SWASHPLATE PTY LTD V LIBERTY MUTUAL INSURANCE COMPANY TRADING AS LIBERTY INTERNATIONAL UNDERWRITERS [2020] FCAFC 137

On 13 August 2020, the Full Federal Court of Australia handed down a decision which addressed the conflict between the terms of a voyage policy and the insertion of a date for commencement in the placement slip.  The decision was that of Swashplate Pty Ltd v Liberty Mutual Insurance Company t/as Liberty International Underwriters which was on appeal from the decision of the Chief Justice of the Federal Court. The appeal was heard by Besanko, McKerracher and Colvin JJ.

This appeal concerned a claim for indemnity under a policy of insurance issued in relation to an insurance facility in place between an Australian insurance broker, and Liberty Mutual Insurance Company, a company registered for trading in Australia.

The issue before the Court was whether the Appellant, Swashplate Pty Ltd (an Insured under the policy) was entitled to indemnity under its policy of marine transit insurance with Liberty for damage sustained to a helicopter during transit from Picayune, Mississippi to the Sunshine Coast Airport, Queensland in May 2018. At first instance, the Chief Justice held that Swashplate was not entitled to indemnity under its policy. This finding was overturned by the Full Court on appeal.

In May 2018, Swashplate made arrangements to ship a helicopter from Picayune, Mississippi to the Sunshine Coast Airport, Queensland in accordance with a purchase agreement entered into by Swashplate to purchase the helicopter. Before the helicopter was loaded and shipped to Australia, Swashplate arranged through its broker to obtain marine transit insurance to cover the transit of the helicopter. The helicopter was damaged whilst in transit which was caused by an insufficiency or unsuitability of packing of the helicopter in the shipping container. Swashplate made a claim under its policy and a dispute arose as to whether the insurance covered the transit entitling Swashplate to claim indemnity.

It was contended by Liberty, and found by the Chief Justice at first instance, that the commencement of the insurance took effect after the transit had already commenced because the Placement Slip that was issued in respect of this policy made reference to a period of insurance being from 19 May 2018. On Liberty’s view, at the time the helicopter left the hangar in the shipping container, the insurance had not yet attached and so it was entitled to rely on the exclusion under the policy in respect of damage caused by insufficient packing prior to inception.

Swashplate contended that inception of the policy occurred when the helicopter was first moved from the hangar for loading and also relied on the ‘Static Cover’ extension contained in the policy which provided for ‘Static Cover for up to 5 days prior to loading’. The packing of the helicopter into the container occurred within this 5-day period which meant that the risk attached before the helicopter was packed.

The Full Court held that the policy of insurance included the 5-day Static Cover extension with the effect that the policy covered the whole transit plus the period of Static Cover. This was on the basis that ‘Liberty agreed to provide insurance on a worldwide basis for single transit of helicopters on terms that did not require certainty as to the date when the risk commenced or the date when the risk terminated. That certainty was to be provided by clauses in the ICC(A) that described the events when the risk attached and, importantly, also described events as to when the risk terminated’ at [93].

The alternative ground of appeal that was submitted by Swashplate concerned whether the cover, which was noted in the Placement Slip to commence on 19 May 2018, was to be measured by Picayune time or Australian Eastern Standard Time. Whilst the Full Court was not required to consider this issue, their Honours noted that in this case, the policy of insurance provided for worldwide coverage and as such, the reference in the Master Slip to LST (local standard time) is relevant where certain events occur which are relevant to determining when the risk attaches.

Mark Mackrell, Senior Partner

Keira Nelson, Partner

Jennifer Andrews, Solicitor