Published on 24 November 2018 at 12:15pm
Gray v Barr [1971] 2 QB 554 (‘Gray’)
I INTRODUCTION
The case of Gray has been said to ‘rival a Shakespearean tragedy in its facts’.[1] The defendant Barr, armed with a loaded shotgun, entered the house of his wife’s lover, Gray. Believing that his wife was in Gray’s bedroom, Barr climbed the stairs towards the bedroom but a scuffle ensued, the gun was discharged and Gray was killed. Barr was acquitted of murder and manslaughter.
Gray’s widow sued Barr for pecuniary loss suffered as a result of her husband’s death. Barr sought indemnity under his ‘Home and Hearth’ policy, which covered liability for ‘damages in respect of…bodily injury to any person…caused by accidents’. The Court of Appeal held that the indemnity was excluded because the death was not accidental and the claim was barred by public policy.
II PRINCIPLES
A Meaning of Accident
A key principle arising from the case is that recovery will be precluded where the actions of the insured are deliberate, intentional, wilful or culpable. An insured’s act will not be an accident merely because the insured was acquitted of a criminal charge. Lord Justice Salmon noted that the injury leading to death by manslaughter ‘may be no accident; as it may be intentionally caused’.[2] Manslaughter greatly varies in its seriousness as it ‘may come very near to murder or amount to little more than inadvertence’.[3] In this case, the court found that Barr had committed manslaughter and Barr’s deliberate act of ascending the stairs with a loaded gun was no accident, rather it was ‘the dominant and effective cause of the death [and] The whole tragic sequence flows inexorably from that act’.[4]
The court chose to go behind the jury’s verdict in Barr’s criminal trial in order to determine that he committed manslaughter and his actions were wilful, rather than merely negligent.[5] Lord Justice Salmon noted that even if the shooting was an accident, Barr threatened violence with a gun and could thereby not claim innocence for the consequences.[6] Therefore, there was sufficient intent for the insured to be denied their claim on the basis of illegality.
B Public Policy
Public policy was held to prevent an insured from seeking an indemnity for the consequences of their deliberate crime. The court in Gray placed great emphasis on precluding wrongdoers from recovering any benefit from their wrongdoing, even if there was no actual intent.[7] Even where the victim’s death is unintended, an insured will not be allowed to recover an indemnity if they were guilty of deliberate, intentional and unlawful violence, or threats of violence.[8] Lord Justice Salmon observed that public policy ‘undoubtedly requires that no one who threatens unlawful violence with a loaded gun should be allowed to enforce a claim for indemnity against any liability he may incur as a result of having so acted’.[9]
III ANALYSIS
It appears that the court’s conclusions stemmed primarily from the fact that the case involved a crime of violence, but it is difficult to extrapolate from their reasoning to determine limits for culpable conduct in other circumstances. The case left open the question whether unlawful conduct committed through recklessness or negligence will preclude indemnity in third party claims.[10] Lord Justice Denning was prepared to accept that cover would not exclude an unintentional act of even gross negligence.[11] Lord Justice Salmon also conceded that negligent acts by the insured must be covered by a third party liability policy, as these are the obvious risks for cover against which premium is paid.[12]
Chief Justice Bathurst points out that ‘all liability policies are predicated on some form of wrongdoing’.[13] For example, motor accidents often involve a breach of law by the driver.[14] However, the court in Gray held that public policy demanded deterrence of crimes of violence involving guns but not necessarily crimes involving cars.[15] The court failed to explain why death by shotgun threatened the public interest more than road rage.[16] As Malcolm Clarke rather starkly put it, ‘Why is the man who spreads his tormentor's brains across the stairs with a shotgun so much more of a threat to society, a curse of the age, than the man who spreads most of his victim across the road with his van?’[17] Lord Justice Salmon failed to substantiate his assertions that deterrence ‘worked, either at all or better on angry husbands than angry motorists’ or that ‘widows of road users either needed or deserved compensation more than widows of adulterers’.[18]
Malcolm Clarke pointed out that ‘according to the official records of the year when Mr Barr shot Mr Gray, for every homicide with guns there were about 20 deaths caused by reckless or dangerous driving’.[19] Nevertheless deterrence is not a compelling factor in determining the public interest in motor vehicle deaths because ‘even a deliberate hit and run with a car can now be covered by insurance without offending public policy’.[20]
Moreover, the court failed to acknowledge the countervailing policy objective of ensuring compensation for the victims of negligent criminal behaviour.[21] It is undisputed that a wrongdoer should not profit from his wrongdoing but third party insurance is intended to benefit the person injured as much as it benefits the injurer.[22] Liability insurance is essentially a contract for the benefit of third parties.[23] It is hardly fair to diminish a victim’s chances of recovery if the injury was intended, rather than merely negligent.[24] The court in Gray failed to demonstrate how allowance of liability coverage would stimulate crime or other intentional injury and how invalidating insurance would deter such crime or injury.[25] Ultimately, the policy aim of deterrence is insufficient to deny coverage especially in such a case where moral indignation appears to have been mistaken for public policy.[26]
IV IMPACT
The narrow definition of accidental damage in Gray has had the international impact of denying third party claimants compensation where the insured courts the risk of damage. Conversely, this definition has effectively allowed first party claimants to plead ignorance of the risk of damage in order to remain covered by their policy.
