Thinking | 5 April 2022
Sparks fly in class action indemnity dispute
The NSW Supreme Court has delivered judgment in Ritchie v Advanced Plumbing and Drains Pty Ltd, a class action brought by Maddens Lawyers on behalf of victims of the Carwoola bushfire, which occurred on 17 February 2017.
The bushfire occurred on a total fire ban day, when a power cutter used by Advanced Plumbing to cut steel reinforcement for use in slab footings caused sparks that ignited dry grass in an adjacent paddock.
Advanced Plumbing was placed in liquidation and the trial proceeded against its liability insurer, CGU Insurance, which denied indemnity on several grounds and was joined under section 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).
Justice Davies rejected CGU’s argument that the construction of footings for a concrete slab fell outside the definition of Advanced Plumbing’s business, which was described as ‘Principally Plumbing and any other activities incidental thereto’. It was held that the relevant activities, which were incidental to the plumbing business, fell within this broad business description.
The Court also rejected CGU’s argument that Advanced Plumbing breached the reasonable precautions policy condition by recklessly conducting hot works on a day of total fire ban. In the context of a public liability policy, it was held that CGU was required to establish that Advanced Plumbing’s workers acted recklessly and subjectively courted the risk of a known danger. While the evidence clearly established negligence on the part of the workers, there was no evidence that they had an actual, subjective awareness of a risk of bushfire from the sparks, which they disregarded.
CGU also relied on a welding endorsement that excludes cover in the event that the relevant Australian Standard for hot works is not strictly complied with. The plaintiff argued the endorsement was not engaged because the power cutter did not fall within its definition of ‘electric cutting’ or ‘spark producing equipment’. However, the consensus between the two welding experts was that the power cutter emitted sparks when used on metal and the Court therefore found that the welding endorsement was engaged.
Noting the expert consensus that Advanced Plumbing did not comply with AS 1674, Part 1 – 1997 'Safety in Welding and Allied Processes – Fire Precautions’, Justice Davies had no hesitation in finding that CGU was entitled to rely on the exclusion to decline cover.
The upshot, subject to any appeal, is that the Carwoola bushfire class action has failed.
Interestingly, the judgment contained no analysis on whether the welding endorsement requiring strict compliance with AS1674 should be read down as a ‘reasonable precautions’ condition, such that CGU would need to establish recklessness. In a somewhat analogous case decided last year by the Victorian Supreme Court it was held that a policy condition requiring compliance with the Australian Standard for scaffolding works should be read down so that the insurer needed to prove recklessness.
It remains to be seen whether the class action will appeal the judgment.
Ritchie v Advanced Plumbing and Drains Pty Ltd  NSWSC 330
 Noori v Majestic Plumbing Services Pty Ltd & Ors , VSC 63
You might be also interested in...
Insurance | 9 Mar 2022
When a natural disaster strikes an area and damages multiple properties in a community, it is often a magnet for third party businesses looking for opportunities to turn a profit.
Insurance | 1 Mar 2022
This decision confirms the importance of giving business sense to the construction of a policy and taking into account the wider context of insuring clauses, including the core commercial purpose of the policy.