in and it named the Insurance Company concerned although only by its initials but with the space provided the initials must have been all to be expected. I am satisfied that this answer has put the Insurance Company on sufficient notice that there has been a substantial claim and it was up to the Company to make further enquiries to seek further detailed particulars if it required same. There has been no material non-disclosure. The question does not ask for the specific amount, it only asks have you made a claim, and the plaintiff in effect answered yes and made no attempt to hide the fact of a claim.
I am satisfied that there has been no material non-disclosure in connection with the answers to question 8 and therefore the defendant cannot avoid its liability on that basis.
The other alleged non-disclosure is in answer to question 9(2) “have you ever had motor vehicle insurance cancelled” and it is alleged that the plaintiff untruthfully answered no, when in fact the plaintiff had had motor vehicle insurance cancelled by the Southern Pacific Insurance Company (PNG) Limited. The circumstances here are that up until November 1992 the plaintiff had insured its vehicles with the Southern Pacific Insurance, however, when it was time for the renewal of the policy with that Insurance Company, in 1992, the plaintiff had been having some financial difficulty and when it received the renewal accounts it had paid the amount of renewal premiums but the cheque was not met by the bank so the renewal offer was not taken out. At the time the plaintiff’s banker recommended that the plaintiff change Insurance Companies as the premium may be less and the plaintiff agreed and the bank pfficer assisted the plaintiff officer to change to the defendant company. So the manager of the plaintiff company acted on the basis that following the bouncing of the company’s cheque, the offer for renewal had not been taken up and it was not a matter of the Insurance Company cancelling the plaintiff’s insurance. And as I have said above, a proposal form is a document to be completed by a man in the street not a lawyer, and a man in the street is entitled to assume that not taking up an offer of renewal is no more than that. There is no evidence that there was a deliberate act of cancelling the insurance for some newly discovered risk attached to the plaintiff. It was made quite clear to the defendant in the proposal form that the plaintiff had previously been insured with the Southern Pacific Insurance and I find that a man in the street with little education is entitled to assume that a company may contact another company to check on the insurance history or at least ask for more details from the proposer if such are required.
To repeat, a proposal for insurance is not a document expected to be completed at the level of professional competence expected of a lawyer it can only be filled in at the level of understanding of a man in the street with possibly little education, thus answers can be simple with little or the barest details, and can be at a commonsense basic level of understanding of the meaning of words and not at the level of legal scrutiny of all possible interpretations.
Thus question 8 only sought an affirmative answer with the barest of details that could be fitted into the space, and question 9 could be answered with a literal understanding of the word cancel.
I find there is no grounds for the defendant to avoid any liability under the policy of insurance that it granted. The defendant has further alleged that the accident happened because the vehicle was in an unsound condition mechanically which the plaintiff well knew and this was in breach of the policy. However the defendant has brought no evidence to support this. The defendant seems to be relying on the police officer’s comment for the reason for the accident as mechanical fault. However all the investigating police officer has done is assumed that the company officials or driver knew there was a mechanical fault when there is no such evidence and further the police officer took no steps to have the vehicle mechanically checked after the incident. There is no evidence to support the Company or the driver had any knowledge of any defect.
I find that the defendant is liable under the policy to meet the claim for the damage to the Truck. The evidence of John Ulu of Ela Motors Goroka was that it would cost at least K28,678.73 to repair the vehicle. There has been no challenge to that estimate so I will accept that figure as the amount for which the defendant is liable. There will be a deduction of the excess of K3,800 as per the exception in the certificate of Insurance.
The plaintiff is also claiming loss of profits whilst the vehicle was out of service because of the accident and because of the delay in the defendant meeting the claim. However the plaintiff has not presented any financial statements to show the income received from the operation of the truck. It has merely been stated that the company had a contract for haulage with Placer and was earning an average of K22,000 per month. Then there is a bank deposit book. However there is no evidence of the details of any contract nor of the breakdown of that income namely what were the running costs etc. So how can this court find an amount for loss of profits when there are no detailed figures to support such.
I find for the plaintiff in the sum of K24,878.73 plus interest at 8% from 25 June 1993 to date being K2,137.53. Judgment for K27,016.26.
Lawyer for the plaintiff: P. Dowa.
Lawyer for the defendant: Young and Williams.