A Third Party Insurance
S & Y Investments
The Australian courts adopted the approach in Gray in the case of S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd.[27] The case involved a hotel manager fatally shooting what he suspected to be an intruder but was actually the hotel’s electrician. Similar to Gray, the manager was acquitted of manslaughter and the victim’s wife claimed compensation from the manager’s company on the basis that they were vicariously liable for the manager’s negligence. The company sought indemnity from their insurer under a public liability policy covering liability for bodily injury occurring as a result of an accident. The court held that the shooting was an accident within the terms of the policy but Gray was then applied to preclude indemnity due to public policy.
The case incorporated a number of Gray principles into Australian law. The court followed Gray in determining that the outcome of a criminal prosecution has no evidentiary value in civil proceedings involving similar issues.[28] The court was therefore able to decide that the manager was guilty of manslaughter by unlawful and dangerous act, despite his acquittal in criminal proceedings.[29] The court also followed the principle arising from Gray that whether an event is an accident must be determined subjectively from the insured’s point of view.[30] The court applied Gray to conclude that the manager courted a risk that an injury would occur when he tried to frighten the intruder by firing the gun.[31] The court also relied on the public policy argument in Gray to determine that the insured should not be allowed to obtain an indemnity where the death occasioning the loss is caused by a deliberate and criminal act.[32] Consequently, Gray has ultimately had the impact of preventing the enforcement of insurance contracts in Australia where the insured deliberately courts the risk of damage, especially if their conduct is unlawful.[33]
Co-operative Fire and Casualty Co v Saindon
The majority of the Supreme Court of Canada in Co-operative Fire and Casualty Co v Saindon also uncritically followed the approach taken in Gray.[34] The case involved the insured threatening his neighbour by raising a lawnmower shoulder-high and directing it towards the neighbour’s face, resulting in the neighbour raising his hand to protect himself and subsequently severing his fingers by the mower’s blade.[35] It was held that the insured’s act constituted criminal conduct and ‘the fact that the "scare" intended by the respondent had more serious consequences than he may have anticipated does not alter the fact that it was his threatening gesture which caused the damage’.[36]
The plurality did not articulate the policy they were seeking to further but it appears they endeavoured to deter violent behaviour, as per the reasoning in Gray.[37] Academic criticism of this decision therefore highlights the faults in Gray. As Reuben Hasson noted, it is difficult to see how an insured who ‘is undeterred by the threat of criminal punishment, and is oblivious to the risk of serious personal injury, is likely to be deterred by an increase in his liability insurance rates’.[38] In any case the insured is likely to have their rates increased or their policy cancelled.[39] The only tangible result of denying coverage is to ‘deprive innocent accident victims of indemnity, and, to compound injuries, to leave such accident victims with massive bills for legal expenses’.[40] Therefore, Gray has aroused significant international condemnation of the unfairness caused to innocent third parties.
B First Party Insurance
The principles arising from Gray have also been applied to first party insurance cases but with a far fairer outcome.
Sheehan v Lloyd’s Names
In Sheehan v Lloyd’s Names Munich Re Syndicate, the insured failed to comply with the operating manual of his boat by switching off the engine when the alarm sounded and the engine was subsequently damaged.[41] The court relied on the principle in Gray that an insured may not recover for accidental loss or damage where he/she is aware of the risk and deliberately chooses to take it.[42] Unlike the above-mentioned third party liability cases, the court here applied the rule in favour of the insured to find that the damage was accidental, as a reasonable person in the insured’s position would not have expected the loss and thus the insured could not have courted the risk.[43]
Matton Developments v CGU
In Matton Developments Pty Ltd v CGU Insurance Ltd (No 2), the Gray principles were indirectly applied to support the insured’s claim.[44] The case involved the overloading of a crane, which exceeded the manufacturer’s guidelines and resulted in the crane tipping over while in use. Justice Flanagan in the Supreme Court concluded on the facts that the loss was subjectively accidental because the driver of the crane genuinely believed that the weight of the crane would flatten the ground, but that it was not objectively accidental because the driver was reckless or deliberately courted the risk. This was overruled on appeal where the plurality held that the conduct was not so culpable as to prevent a finding that it was an accident. Consequently, Gray has had the international impact of supporting first party claims where the insured has acted recklessly but without violence, or threat of violence.
V CONCLUSION
The impact of Gray ultimately demonstrates that ‘public policy is rightly regarded as an unruly steed which should be cautiously ridden’.[45] The court’s limited definition of accidental damage has resulted in great unfairness to third parties in comparison to first party claimants. The undue emphasis on deterrence has proven to be an insufficient reason to deny third parties the benefit of compensation, particularly where motor vehicle policies allow such claims. It is certainly incongruous to require insurers to pay for damage caused by criminal behaviour but Gray and subsequent cases have failed to adequately justify why there should be a blanket prohibition on such claims.
[1] Tom Bathurst, ‘Insurance Law – A view from the Bench’ (2014) 25 Insurance Law Journal 94, 98. [2] Gray v Barr [1971] 2 QB 554, 578. [3] Ibid 581. [4] Ibid 567. [5] Ibid 567-579; see also Bathurst, above n 1, 99. [6] Gray v Barr [1971] 2 QB 554, 581; Bathurst, above n 1, 99. [7] Gray v Barr [1971] 2 QB 554, 580-1. [8] Ibid 568-9; see also Christopher Rodd, ‘Fraudulent Claims and the rights of the innocent coinsured’ (1997) 9 Insurance Law Journal 1, 2. [9] Ibid 581-2. [10] Bathurst, above n 1, 99. [11] Gray v Barr [1971] 2 QB 554, 566. [12] Ibid 579. [13] Ibid. [14] Ibid. [15] Gray v Barr [1971] 2 QB 554, 581-2 (per Salmon LJ). [16] Malcolm Clarke, ‘Insurance of Willful Misconduct; the Court as Keeper of the Public Conscience’ (1996) 7 Insurance Law Journal 1, 11. [17] Ibid; see also Gardner v Moore [1984] AC 548. [18] See for example: Clarke, above n 16. [19] Ibid. [20] Ibid; Gardner v Moore [1984] AC 548. [21] Bathurst, above n 1, 99. [22] John Fleming, ‘Insurance for the Criminal’ (1971) 34(2) The Modern Law Review 176, 176. [23] Ibid 177. [24] Ibid. [25] Ibid 177-8. [26] Ibid. [27] (1986) 82 FLR 130. [28] Ibid 150; see also: Kenneth Sutton, ‘Insurance’ (1987) 15(6) Australian Business Law Review 443, 444. [29] S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 82 FLR 130, 142, see also: Sutton, above n 28, 444-5. [30] S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 82 FLR 130, 138 citing Gray v Barr [1971] 2 QB 554, 585. [31] S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 82 FLR 130, 140. [32] S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 82 FLR 130, 138 citing Gray v Barr [1971] 2 QB 554, 585. [33] Ibid. [34] (1975) 56 DLR (3rd) 556 (Supreme Court of Canada). [35] Ibid; see also: Reuben A Hasson, ‘The Supreme Court of Canada and the Law of Insurance 1975’ (1976) 14(3) Osgoode Hall Law Journal 769, 774. [36] (1975) 56 DLR (3rd) 556 (Supreme Court of Canada) 564. [37] Hasson, above n 35, 777. [38] Ibid 777-8. [39] Ibid. [40] Ibid. [41] [2017] FCA 1340. [42] Ibid [68]. [43] Ibid [73]. [44] [2016] QCA 208. [45] Gray v Barr [1971] 2 QB 554, 581-2; see also Bathurst, above n 1, 100.
REFERENCE LIST
A Articles/Books/Reports
Bathurst, Tom, ‘Insurance Law – A view from the Bench’ (2014) 25 Insurance Law Journal 94
Clarke, Malcolm, ‘Insurance of Willful Misconduct; the Court as Keeper of the Public Conscience’ (1996) 7 Insurance Law Journal 1
Fleming, John, ‘Insurance for the Criminal’ (1971) 34(2) The Modern Law Review 176
Hasson, Reuben, ‘The Supreme Court of Canada and the Law of Insurance 1975’ (1976) 14(3) Osgoode Hall Law Journal769
Merkin, Robert and Ian Enright, Sutton on Insurance Law (Thomson Reuters, 4th ed, 2014)
Rodd, Christopher, ‘Fraudulent Claims and the rights of the innocent coinsured’ (1997) 9 Insurance Law Journal 1
Sutton, Kenneth, ‘Insurance’ (1987) 15(6) Australian Business Law Review 443
B Cases
Co-operative Fire and Casualty Co v Saindon (1975) 56 DLR (3rd) 556 (Supreme Court of Canada)
Gardner v Moore [1984] AC 548
Gray v Barr [1971] 2 QB 554
Matton Developments Pty Ltd v CGU Insurance Ltd (No 2) [2016] QCA 208
Sheehan v Lloyd’s Names Munich Re Syndicate [2017] FCA 1340
S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 82 FLR 130
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